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Africa FinTech Report 2020 - Executive Summary
- 1. 1AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY EXECUTIVE SUMMARY
- 2. 2AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Research Methodology The Africa FinTech Report 2020 is a comprehensive study based on MEDICI’s proprietary FinTech data on thousands of startups, deep market intelligence derived from years of tracking the FinTech industry, and secondary research that was refined through brainstorming sessions and in-depth interviews with segment experts to extract valuable market signals from the noise, identify market trends, and develop points of view. MEDICI has ample information in quantitative and qualitative forms, which is curated by our industry analysis and market engagement initiatives. In the secondary research process, we conducted an in- depth study of the FinTech landscape in Africa by understanding the key stakeholders, drivers, trends, challenges, and opportunities. Key sources referred to for the secondary research process spanned across company and industry reports, press releases, government and other official sources, national and international databases, our partners, and many others that facilitated valuable data-driven insights. MEDICI combined primary and secondary research in Payments, Lending, InsurTech, WealthTech, and Blockchain & Cryptocurrency. We analyzed over 581 FinTechs in Africa and down selected 473 of them based on their current active status. The qualitative and quantitative findings and insights were curated by MEDICI analysts to present a comprehensive view of the FinTech landscape. These were further refined through years of deeply tracking industry developments and bringing together the ecosystem.
- 3. 3AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Introduction Growth of FinTech Startups in Africa 581 567 525 468 392 313 238 189 158 129 114 90 72 53 44 42 38 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Before 2005 Africa is a unique region in several ways. The continent has diverse cultures, different languages, and wealth distribution is on an extreme spectrum. Africa also has 6 of the world’s top 10 fastest economies as per the World Economic Forum; Africa’s average GDP growth has consistently outpaced the global average and is expected to remain at least 6% until 2023. As a continent, Africa has focused on leveraging technology, especially in the last decade using mobile carriers to push the financial inclusion agenda. Africa’s mobile subscription penetration is at 80%, and for countries such as Kenya, this figure is over 91%. This is a major factor for FinTech booming in the continent. In this report, MEDICI analyzed 581 FinTechs that have been founded in Africa, and during the analysis period of this report from January 2018 to November 2020, over $821.94 million had been invested in the sector. As per our analysis of the market over the last four years, there has been a steady growth in FinTech funding in Africa between 2016 and 2019. Due to COVID, the number of startups founded in 2020 has reduced significantly. The average number of companies founded between 2015 and 2020 is close to 66, while the average number of FinTechs founded between 2010 and 2014 is close to 30, which shows that FinTech is starting to gain traction in the African market. FinTech has played an important role in the growth of Africa’s financial sector. It has provided an alternative to the traditional financial sector, especially in the rural and urban areas where proximity is a barrier to access services and products from incumbent banks and FIs.
- 4. 4AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Introduction Mobile money has been a catalyst to the revolution in banking and financial services in Africa, which started in Kenya and subsequently spread across the continent. It demonstrated that people are ready to adopt new offerings along with unlocking an opportunity for entrepreneurs to develop new solutions that drive financial inclusion in the continent by providing them access to financial services from their mobile phones. The growth of FinTechs in Africa would potentially be fueled by the African Continental Free Trade Agreement that has 54 of the 55 African Union (AU) nations. Among other objectives, this agreement aims to create a single market and deepen economic integrations. Once the agreement comes into force, Africa would be the largest free trade area, and this will help FinTech companies expand their services across the continent without much regulatory barriers. This is also likely to incentivize successful FinTech businesses in overseas markets to introduce their offerings in the continent. During this analysis we also observed multiple acquisitions and exits clearly demonstrating vibrant consolidation. Over the past decade, there were over 30 such deals. The two biggest deals were the acquisition of EMP and DPO Group by Network International for about $320 million and $288 million, respectively. A total of 21 of those were in Payments, indicating a clear consolidation trend in this segment—the most mature of all FinTech segments in the continent. Governments across the continent and regulators in respective countries are taking steps to bolster innovation using FinTech as a vehicle. Here are some of the initiatives: • Creation of a regulatory sandbox by the Capital Market Authority in Kenya to test innovative products in capital markets • Creation of a taskforce by the Ministry of Information Communication and Technology to leverage blockchain AI and IoT in Kenya • Creation of the National Payment System Framework and Strategic Vision 2025 for the national payment industry in South Africa • Creation of the Digital Asset Marketplace framework and Mauritius African FinTech hub (Mauritius) • Allowing the payment of almost all government-related services through e-wallets and other means in Tanzania • Implementation of the National Financial Switch project to facilitate the interoperability of digital payments in Zambia Local authorities in the continent have undertaken many other initiatives. Owing to a large customer base, quick adoption of new technologies by people, and regulatory support, FinTechs have a great opportunity to provide banking and financial services to those who were previously left out.
