This is an excerpt from The Future of Fintech in Africa 2023 report.

Africa is maturing as a fintech market. McKinsey predicts that the financial services market in Africa could grow at 10% per annum through 2025 reaching $230 billion in revenues, excluding South Africa. The diagram shows that African fintech growth exceeds that of the global benchmark.

African fintech firms need access to data to provide better services

As the fintech market in Africa continues to grow, the utility of data will become increasingly important. Data provides fintechs with the ability to monitor their customers, interpret their behaviours, assess their credit worthiness, and has become essential to risk monitoring systems.

However, in order for fintechs to understand and better service their customer base, they need to have access to their customers’ relevant data, which seems to be more difficult within the African market.

There are many reasons why Africa has lower data penetration when compared with other markets.

Cash payments still dominate the African market, although this is changing. According to Statista, as of 2022, cash was the main payment method used in online retail in Egypt, Nigeria, and South Africa, accounting for 67%, 66%, and 40% of the total, respectively. Outside of online interaction, according to McKinsey, 90% of total transactions are still cash based across the continent.

Internet connectivity in Africa is a work in progress

Another issue facing data collection is due to internet connection and access. According to the International Telecommunications Union, in 2022, 66% of the global population is using the internet, this is compared with just 40% of the African population.

Another issue facing data collection is due to internet connection and access. According to the International Telecommunications Union, in 2022, 66% of the global population is using the internet, this is compared with just 40% of the African population.

However, access to internet has become essential in a modern economy and often key to financial inclusion. Bruce Paveley, chief technology officer at TymeBank makes the argument that with “bigger bandwidth at the cheapest price gives all citizens access which is key to financial inclusion and economic growth.”

Looking to how to improve access to data of the African population, internet access will be a key hurdle, but one which can be overcome.

Speaking to this issues, Mr Rajesh Savji Parmar, co-founder and CEO of Cloud Africa and founder of Indelible Inc, argues: “Internet connectivity can be improved in Africa through a combination of government initiatives, private sector investment, and infrastructure development. Some of the plans that are already in place include the deployment of fibreoptic cables, the expansion of mobile networks, the provision of affordable devices, and the establishment of public Wi-Fi hotspots. Governments can also encourage private sector investment by creating a favourable regulatory environment and offering incentives for infrastructure development.”

Adding to these plans, Hannes Wessels, country head for Binance South Africa, points out that there two ongoing underwater cables being installed. The first is Google's Equiano cable spanning from South Africa all the way up the west coast to as far as Portugal.

The second is being carried about by a consortium headed by Facebook and Orange is developing the Africa subsea cable. The growth of internet related subsea and terrestrial infrastructure is shown in the diagram.

Wessels adds: “Both of these initiatives will simplify the deployment of 4G and 5G networks as well as fixed broadband for hundreds of millions of people across the globe.

Local internet connection is another aspect Wessels points to being worked on. Wessels stated that “the number of Internet exchange points (IXP) is growing in Africa in order to improve connections among internet service providers locally and give operators and content providers another more inexpensive choice.”

Cross-border connectivity is the final area Wessels points to as being in development. He stated that there are advancements being made on powerhouses such as Liquid Intelligent Technologies, whose terrestrial cable stretches from South Africa to Egypt and from Kenya to the DRC are contributing to improved connectivity in Africa. Other actions include Paratus's expansion into Southern Africa from Namibia and BCS's installation of fibre networks across East Africa.

The future of Africa will be quicker to adopt digital payments

With increased internet access, there will be the ability to access more data. This is particularly applicable to Africa’s relatively younger population, who have been quicker to adopt smartphones and their digital payment capabilities. According to the GSMA, by the end of 2021, 515 million people subscribed to mobile services in Sub Saharan Africa, representing 46% of the population – an increase of almost 20 million on 2020. Additionally, there will be nearly 100 million new subscribers by 2025 in the region.

Savji Parmar argues that with “the average age being 19.4 years old and the median age of its leaders being 63, there is a massive deficit in the gap between the haves and have nots. However, with the population standing at 1.4 billion people and growing, the opportunity to farm data and develop new products and services to connect Africans across Africa while creating a path for self-development, and growth (jobs....), AI, Blockchain and all other technologies focused on Africa must throw their lot into creating products and services for the masses.

Savji Parmar continues: “The comparatively younger African population's growing mobile usage is expected to have a significant impact on data going forward. With the increasing adoption of smartphones and mobile internet, there will be a growing volume of data generated from mobile devices. This data can be used to gain insights into consumer behaviour, improve the delivery of services, and drive innovation in various sectors. Moreover, the younger generation's preference for mobile-based solutions is likely to drive the adoption of new technologies.”

However, Steve Haley, director of market development and partnerships at the Mojaloop Foundation, anticipates a major hiccup to the possibilities of data collection: “The comparatively younger African populations’ growing mobile usage will increase the quantity of customer data however it will remain under-utilized in silos, except in countries that adopt a national digital public infrastructure initiative. Very well-intentioned data protection laws will make it difficult to use customer data to benefit citizens equitably, but a digital public infrastructure (DPI) strategy could unlock that safely.”

As it stands, the major development in improving the access to data within Africa is internet infrastructure. Developing this infrastructure will help to mature the digital payments market as more people have access to it, which could lower the number of cash transactions allowing for more customer data.

The train is on the tracks for better internet connectivity across Africa with the current infrastructure project. However, it will be the role of governments and countries to be able to properly utilise that data for better growth.