Equity Analysis /
Sub Sahara Africa

Five major themes for the future of fintech in Africa

  • African fintechs are innovating with new products, a broader footprint, cutting-edge technologies and partnerships

  • As a result, they are increasingly impinging on long-established incumbents, eroding the value of these franchises

  • Investors may be overlooking in-house fintechs; we cite listed examples in Egypt, Kenya, Ghana, Senegal, S Africa & Zim

Five major themes for the future of fintech in Africa
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Nkemdilim Nwadialor
Tellimer Research
28 May 2020
Published byTellimer Research

The African fintech space has recorded impressive growth over the past decade. There are currently over 400 active fintech companies across the continent, c80% of which are home-grown. Major drivers of this growth in the fintech ecosystem include favourable demographics, high levels of mobile phone access and Africa’s generally poor levels of financial inclusion.

We surveyed 160 African fintech companies to better understand the drivers of future growth in the sector. 

Our research points to five major themes for the future:

1. Launching new products and services.

This will enable companies to claim a greater share of wallet from existing customers, and also help attract new customers to the franchise

2. Expanding into new countries.

This allows companies to scale up existing operations, and attract a whole new customer base

3. Focusing on new market segments.

By using innovative approaches (related to product features or distribution, for example) fintechs can profitably serve customers who fall out of the realm of traditional financial providers.

4. Increased investment in technology infrastructure 

This builds additional capacity for innovation, automation, efficiency and scalability.

5. Partnering with incumbents 

This can improve fintechs’ reach, especially in highly regulated markets, or can help them to better satisfy the needs of the most challenging consumers.


Other, less commonly cited strategies include: applying for licenses where regulatory restrictions exist; hiring experienced personnel to build in-house expertise; and buying smaller fintechs with interesting business propositions to acquire new products and skills or to reach new markets.

Strategies by product line

Expansion into other countries is most popular among fintechs active in payments (for example Paga expanding into Mexico), lending (Jumo expanding into Nigeria and Ivory Coast), and remittances (SureRemit, which is expanding across Africa).

Introducing new products/services is the most popular strategy among lending fintechs (for example, Tala plans to launch a micro insure offering in the next 12 months). Borrowers represent a captive audience for such companies. Offering additional products can also help tie-in the customer and reduce credit risk.

Targeting new market segments is most popular among insurance (Pineapple is expanding into the auto insurance segment) and investment fintechs (haloyako adding government instruments to its offerings). These companies are typically trying to bring such products to previously excluded individuals, such as those at the bottom of the pyramid.

Increased investment in technology infrastructure is a common theme across the board as this allow fintechs to innovate and improve on their operations.

Partnering with incumbents is particularly popular with payments fintechs (for example, Paga’s partnership with Visa on payments, M-Pesa partnering with Ria for remittances). One motivation is the opportunity to offer services that would ordinarily require licenses or demand stringent approval procedures.

Strategies by market 

Kenyan and Nigerian fintechs, which were the continent’s largest recipients of funding in 2019, are more focused on expanding into new markets than fintechs in other markets. 

Egyptian fintechs are the least interested in expanding into new markets, which in our view is testament to the significant opportunities that exist in the domestic market.

Introducing new products is a common strategy across all markets, but the rest of Africa seem to lag behind the four major hubs. This might be due to the lower uptake of fintech offerings within those regions and/or restrictions on the activities of nonlicensed financial institutions by central banks. 

Identifying new market segments is most common with Egypt fintechs and the rest of Africa, which we think is due to the greater extent of financial exclusion within those regions. 

Fintechs in Egypt and other parts of Africa (Ghana, Ethiopia, Senegal and Zambia) are keen on partnering with incumbents like banks, mobile network operators or other fintechs as this would help them increase their reach and gain new customers. 

Implications for investors

Investment volume in African fintech has shown a strong positive growth trajectory. Over the past five years, the number of deals has grown from 28 to 125 (35% CAGR), the total value of deals has grown from US$150mn to US$1.1bn (48% CAGR), and the average deal size has increased from US$4mn to US$8mn.

In contrast, for incumbent banks in Africa, the median PE discount to their five-year average valuation is 27%, and the median PB discount is 22%.

At the country level, banks in Uganda, Zambia and Rwanda are trading at the biggest discounts to history, while banks in Zimbabwe, Kenya and Mauritius are trading close to their 5-year historical average multiples.

We think these opposing trends reflect the increasing viability of fintech encroachers, given their potential to offer new products at lower cost with greater convenience, and the increasing vulnerability of incumbents, given the erosion of traditional entry barriers such as physical distribution networks and regulatory restrictions.

For investors in listed equities (ie the incumbents), we think this fintech threat carries the following implications:

  1. A return to historical valuation levels should not be assumed as a base case scenario.
  2. Tipping points may be reached rapidly, given fintechs’ ability to scale-up and expand.

On the other hand, we do feel that incumbents’ own fintech capabilities are being overlooked by investors. We highlight below a handful of listed African entities that provide direct exposure to fintech trends for investors in secondary equity markets.

In Egypt, we have payment platform Fawry, which came into the market via an IPO when private equity firm Helios partially exited its investment in the company.

Kenya's fintech revolution has helped the country achieve an impressive financial inclusion rate (c80%), principally due to the rapid spread of mobile money which received tremendous support from the Kenyan regulatory authorities. M-Pesa is the mobile money offering of Safaricom (East Africa’s largest telecommunications firm that contributes c5% to Kenya’s GDP). Commercial bank NCBA, in partnership with M-Pesa, offers M-Shawari for micro loans and savings. Equity Bank  offers Equitel, its mobile payment and banking service, which is operated through its subsidiary Finserve Africa Limited in partnership with Airtel.

MTN Ghana is the only listed company on the Ghanaian stock exchange with meaningful exposure to the fintech space via its mobile money subsidiary.

Senegal’s largest telecommunications provider, Sonatel, hosts Orange Money, a mobile money wallet.

In South Africa, Purple Group’s subsidiary, Easy equities, enables users to invest in shares, exchange traded funds (ETFs) and other equity-based securities.

Vodafone Tanzania offers M-Pesa, a mobile money platform for funds transfer, bill payment and remittance.

Zimbabwe can point to Cassava Smartech, a financial technology company with a subsidiary, Econet, that operates Ecocash, the largest mobile money platform in the country. Getbucks, the fintech lender that dominates the Southern Africa markets, is another listed entity.


For more detail on the fintech trends in Africa see our recently published in-depth report The Ultimate Guide to African Fintech.