The financial-technology (fintech) industry is thriving globally and received $17.4 billion in investment last year alone.
According to EY’s Fintech Adoption Index, a third of consumers worldwide are using two or more fintech services, with 84 percent of customers saying they are aware of fintech (up 22 percent from the previous year).
But users are often unaware that the financial services applications they use count as “fintech”, or may not know what exactly fintech and its accompanying jargon means.
Financial technology is broadly defined as any technological innovation in financial services.
Those engaged in the industry develop new technologies to disrupt traditional financial markets.
Various start-ups have been involved in the process of creating these new technologies, but many of the world’s top banks including HSBC and Credit Suisse have been developing their own fintech ideas as well.
Fintech companies utilize technology as widely available as payment apps to more complex software applications such as artificial intelligence and big data.
The contribution of the financial-technology industry to sub-Saharan Africa’s economic output will increase by at least $40 billion to $150 billion by 2022, according to Financial Sector Deepening Africa, a development-finance organization.
The industry currently employs about 3 million people directly and indirectly in the region, FSD Africa Financial Markets Director Evans Osano said in an interview on Thursday. Sub-Saharan Africa’s gross domestic product is about $1.6 trillion, according to data compiled by the International Monetary Fund.
“If you look at the value chain, most of that money is coming out of mobile-phone companies,” Osano said. “So from the other support services the contribution is not much, but is expected to increase as fintech develops to address the financial needs of people or making services more accessible.”
Safaricom Plc, East Africa’s biggest mobile-network operator, developed one of the world’s first mobile phone-based money transfer services, and says 88 percent of its almost 30 million customers now use it. About 21 percent of adults in sub-Saharan Africa have a mobile-money account, nearly twice the share in 2014 and the highest of any region in the world, according to the World Bank’s Global Findex Data.
FSD Africa is working with some lenders, insurers and fintech companies in several countries including Nigeria, Ghana, Tanzania, Malawi, Ivory Coast, Ethiopia, Kenya, Mozambique, Sierra Leone and Zambia to increase the use of data analytics, FSD Africa Financial Institutions Director Paul Musoke said in the same interview.
“What we’re focusing on is data, availability of data and how institutions can take on this data and utilize it to gain better insight of their customers and product development,” he said.
FSD is working with companies that are developing technology to collect premiums from the diaspora and to enable insurers in various African nations to cover death and medical-related expenses, Musoke said. It is also looking into using technology to collect funds among Africans in the diaspora to invest in building homes.
It is still too early for African governments to start taxing start-up companies in the fintech industry and regulations should encourage innovation rather than try control the sector, he said.
“From a regulatory point of view it is about protecting the consumers who use these apps, that is where the real concern is,” Musoke said.
