In this opinion editorial for TechCabal, Noel K. Tshiani, founder of Congo Business Network, shares his views on the top 5 benefits of fintech for African countries and economies. A native of the Democratic Republic of Congo, he has lived in New York for 10 years. He travels to Kinshasa often to advise fintech startups on their business, fundraising, and branding strategies. He has also organised delegations since 2019 to participate in the Africa Fintech Summit in Addis Ababa, Cairo, Cape Town, and Washington, DC in the United States of America.
Fintech, or financial technology, has revolutionised the financial services sector worldwide, and African countries and economies are no exception. In the past five years, fintech solutions have driven significant changes in the African banking industry. As a result, individuals and businesses have gained new opportunities. Here are the top five benefits of fintech for African countries and economies.
1. Financial inclusion
Financial exclusion remains a significant challenge in Africa, where millions of people lack access to formal banking services. Fintech has been the driver in addressing this challenge by providing innovative solutions that cater to the unbanked and underbanked populations. Mobile money and digital payment platforms have made it easier for people to access banking services, even in remote areas where traditional banks have limited reach. In fact, by increasing financial inclusion, fintech helps to drive economic growth and reduce poverty in African countries.
2. Increased efficiency
Fintech has also improved financial services efficiency in Africa. Digital platforms have streamlined processes, reduced paperwork, and minimised manual errors, leading to faster and more efficient service delivery. Advancement in technology has not only improved the customer experience but also helped businesses cut costs and increase profitability. For instance, digital lending platforms have made it easier for small businesses and individuals to access credit, which was before a cumbersome and time-consuming process.
3. Improved risk management
Fintech has also provided better risk management solutions, especially in areas such as fraud detection and prevention. With the rise of digital financial transactions, fraud has become a significant concern in Africa. The good news is: fintech has introduced innovative technologies such as biometric authentication and machine learning algorithms that detect and prevent fraudulent activities in real time. Better technologies have helped to improve financial transaction security and build trust in the banking system in the eyes of consumers.
4. Innovation and entrepreneurship
Fintech has boosted innovation and entrepreneurship in Africa. The sector has created new opportunities for startups, entrepreneurs, and innovators to develop and launch new financial products and services. Startups have led to the emergence of a vibrant fintech ecosystem, with many entrepreneurs developing innovative solutions for financial services. These solutions include mobile banking, digital payments, and blockchain-based remittances. Based on the studies done by Partech Africa and McKinsey & Company, African startups have also attracted significant investments into the continent from institutional investors in the United States and Europe, providing opportunities for economic growth and job creation for young workers.
5. Financial sector integration
Fintech facilitates financial sector integration in Africa by enabling cross-border payments, making it easier and cheaper for individuals and businesses to conduct transactions across different countries such as Nigeria, Egypt, Kenya, Senegal, or the Democratic Republic of Congo. Integration breaks down barriers and increases trade and investment across the continent. Additionally, fintech has also improved the connectivity and interoperability of different financial systems. Recent innovations make it easier for individuals and businesses to access a broad range of financial services between banks, startups, agents, and mobile money providers.
In conclusion, fintech brings significant benefits to African countries and economies, including financial inclusion, increased efficiency, improved risk management, innovation and entrepreneurship, and financial sector integration.
These benefits transform the African finance industry, creating new opportunities, and contributing to economic growth and development. That’s why African governments, central banks, mobile money operators, retail banks, and corporations will benefit from this momentum by continuing to invest in developing fintech solutions, improving the regulatory environment, and supporting startups to unlock the full potential of financial technology in the months to come in 2023.