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African fintech startups are diversifying to scale up

A man laughs in front of a banner for the Flutterwave company. In front of him is a woman holding a phone.
A new report says in Nigeria, 27.3% of fintech startups, including Flutterwave, are diversified.
By Carlos Mureithi
Published Last updated

Increasingly, African fintech startups are moving from focusing on niche areas such as payment, lending insurance, and investment, to offering a wide range of complementary services. This is according to a new report by Disrupt Africa, a website for news on African startups.

Almost 25% of the fintech startups tracked this year are operating in multiple categories. This is up from 15% in 2019 and 8% in 2017. The report is based on data from 576 fintech startups in Africa. The website defines fintech startups as those that disrupt traditional financial services and challenge incumbent service providers.

This diversification is driven by the startups’ need to expand, says Tom Jackson, co-founder of Disrupt Africa. Startups, especially those that are venture-backed where growth is a key performance indicator, are seeking growth and more customers, he says.

The diversification trend is most common in Nigeria, where 27% of fintech startups are multi-category, such as Flutterwave, Kuda, Cowrywise, and OneFi. This is followed by South Africa at 22% and Kenya at 21%. The Covid-19 pandemic has also contributed to the trend with investors more willing to fund the expansion of activities of existing fintech startups as compared to funding new entrants.

Fintech remains the most attractive category of startups in Africa for investors

Fintech is the most dominant component of Africa’s startup space, with the majority of startup funding over the past four years flowing into this sector. And for the past six and a half years, African fintech startups have raised about $900 million, more than twice that raised by startups in any other space over the same period, according to Disrupt Africa. The biggest funding news this year in this space was that of Flutterwave, an Africa-focused payment technology company, raising $170 million in a Series C round.

With more than half of the adults on the continent still unbanked, these startups fill gaps in traditional financial services by innovating and putting up digital systems and infrastructure. Diversifying allows them to fill these gaps while leveraging technology and the opportunities it offers in banking, payment, and credit.

Technology enables fintech startups to innovate and reach new customers

Technology provides innovative solutions for reaching customers. The most popular combinations, the report says, include payment, remittance, and business admin platforms; payment, lending, and financing companies; and investtech and personal finance platforms.

Businesses can scale geographically or vertically, Jackson says, “and often adding new verticals to your product suite is easier as you are simply offering a new  service to your existing customer base, who hopefully already use and trust you, as opposed to having to attract a whole new base in a new, and probably quite different, market”.

On the customer side, Jackson says, there’s a “pull factor”, as customers “ideally” want to carry out all their financial transactions in one place.

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