AFRICA: FINTECH TRENDS
Currently many of those with online access rely on purchasing almost all household items online in order to minimise movement and physical contact, which translates to a number of changes that will impact the financial industry.
These changes will impact everything that involves money, from payments to insurance, to retail to banking. Some of trends we anticipate include the following:
- Growth of digital platforms -With people being confined to their homes and not buying new insurance via brokers, they now want to buy and have their policies serviced online or purchase other goods and services on the same platform. There was also massive uptake at Discovery Bank and TymeBank, two digital banks in South Africa.
- Payments - Investments in the payments space will continue to dominate the sector globally particularly in less mature markets. We will likely see large payments players consolidating to drive global scale, which will drive new M&A deals.
- Embedded finance - There will be strong growth in embedded finance (e.g., buy now and pay later programs, embedded insurance options) and banking-as-a-service offerings.
- Fintech IPOs- Given the successful IPOs of a number of tech unicorns in 2020, IPOs will likely be on the agenda for a number of mature fintech unicorns in 2021. Many local exchanges are also making themselves much more attractive for technology listings to compete with NASDAQ.
- M&A - M&A activity will see a resurgence, driven by incumbents looking to accelerate their acquisition of digital capabilities, by fintechs looking to scale as they look to grow globally or extend into nearby adjacencies and by private equity looking to invest in a growth sector.
- Crypto-assets will become mainstream - The evolution of digital ledger technologies combined with stablecoins and increasing interest in central bank digital currencies will begin to open up tremendous opportunities in the cross-border payments space and inter-bank settlement system. The mainstreaming of crypto-assets combined with clearer regulation is likely to stimulate the emergence of enterprises focusing on systemic support functions within the crypto-asset and broader fintech ecosystem.
- Financial inclusion - Fintechs will be central to efforts to integrate the unbanked into the global banking system. Fintechs, in strategic partnerships with financial institutions, retailers and government sectors across jurisdictions, can help democratise financial services by providing basic financial services in a fair and transparent way to economically vulnerable populations. This presents opportunities for sustainability-linked financing solutions for fintechs.
- Crypto-asset regulation is more likely to increase at the domestic level, and is likely to see increased regional co-operation initiatives among regulators, with a focus on cyber-security, anti-money laundering and anti-terrorist financing, consumer protection and exchange controls