A new report by Catalyst Fund, an accelerator that supports inclusive tech innovators in emerging markets and data research company Briter Bridges has indicated that fintech investment across emerging markets, including Africa, is increasing, and in addition to the rising numbers, the report shows insight on and acquisition strategies favoured by startups, and the popularity of embedded finance models.
However, there remain shortfalls in demographic representation and the average size of seed deals on the continent.
Briter Bridges Director, Briter Bridges in a statement said: “We were particularly happy to see that the performance of fintech companies in emerging markets remained strong, and grew in terms of users, throughout COVID-19.”
Catalyst Fund: What did the data report show about fintech investment?
The report surveyed 177 startups and 33 investors from across Africa, India, and Latin America. According to the data report, fintech investment in Africa and other emerging markets has increased during the last five years. The amount of investment across the regions totaled $23 billion. Furthermore, Africa is experiencing a growing number of early-stage deals.
However, while seed and pre-seed deals in Africa are rising, their average sizes are still lower than that of other regions. Africa seed rounds on average yield $1 million. In India and Latin America, the rounds on average yield $3 million.
Meanwhile, embedded finance models, financial services offered by non-bank entities, are becoming more popular. This is due to fintech offerings becoming embedded into other product services such as agriculture and e-Commerce. But, this fintech opportunity is still in the minority.
75% of startups use partnerships and digital media as their main customer acquisition strategies. This is particularly the case with startups offering financial infrastructure and payment products. However, agent networks are still essential for startups to reach their base.
Previously underrepresented groups, such as women and migrants, still make up a small number of fintech customers. Underserved groups made up less than 25% of the total customer base among the majority of surveyed startups. However, 81% of startups said they intend to target these segments.
Giuliani said: “As fintechs play an even bigger role in financial inclusion, investors have indicated greater interest in both financial and social returns, which will likely translate into more resources and more attention from global players paid to these startups, especially in cash-dominated economies.”
The detailed report can be found here.
