When you mention Africa, some people think it is a country full of famine and war. First, it is not a country but a continent and yes, there is some famine and war, but that’s not Africa. Before the pandemic, I travelled to many countries in the region and had amazing experiences in Kenya, Rwanda, Ethiopia, Zimbabwe and more. Now, I am so pleased to report that from early seeds, trees have grown.
Africa is leading a FinTech revolution that many have not seen or noticed. It has unicorns and funding that has increased nine times in just the last five years to a value of $5 billion in 2021, and that is double the amount of 2020.
Among the largest beneficiaries of the fintech capital were Opay, which raised $400 million in Series C funding; Flutterwave, which got $170 million in a Series C round; and TymeBank, which raised $180 million in a Series B. Jumo and MNT Halan raised $120 million rounds, as digital payments gateway MFS Africa gained $100 million. This was as Zepz (formerly WorldRemit) raised $292 million in Series E financing, while Chipper Cash raised $250 million, Tala $145 million and Wave sealed $200 million in funding.
In fact five out of seven African unicorns are FinTechs and there are a number of other bubbling companies called soonicorns, soon to be unicorns, like Kuda Bank. The Nigeria-focused challenger bank raised US$55 million in a Series B in 2021, at a valuation of US$500 million.
Liz Lumley at The Banker also spotted a FinTech boom blossoming in Africa on LinkedIn noting that "the country that gathers the most investment in and press coverage of emerging companies is #Nigeria. The west African country is home to some of the best-known fintech unicorns, companies valued at more than $1bn, including Paystack, OPay and Flutterwave. The country has a growing population of over 200 million, with more than 40% under the age of 14. While only 45% of the population rely on a formal bank account, more than 81% own a mobile phone, according to data from the ‘Enhancing Financial Innovation and Access to Financial Services in Nigeria 2020’ survey. According to Adesoji Solanke, director of frontier/sub-Saharan banks and fintech at Renaissance Capital, “Nigeria is the hottest market with 35% of the funds raised this year, followed by South Africa at 21%, then Egypt at 15%, Kenya at 9%, Ghana at 7% and then Senegal, surprisingly, at 6% — but that was because of one deal, which was Wave.”
If you want to know more about the Nigerian experience, checkout her column at The Banker.
What I love about African FinTech is that it’s not the same as anywhere else. It is all focused primarily on allowing connectivity and payments for people who never had access to connectivity and payments before.
I’ve mentioned this before, and we all know about the Kenyan transformation via Mpesa. But did you notice that Zimbabwe runs on mobile money these days? Or that Orange makes massive money in Malawi? Or that Nigeria runs on mobile money and cryptocurrencies?
The adoption, use and innovations with Fintech across African nations is amazing and, because they didn’t have a lot of automation of finance before, means that these countries are the ones to watch for the next wave of FinTech leadership.
In fact, I remember distinctly a conversation with the taxi driver in Kenya who took electronic payments and used contactless payments all through his phone. But his payments weren’t going through a bank. They were through Mpesa. I asked him whether he had a bank account, and he said yes. I asked him what he used his bank account for, and his answer was the complex things.
When I need foreign exchange transfers, or to get a loan or a mortgage, I would go to the bank but, for every day, I don’t need a bank. I use Mpesa.
And that defines the key for me. As millions, or even billions, of Africans get financial inclusion through Opay, Flutterwave and their brethren, they don’t need a bank. They just need a telephone.
Meanwhile, who are those five unicorns?
Top fintech unicorns in Africa.
Valuation: US$2+ billion
A listed company, Fawry is not a unicorn in the technical sense of the word (since it is a listed company, whereas unicorns are usually startups with a US$1+ valuation). Yet, it is widely considered to be one in the MENA region.
The company offers a wide range of B2B and B2C payment services, and trades on the EGX with a market cap of about US$1.5 billion as of 6 October.
Valuation: US$2 billion
OPay sprung to unicorn status after SoftBank’s Vision Fund 2 led a US$400 million funding round in the company in August this year. The round took the company’s valuation to US$2 billion. It also made OPay SoftBank’s debut investment in Africa.
OPay provides a mobile money solution (a central fintech sector in Africa) that comes with physical debit cards, an offline banking solution and savings facilities.
Valuation: US$1.7 billion
Wave is the latest entrant to the list of fintech unicorns in Africa. The company attained a valuation of US$1.7 billion in September this year, after a US$200 million Series A funding round.
Investors in the company include global heavyweights Sequoia, Founders Fund, Stripe and Ribbit Capital. Wave also offers a mobile money solution that includes deposits and withdrawals, transfers and bill payments.
Flutterwave (San Francisco)
Valuation: US$1+ billion
Payment infrastructure company Flutterwave raised US$170 million in a Series C that took place in March this year. The funding round came at a valuation of US$1 billion, taking the company to unicorn status.
Valuation: US$1 billion
Interswitch is a digital payments company, with solutions spanning transactions, collection, disbursement, card issuance and more.
The company became a unicorn after Visa picked up a minority stake in the company in 2019, leading to a valuation of US$1 billion. The deal was reportedly valued at US$200 million for 20% equity. The company had IPO plans for the first half of 2020, but the plans haven’t materialised thus far.
Postnote 1: There are other important movements across Africa, such as the newly launched in 2022 Pan-African Payment and Settlement System (PAPSS). Developed by African Export-Import Bank (Afreximbank), the system is forecast to save the continent more than $5bn per year in transaction costs by enabling increased cross-border trade and commerce within Africa. It is also a critical market infrastructure to support the African Continental Free Trade Area (AfCFTA), officially launched a year ago to foster greater economic integration and create a single market across Africa. For more on this read Joy MacKnight's write-up on The Banker.
Postnote 2: Toto's Africa is one of the biggest songs of all time
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...