Bye-Bye Brick And Mortar: Sub-Saharan African Markets With The Most Fintech Opportunities

Bye-Bye Brick And Mortar: Sub-Saharan African Markets With The Most Fintech Opportunities

Sub-Saharan African banks are late to the party.

With large masses of the population still unbanked or underserved, fintech startups are getting a foothold and creating financial and economic change.

Technologies like mobile payments and bitcoin steal the show. But it is simpler solutions to saving and withdrawing money that have great impact when focused on boosting financial inclusion. And, to be more frank, fintech in Africa is garnering more investment and fanfare because it is recognizing wide gaps in services and products and addressing them with very transferable and translatable solutions.

Sub-Saharan African trends in fintech

Sub-Saharan Africa fintech is not so much a disruptor. That may sound blasphemous but sub-Saharan African financial markets are not all developed.

In developed markets, traditional banks and financial institutions are everywhere, with physical bank branches and ATMs in every town and village.

This is not true in most of Africa, where banks provide access in high activity areas but often ignore far-out or “last-mile” locations. Mauritius and South Africa may go against that rule but they are the exceptions. Fintech companies in Africa are accordingly creating a new financial infrastructure that can either link up to traditional banking entities or fill a gap not even being addressed in those banking boardrooms.

Mobile banking is a perfect example of this situation where many Africans may not know the full suite of traditional banking offering. Many Africans adopted mobile banking and operate in a world where the physical banking building appears archaic. That is not disruption…maybe more like time traveling to the future.

Big data and fintech

African investors want more data and information, and it is not easy to come by. You can talk to three bank CEOs and get different opinions on the market and direction of it. Due to the already prevalent and growing presence of mobile banking and general mobile usage, data crunchers are finding ways to add value to those looking at African markets.

Answers to the continent’s challenges and conundrums lie in the data, or at least begin with analyzing the data. This becomes an even greater truth when considering Africa’s vast informal market. The more the narrative is based on data and less storytelling (regardless of how entertaining and personal), the more solutions and offerings can be targeted.

Convergence and integration are beloved in fintech

Convergence between different sectors is not a new thing in Africa. Mobile banking took off and other sectors have joined for the ride and opportunity. Farmers can check prices at different points of sale for their crops. Mobile applications exist for education loans or paying for solar panels. M-KOPA Solar is effectively taking its prepaid solar business to the market as a consumer asset finance business.

This convergence of sectors and the subsequent innovation is a quick cross-pollination of ideas and concepts. African innovators are very comfortable testing solutions by mixing cloud computing, software as a service (SaaS), internet of things, big data and block chains with a little bit of local culture and knowledge. The integration of these technologies across multiple markets makes stronger consumer products and services and provides more information for the next innovator.

Sub-Saharan African markets with most opportunities

Before diving into a discussion on African markets with the most opportunities, it’s important to recognize that the fintech offerings addressing the unbanked and underserved markets have the greatest potential.

More than 75 percent of the continent’s population does not have access to traditional banking services. Addressing Africa’s poor is money-making and impactful but is also time-consuming — something to consider for those who want a quick return.

Regulations and laws are moving slowly and end users are quick tasters but not always quick adopters. End users are quick to try a mobile application or technology but innovators could go far by providing more information on how this offering can more directly impact or improve lives. I understand why chip credit cards have improved the industry, but this may not be clear to someone who has never had a traditional bank card before.


More than 60 percent of the population has access to mobile phones in Nigeria, Africa’s most populous country with more than 180 million people. The country also boasts the second largest banking sector in sub-Saharan Africa. Yet less than 40 percent of adults are banked, according to the most recent Enhancing Financial Innovation & Access Access to Financial Services Survey (EFInA). EFInA is funded by the U.K. government and the Bill & Melinda Gates Foundation to promote financial inclusion in Nigeria.

Even a greater percentage is underserved. Fintech may have its greatest upside in this market. The need for big data is at the forefront of the fintech discussion for addressing the needs and wants of Nigerians, especially the underserved. Nigeria’s underserved and unbanked consistently baffle traditional financial institutions. The market is fertile and hungry for a fintech revolution, and it is coming.

BuxMe is a mobile app by Wema Bank, Nigeria’s longest surviving indigenous commercial bank, that allows users to send or receive money to and from any email or phone number, whether the user has the app or not. Quickteller, launched by the Nigeria-based Interswitch Group, is a money transfer and bill payment system. Verve World, an extension app of Quickteller, enables cardless ATM withdrawals. One Credit provides short-term loans to lower income Nigerians. Slimtrader provides ecommerce services for inventory management and payment solutions. A similar application, CashMadam, uses advanced analytics to help SMEs in the inventory management ecosystem. Piggybank is a favorite of mine by helping people save money through automatic debits from their account. It could be useful in many developed markets. This list in Nigeria fintech startups could go on and on, yet there are still so many unaddressed market challenges.


