The Nigeria-South Africa Chamber of commerce webinar for February 2022 was held on 24th February 2022, sponsored by Tangerine Africa.
The Speaker was Kemi Owonubi, Group Head, Merger/Acquisition, Tangerine Africa. She spoke on the topic: What’s Driving Investors to invest In Africa from the Fintech/ Insuretech Perspective. The panelists are: Yewande Adewusi, Group Executive Director, Tangerine Africa and Yomi Onifade, Group Executive Director, Tangerine Africa.
Owonubi said that Nigeria is the largest economy in Africa (GDP of $443B) and will be the 3rd most populous country by 2050 at a time when Africa ‘s digital economy is growing exponentially between 2010 and 2019, more than 300 million African gained access to the internet, marking a shift towards digital processes and lifestyles.
Digital access is increasingly fundamental to economic growth and the socioeconomic advancement of individuals young digitally savvy working age population and growing middle class.
Unique mobile subscribers and the penetration rate is at 554Million and 44% in 2018, projected to 733M and 50% in 2025. SIM card connections and the penetration rate is at 916 M and 74% in 2018 and projected to 1230M and 84% in 2025.
Mobile internet users and the penetration rate is at 272M and 26% in 2019, Projected to 475M and 39% in 2025.Total volume of online payment transactions amount to 23.8B and valued at $456.3B in 2019.
She added that Africa’s unbanked population remains large, but growing mobile and internent pentration provides opportunity for mobile banking and payment.
Fintech has grown rapidly in recent years, driven by technological advancement,changing customer expectations, availability of funding and increasing support from governments and regulators. This report considers the value fintech creates for individuals, small businesses and society, and what makes a successful fintech ecosystem.
The financial technology space in Nigeria has become quite a competitive subsector in the economy with about 250 companies in the system.
Financial technology is basically an initiative that aims at delivering financial services to consumers – the technologies may include internet, apps, mobile phones and other technological devices.
One of the merits of fintech is its capacity to enhance achieve financial inclusion globally.
These companies offer services such as money transfer, depositing a check with your mobile phone, applying for credits, raising funds for business.
The companies usually have little or no physical presence because the entire banking process is online. Some of these companies use the ajo (thrift) scheme method and charge zero interest on loans.
Total capital invested in African FinTech companies grew by $1.49bn in 2021 compared to the previous year, setting Africa’s highest FinTech funding year to date at $2.02bn. The number of deals had a gradual increase of 18% YoY to a total of 287 deals. This shows that completed deals in 2021 are much larger in capital. The average deal was $10.7m in 2021 compared to $3.7m in 2020 which is due to keen interest from foreign investors.
Africa is the continent with the youngest population worldwide. As of 2021, around 40% of the population is aged 15 years and younger, compared to a global average of 26%. FinTech adoption is more likely with a younger age group and may be a reason that investors bet big on the continent as the potential gains and new territory for established FinTech companies are astronomical.
Africa also has a huge underbanked population. 42% of the adult population is estimated to not have a bank account in 2022, around 456 million people. FinTech companies are capitalising on this by providing alternative solutions via mobile. This is possible due to the large adoption of mobiles in Africa, currently there are 650 million mobile users in Africa.
According to GSMA in 2020 Sub-Saharan Africa had the largest amount of mobile money transactions at $490bn, 374% higher than the second largest market, South Asia.
Banking in Nigeria remains an attractive sector, with over $9 billion in value pools, but despite high levels of competition, the vast majority of consumers are underserved. Lack of access to services, especially in rural areas, issues of affordability, and poor user experience all contribute to the frustration consumers experience right across the customer spectrum.
This has created an opening that fintechs have been quick to take advantage of, with many stepping up to develop enhanced propositions across the value chain to address pain points in affordable payments, quick loans, and flexible savings and investments, among others.
At the same time, a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to create the perfect recipe for a thriving fintech sector. Nigeria is now home to over 200 fintech stand alone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million.
A youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to create the perfect recipe for a thriving fintech sector.
However, the sector is still relatively young. As Africa’s largest economy and with a population of 200 million—40 percent of which is financially excluded—Nigeria offers significant opportunities for fintechs across the consumer spectrum, notably within the small and medium-sized enterprise (SME) and affluent segments and, increasingly, in the mass-market segment.
Digitally savvy, middle-aged and young affluent individuals face poor user experience on products and find the value-add from using financial products underwhelming.
In line with the evolution of fintech in other markets, fintech activity in Nigeria started in payments and moved into other areas. Payment solutions currently represent around 15 percent of banking revenue pools in the country and continue to grow.
Beyond this, consumer lending—and, increasingly, asset management—are focal points for fintech activity, while insurance, across all segments is an untapped opportunity for those that can leverage technology to provide affordable healthcare premiums, enhance insurance distribution, and also create differentiated pricing based on customer data.
The drive towards cashless societies and the consequent proliferation of apps and enterprises to help underserved communities in Africa access financial products and services have made this an industry ripe with opportunities, with a large amount of new players hoping to cash in, as also create impact.
And where else to base this cover story than in Nigeria, Africa’s biggest economy and the hotbed of financial innovation on the continent today, not merely because of its population of over 200 million, but also for its sizeable appetite for currency and change.
Nigeria has emerged as one of the most important fintech ecosystems within the African continent and continues to attract attention globally.
The sector raised some $439 million in 2020 alone representing 20% of the capital raised by all African tech startups. The growth is down to a number of key factors, namely a youthful population, increase in smartphone penetration and a combination of new regulatory frameworks that have increased the use of cashless payments.
“When you look at the fintech ecosystem in Nigeria, we have blockchain, we have insuretech, but payments is the foundation for any ecosystem to function. I think the Nigerian payment system has matured, so you see prior to Covid-19, a lot of maturity within payment systems but that doesn’t mean these areas cannot be improved.
As economies work towards fulfilling the United Nations’ Sustainable Development Goals, financial inclusion has become all the more imperative as a prerequisite for achieving them.
Insurance in Kenya and Africa at large remains a marginal product, with levels of penetration across the continent half the world average as a percentage of GDP, and premiums per capita 11-fold lower than the world average. But economic growth and the rapid expansion of digital and mobile services are set to change.
Insuretech companies not as prevalent relatively more complex product set compared to e-commerce, banking/transactional, even as credit based system is developed especially in the retail/individual segment is being developed, you will see the growth of insuretech following similar trends across developed markets.