A total of 277 fintech startups in the continent have raised ~900 million in the past six and a half years, more than double the amount raised by startups in other sectors. The amount raised has been growing annually and in the first six months of this year, it has doubled last year’s total in a development largely as a result of Flutterwave, an Africa-focused payment technology company, raising $170 million early this year.

Nigeria, South Africa, and Kenya are the largest recipients of African fintech funding

Most of the funding for African fintech startups goes to companies in Nigeria, South Africa, and Kenya. Together, investment in fintech startups in these countries makes up 87.9% of the entire amount raised by companies in this area since 2015.

The three are the top funding destinations because they have the most number of fintech startups—a combined 68%—and they have more developed ecosystems, Tom Jackson, co-founder of Disrupt Africa, tells Quartz. “[They are] Big markets, with track records, success stories, and startups that have already raised, so investors feel more confident investing in these countries than elsewhere,” he says.

Although there are also growth signs in other markets, the report says, “the overwhelming signs are that investors, especially in the age of COVID-19, still prefer to invest in the more established fintech ecosystems.” Recent developments in Egypt could however soon lead to a shakeup in these regional dynamics.

Most investment in African fintech has gone to payments and remittances

Startups dealing in payments and remittances have received the highest amount of investment. This is because this is the most established and populated category within fintech space and it addresses “a huge fundamental issue” of how to pay and get paid affordably and quickly, says Jackson. Further, the payments and remittance space has big companies with great track records, and “investors like spaces that have proven value and have already attracted big investors,” he says.

Still, a new category is emerging—open banking—which Disrupt Africa has featured for the first time. A system that is expected to disrupt the banking industry, open banking allows control of consumer banking accounts through third-party applications. For banks and other financial institutions, it allows them to expand customer reach while for the startups, it creates a revenue-sharing system where they can profit from a subscription or referral basis from their third-party apps.

This space is new and has few players. Disrupt Africa is tracking six, including Nigeria’s Pngme and South Africa’s truID. But with 1.8% of all fintech funding, this banking model has already raised more money than some older spaces. Open banking “is one to watch over the next couple of years, especially in Africa’s most developed fintech markets,” the report says.

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