Seth Onyango, bird story agency

South Africa's financial services market will out-earn Nigeria's over the next seven years on the back of a strong performance by Africa's fintech sector, according to a report.

'New Global Fintech 2023: Reimagining the Future of Finance' by Boston Consulting Group (BCG) and QED Investors predicts that Africa's fintech market, led by South Africa, Nigeria, Egypt, and Kenya, will grow to US$65 billion in 2030 - a thirteen-fold increase from today's levels.

"We expect some degree of leapfrogging in technology, particularly when it comes to cashless payments. In Nigeria, 73% of adults have a smartphone, but a mere 2% have credit cards," reads the report.

"Accordingly, most Africans' first interaction with the financial services sector may be through their smartphones — presenting major fintech opportunities in payments and lending for regional champions with full-stack attacker models."

Historically, telco-fintech players, such as M-Pesa, developed by Vodafone's subsidiary Safaricom, have led much of the segment's growth in the region. 

The fintech report now expects them to maintain their significant role alongside grassroots fintechs. 

"We project a fintech revenue CAGR of 32% until 2030, with South Africa, Nigeria, Egypt, and Kenya being the key markets."

Fintech, which accounts for just 2% of the global financial services revenue, will secure a 25% stake or $1.5 trillion annually, by 2030. 

The Asia-Pacific region is poised to drive much of this growth, contributing 42% of all incremental revenues, the report states.

North America, a key innovator in the fintech realm, remains an essential market, while Europe and Latin America are projected to witness robust expansion, aided by favourable regulations. 

Notably, Africa, unburdened by outdated infrastructures, has the potential to build an innovative financial system, leveraging fintech's rapid advancements.

In 2022, Africa's fintech space saw considerable pandemic-induced growth in new finance app installations, energised by the rapid adoption of mobile banking solutions.

AppsFlyer and Google analysed over 140 million installs across 3,000 finance apps and found that finance app installs across Africa grew by 25% over the previous year.

Ghana led the charge in the African fintech ecosystem in 2021/22, posting a staggering 200% spike in finance app installs.

Nigeria also saw strong growth, with a 33% increase, while Kenya's growth was more modest at 5%. South Africa, on the other hand, experienced an 11% decline.

Mobile attribution platforms, AppsFlyer and Google note that over the past few years, micro and macro conditions have proved conducive to the growth of Africa's fintech industry.

This comes as banks across Africa continue to ramp up their digital offerings and adopt automation, blockchain and distributed ledger technologies to ring-fence their clientèle and court new ones.

Traditional banks in Kenya are already taking on mobile money behemoth, M-pesa, by growing their mobile cash offerings - either by building their platforms or building on the back of existing platforms, including M-PESA.

Africa's internet economy is forecast to balloon 56% to US$180 billion in gross merchandise value by 2025 as paperless retail transactions continue to rise in the post-pandemic era.

Blockchain-based mobile network operator World Mobile figures, show Nigeria, Kenya, South Africa, and Egypt will fuel the continent's mobile commerce boom.

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Find the report here: https://web-assets.bcg.com/66/7e/a36d7eab41e2b4b65c3e687a17f5/bcg-qed-global-fintech-report-2023-reimagining-the-future-of-finance-may-2023.pdf.