Fintech is a growing industry with seemingly limitless opportunities to improve our financial systems through technology. It is a fast expanding industry that serves both consumers and businesses in a variety of ways. Last year saw an unprecedented rate of change in the financial sector, with huge growth in the use of digital financial services. A report by CB Insights entitled ‘State of Fintech’ revealed that the third quarter of 2021 was the second highest on record for fintech financing, up by 147% year-on-year, and 2022 is looking like more of the same.
COVID-19 pandemic and lockdown pushed fintech services into the mainstream and they will continue to drive financial inclusion, assisting in the creation of an accessible and sustainable digital economy for all, particularly across developing nations. Africa’s large unbanked and underbanked population, together with the increase in mobile penetration create fertile ground for fintech innovation, providing much-needed economic independence to those outside the formal banking system.
Major trends will most likely define the future of the fintech industry and make an impact in the financial sector this year.
According to the Global System for Mobile Communications (GSMA), the number of registered mobile money accounts grew by 12.7% globally in 2021 to 1.21 billion, with sub-Saharan Africa making up 548 million of those accounts. With mobile subscriber penetration across Africa predicted to increase by four percentage points to hit 615 million by 2025, an upsurge in mobile transacting is certain.
The fastest adopters of mobile payments are small, medium and micro enterprises (SMMEs), which, according to the African Development Bank (AfDB), account for more than 90% of businesses and almost 80% of employment in Africa. Traditionally dealing only in cash, the ease of use, affordability and accessibility of digital wallets, mobile POS solutions and QR code payments are changing the way merchants transact, giving them access to loans, insurance and other vital financial services previously out of their reach.
Taking it further and integrating digital financial services into the messaging experience, chat banking is fast becoming the next big thing, allowing users to do their banking on their favourite chat platform. By combining the ease and enjoyment of messaging apps like WhatsApp with the convenience of online banking, users have a fast and personalised way to manage their finances. Banks and mobile network operators are partnering with fintech enablers to bring this service to market and become players in the mobile network operator space.
In 2021, remittance inflows in sub-Saharan Africa amounted to over USD$45 billion, a figure which is expected to more than double in the next two years. A large proportion of the technology supporting these cross-border payment systems remains on legacy platforms, but this is set to change this year, thanks to innovations focused on revolutionising the time-consuming, unsecure and expensive remittance industry.
A joint venture between Ukheshe and ForexPeople – boostXB – will enable customers to accelerate cross border remittance. Through boostXB, Ukheshe enables seamless cross border remittance services for the likes of Chipper Cash, Sasai and many more.
Buy now pay later
The buy now, pay later (BNPL) movement is gaining momentum after kicking off during the COVID-19 economic crisis when companies sought to help customers struggling to pay their bills. This method of deferred payment allows buyers to increase their cash flow and budget more easily by splitting payments into four or six instalments – interest free – and is expected to drive the growth of ecommerce further as more retailers get on board.
BNPL is predicted to increase by 66.9% annually in South Africa, with other African countries closely following suit. Globally, this figure is expected to move from US$176.2 million in 2020 to US$ 1,673.7 million by 2028. A study by PYMNTS.com shows that 48% of BNPL platform users will not buy from a merchant if they don’t offer BNPL and a recent survey revealed that almost 80% of shoppers would not have made their most recent online purchase if not for the BNPL service. With consumer interest being this high, banks are looking to partner with fintechs to help accelerate their technology development and bring BNPL products to the market faster.
Cryptocurrency and Blockchain
The emergence of cryptocurrencies and blockchain is developing in combination with fintech. Blockchain is the technology that allows cryptocurrency mining and marketplaces to exist, and both blockchain and fintech are responsible for improvements in cryptocurrency.
The fintech market is embracing blockchain, and it’s here to stay. According to Market Research Future, global blockchain in the fintech market is expected to expand from USD 231.63 million in 2017 to USD 6700.63 million by 2023, at a compound annual growth rate (CAGR) of 75.2% during the forecast period.
This digitisation push for the fintech sector will see an increased demand for digital payments and other financial services.
At the heart of these trends is the willingness to collaborate, create partnerships and engage with innovation.