There’s no shortage of opportunity in the African digital financial services sector. However, this doesn’t mean that fintechs can just show up and grow.
Juan Seco, chief growth officer at Mukuru
There are established fintech brands operating alongside new players in diverse markets. Businesses from other sectors, such as telcos, are developing fintech services while next-generation financial services providers are innovating and entering the neobanking arena. The industry is best described as dynamic.
Despite the diversity of products and approaches on the continent, there are definitely key trends that lead to sustainable growth. Reviewing 2024 and looking ahead to next year, here are five strategies that will go a long way to determining a fintech’s success in Africa.
Sustainable businesses have a customer-centric approach
There are two distinctly different approaches to fintech in Africa. On the one hand, there are venture capital-backed players that pursue rapid growth and expansion, often powered by significant infusions of capital. These fintechs replicate a “Silicon Valley style” model, wherein one takes a proposition and scales customer acquisition rapidly. However, Africa’s heterogeneous markets with their diverse regulatory landscapes and operating environment present particular challenges to scaling across borders.
On the other hand, many businesses in emerging market environments have taken a different, organic and customer-centric approach to growth. In essence, this approach is aimed at building a sustainable business that’s in tune with its target customers and their needs. Sustainable fintechs tend to build their suite of offerings around highly specific customer needs and durable unit economics. This is the approach Mukuru has favoured over its two decades of operations.
An owned technology stack builds the agility needed for fragmented markets
A trend over the past few years, and in 2024 specifically, has been the convergence of digital platforms, where fintechs seek to build a “hero product” and then scale other offerings off of this. In theory, it is a great idea, except that Africa presents a highly diverse operating environment and so there’s never a one-size-fits-all solution.
By way of analogy, a fintech could spend huge amounts of money on a single market – Nigeria, for example – and enjoy relative success because there is a deep customer pool. However, when it’s time to expand into other markets, businesses are often hamstrung by the sheer amount of fragmentation across the continent. The way around this is to be able to react and iterate quickly.
A fintech that owns its own technology stack, from end to end, is far better placed to do this. As opposed to running solutions off borrowed tech, so to speak, when a fintech runs its own tech, it owns its own future. It can tailor and modify as it sees fit, with its hand on the wheel prioritising exactly the sets of features and functionalities that will result in success in different markets. This capability empowers such fintech to create a more holistic financial ecosystem, serving both consumers and businesses.
Remittances are still a powerful gateway
A neat follow-on from the idea of building a hero product and then innovating around it, remittances in Africa are still a powerful gateway to build trust relationships with customers and then to expand offerings for those customers.
Remittances create a funded relationship between the sender and receiver. When considering the move towards neobanking – which as we know is most often far more suitable than traditional banking for underserved populations – leveraging this funded relationship as a foundation to build a broader platform of financial services is a key competitive advantage.
Simplicity and transparency wins the day
The African market responds well to simple, transparent products with attractive and easy-to-understand pricing structures. This is what drives adoption. The surest way to fail in Africa is trying to fool consumers with complex fee structures and rules around how products should be used.
If you have a solution that is complex to build but simple to deliver, then you’re sitting on a winner. On the other hand, if you have a product that is highly complex where consumers cannot see how it works or why using it will benefit them, then it is poised to fall flat on its face.
Empowering the ecosystem is the next growth catalyst
Integrating vertically and enabling merchants to accept digital payment solutions creates a more vibrant digital economy. This strategic move leverages an existing customer base and brand trust to drive adoption among businesses. Merchants recognise the growth potential in accepting a digital product already trusted and used by a large customer base.
This is a logical next step for sustainable growth. Providing places and use cases for customers to spend their digital money, rather than it remaining dormant or being withdrawn as cash, is crucial for the success of digital financial services. This strategy empowers consumers, SMMEs, merchants and others and will be a significant driver of sustainable growth in the digital financial services space in 2025 and beyond.