Africa’s fintech boom is creating niche ecosystems to power the industry’s future globally

Fintech startups like M-Pesa have significantly impacted Kenya.
Fintech startups like M-Pesa have significantly impacted Kenya.
Image: AP Photo/Sayyid Abdul Azim)
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The emergence of fintech startups across Africa working to boost financial inclusion over the past half decade has had some obvious effects. The startup sector has become the best funded on the continent and that has, in turn, fueled the launch of more fintech startups.

But all that activity has also seen niche fintech ecosystems pop up across several African cities. In the inaugural edition the Global Fintech Index City Rankings, four African cities are identified among the top 100 fintech ecosystems globally.

The rankings were compiled by scoring several factors including the number of fintech startups and hubs in cities, the scale of investment in those startups as well as the local regulatory environment—ranging from ease of doing business to startup incentives and internet censorship—where the startups operate.

Johannesburg, Cape Town, Nairobi and Lagos all rank among the top 100 cities for fintech ecosystems, keeping with a trend which sees nearly half of the top 100 cities located in emerging markets. The rankings also reflect that those cities are home to Africa’s most valuable tech ecosystems and typically accounting for the most startup investment received on the continent annually.

Overall, fintech startups in Africa are not so much disrupting traditional financial services as building up a historically underdeveloped banking and financial industry. And by creating a raft of tech-based products and solutions from mobile money, online payment processing, lending to investing, these startups are plugging large gaps that exist in local financial service industries in the world’s youngest and fastest growing continent.

Given the clear need and the potential upside, the report predicts “fintech’s future is likely to arrive fastest” in Africa. There are clear signs major Western industry leaders think so as well with PayPal, Visa, Mastercard and Stripe all investing in African fintech startups in the past 18 months. There is also strong concerted interest from the East as China has emerged has a strong player in the space over the past few months: OPay and PalmPay, two fintech companies in Nigeria have jointly received over $210 million in funding mainly from Chinese investors this year alone.

Yet, despite all this activity, the rankings also reveal there’s still plenty of room to accelerate the scale of growth and expertise of startups and their founders in Africa based on the number of hubs.

The ranking of 238 cities was compiled by Findexable, a fintech research firm, in conjunction with partners like Crunchbase, the global startup funding database, and the Africa Fintech Network.

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