The number of startups on the African continent tripled to about 5,200 between 2020 and 2021, according to the latest report from McKinsey and Company.
Financial technology (Fintech) startups account for just under half of the entire startup and generated around $4 billion to $6 billion in 2020.
On average, fintech penetration on the continent was estimated between 3 and 5 percent for all African nations, excluding South Africa.
However, revenue could go up by 800% if penetration levels reach 30.3 percent like global market leaders.
The report estimated that Africa’s financial-services industry could expand by about 10 percent per annum and grow to $230 billion in revenue by 2025. South Africa alone is estimated to generate $80 billion of the total amount.
Transactional solutions of African fintechs can be up to 80 percent cheaper and interest on savings up to three times higher than those provided by traditional players, while the cost of remittances may be up to six times cheaper, McKinsey noted.
“Rather than a “fintech disruption,” the continent is experiencing a “fintech eruption,” and local and international investors are taking notice. African fintech is emerging as a hotbed for investment, with average deal sizes growing and the proportion of fintech funding in Africa increasing over the past year, bringing jobs and growth to African economies. And the story is only just beginning.
“As fintech matures, financial services on the continent are at an inflection point, and several African countries have a significant opportunity to capitalize on the momentum of recent years to unlock further potential in the sector,” McKinsey added.