M-Pesa, the Kenyan money transfer system now spread across Africa, is the celebrated success story in the sub-Saharan African fintech sector. Kenya was (and remains) an ideal market for trying out a new fintech idea. The number of mobile money users is approaching 28 million with a high penetration of smartphones and most users speak English. Such promising factors are evident in a recent report published by Disrupt Africa discussing how more than 120 startups raised a total of $185 million plus in 2015.

Kenya startups came in No. 3 after South Africa and Nigeria based on the amount of dollars raised by tech startups. One of the companies mentioned in the report is Cellulant, which has operations in 10 countries, employs over 300 people, and has connected more than 40 million customers across Africa. The company provides mobile payment and banking services and allows businesses to engage customers on feedback via mobile phones.

Alternative Circle is an app-based marketplace that enables financial institutions to lend capital directly to customers without those institutions being required to build their own infrastructure and financial ecosystem. Kenya’s BitPesa is the fastest growing (and affordable) bitcoin trading platform. Ranis Capital uses customer invoices to provide short-term financing. First Access, a New York-based data analytics company, and Finca, a U.S. microfinance organization, joined together to offer loans to East Africans using credit scores collected from mobile phone data. Kenya is one of their first locations.


Tanzania is pushing its neighbor Kenya in the race to the top of fintech hill in East Africa.

First, the market conditions are ripe. The population is large at 55 million, with approximately 35 million active mobile contracts. The GMSA, a global body for mobile service operators, estimates that Tanzania will be among the top seven subscriber markets in sub-Saharan Africa by 2020.

Second, the results show that fintech is getting its footing. The World Bank reported in 2015 that Tanzania had more mobile money accounts per 1,000 adults than anywhere else in Africa. Statistics suggest that the percentage of adults with mobile money accounts is nearly four times those with traditional bank accounts. The results encapsulate the growing appreciation for financial inclusion and microfinance banking platforms strengthening the country’s financial ecosystem. Tanzania may not be creating household names in the mobile app market but the big players are taking notice. For example, the MasterCard Foundation and Mercy Corps launched AgriFin Accelerate in Tanzania based on its initial success in Kenya.

South Africa

South African startups accounted for more than 40 percent of the money raised by fintech startups in 2015, according to Disrupt Africa. This is good news for South Africa. The country is particularly keen for entrepreneurship and activity in the fintech space. The unemployment rate in South Africa is at an 11-year high with nearly 5.7 million people out of work. Startups and small businesses are changing the narrative for this country at time when confidence is low in the general economy.

Tech hubs such as Rand Merchant’s AlphaCode in Johannesburg and Barclays Rise in Cape Town, are fertile grounds for fintech startups. Standard Bank offered fintech entrepreneurs a chance to win 500, 000 rand ($34,747) in prizes and business support at its Pathfinders Challenge finals. Fintech startup Zoona announced in April 2016 that it had processed over $1 billion in money transfers, bill payments and other financial services through its network of agents. Now it has plans to expand to the Democratic Republic of Congo (DRC) and Mozambique. GetBuck is focusing on providing a full suite of private banking for the underbanked. And Nomanini offers a small, interesting-looking wireless device that links to cloud computing software and helps informal vendors process small transactions.


The Ghana fintech market often falls under the radar, but it is a very active market with a major focus on the underserved and unbanked. Leapfrog Investments has invested more than $15 million in Ghana’s insurance sector in the past three years. BIMA provides mobile-delivered insurance in Ghana as well as Senegal, Tanzania and Mauritius. It is also active in Asia and Latin America. Zeepay, a star of the DEMO Africa 2015 event in Lagos, enables mobile payments from both smartphones and other mobile phones and supports international remittances by partnering with mobile network operators and various payment services providers.

Farmerline is a mobile technology and information software company that aids Ghanaian farmers with information on weather, agriculture tips, and, most importantly, market prices. Farmers effectively can better choose the market or POS for their products with more information. IT Consortium supports the education sector in Ghana by collecting enrollment information, storing academic data and processing parents’ tuition payments. South Africa’s Nomanini is also very active in Ghana.

Bye-bye brick and mortar

It’s not an overstatement to say that many sub-Saharan Africans are skipping brick and mortar for mobile money. There is a mismatch for many financial institutions. The sector has built its value through physical locations — branches, ATMs — and the physical presence of people. Fintech theoretically eliminates a significant portion of physical aspects of financial markets.

Brick and mortar is still relevant in developed markets for wealth management, money management, and complex transactions. That being said, fintech can serve up significant solutions to simple, straightforward needs. And adoption can be far easier than explaining Venmo to your grandmother. (Venmo is a free digital wallet service of PayPal that lets you make and share payments with friends so you can split the bill on things like cab fare.)

Maybe, as one investor described it, fintech is truly a time traveling exercise in development. Some steps are fun to skip if you are consumer. Many sub-Saharan Africans did not lose out by not experiencing the fixed telephone line era.

Kurt Davis Jr. is an investment banker with private equity experience in emerging economies focusing on the natural resources and energy sectors. He earned a law degree in tax and commercial law at the University of Virginia’s School of Law and a master’s of business administration in finance, entrepreneurship and operations from the University of Chicago. He can be reached at kurt.davis.jr@gmail.com.