- 5. 5AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Africa FinTech Landscape Break-up of 473 active startups in Africa South Africa, with 190 active startups, and Nigeria, with 141 active startups, have the largest FinTech ecosystem in Africa, followed by Kenya. We are also witnessing Egypt, Ghana, Uganda, and Rwanda as centers of innovation in financial technology in the continent. Note: Includes only active companies. ‘Other’ includes, Artificial Intelligence/Machine Learning, Capital Market Tech, RegTech, Remittance, Trade Finance, Loyalty/Rewards, Digital Cards, Big Data Analytics, and Cybersecurity. 105 Payments 78 Lending 41 Wealth Tech 35 Insur Tech 50 Blockchain & Crypto currency 32 B2B FinTech 25 Banking Tech 99 Other 23 Neobanks/ Digital Banks Number of FinTech Companies by Segment Country-Wise Break-Up – Top 8 190 South Africa 47 Kenya 18 Egypt 08 Ethiopia 08 Rwanda 14 Uganda 141 Nigeria 09 Ghana HIGHLOW
- 6. 6AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Growth Over the Years in Top FinTech Ecosystems in Africa 129 151 178 184 187 190 2015 and Before 2016 2017 2018 2019 2020 SOUTH AFRICA 45 67 84 109 134 141 2015 and Before 2016 2017 2018 2019 2020 NIGERIA 5 7 9 13 16 18 2015 and Before 2016 2017 2018 2019 2020 EGYPT 29 39 45 45 47 47 2015 and Before 2016 2017 2018 2019 2020 KENYA Note: The above numbers represent the number of active FinTech companies as of a given year
- 7. 7AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Africa FinTech Funding Analysis 137.2 41.4 44.9 193.5 502.4 126.0 30 44 56 39 56 69 4.6 0.9 0.8 4.9 9.0 1.8 0 25 50 75 0 150 300 450 600 2015 2016 2017 2018 2019 2020 Total Funding ($, Mn) No. of Deals Avg. Funding ($, Mn) 56 For the 2-year period from 2018 till Nov 2020, early-stage funding (Seed + Series A) led the charts in terms of the number of deals announced, clearly demonstrating growth in the entry of new startups. 14 of these deals were in Payments, which indicates the continuing focus in the continent on money movement internationally as well as locally. Only Cellulant from Kenya raised $47.5 million from its Series C round. During our analysis, we also found that three companies had raised money through equity crowdfunding e.g., Wealth Migrate which raised over $2.2 million. While most of the companies have raised funds only till Series B in the last two years, it also indicates that more money will flow into the later funding rounds as the startups expand. Stage-Wise Break-Up of Total FinTech Funding In Africa: 2018– Nov. 2020 74.2 75.4 239.2 47.5 385.794 24 10 1 35 0 20 40 60 80 100 0 100 200 300 400 Seed Series A Series B Series C Other Total Funding ($, Mn) Total No. of Deals 35 01 1024 Note: The total number of deals includes deals with undisclosed amounts. Doesn’t include debt funding, convertible bonds, grants, ICOs, and IPOs. Other’ includes unknown series rounds, strategic investment deals, crowdfunding, and private equity rounds. Note: The total number of deals includes deals with undisclosed amounts. Doesn’t include debt funding, convertible bonds, grants, ICOs, and IPOs. Year-Wise FinTech Funding in Africa: 2015–Nov. 2020
- 8. 8AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Active Investors in Africa FinTech This is not an exhaustive list TECH COMPANIES BANKS /FIs VCs/PEs
- 9. 9AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY M&A Activity 02 WEALTHTECH 02 B2B FINTECH 02 LENDING 01 INSURTECH 01 REMITTANCE 01 BANKINGTECH Acquiree Acquirer Deal Price ($, Mn) Date Year Segment EMP Network International 340 3/4/2016 2016 Payments DPO Group Network International 288 7/29/2020 2020 Payments Paystack Stripe 200 10/15/2020 2020 Payments Fundamo (PROPRIETARY) Visa 110 6/9/2011 2011 Payments Paycorp Holdings Actis 95 8/7/2013 2013 Payments Top 5 Deals Out of the 31 M&A deals over the last decade, over 70% were in the payments sector. By analyzing the acquirers, we understand that these acquisitions were strategic in nature. Most of the acquirers have been successful businesses across geographies, and they wanted to enter Africa through acquisitions. The first ten months of 2020 saw six M&A deals, up from three (M&A deals) in 2019. COVID-19 has accelerated M&A—many brick-and- mortar shops in the region have been closed. As a result, transactions have reduced and B2Bs and payments segment startups have been affected. Four out of the six M&A deals in 2020 took place in the payments segment. 22 PAYMENTS Number of M&A deals by Segment
- 10. 10AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY WealthTech Market Landscape Investment Platform Personal Finance Management Others This is not an exhaustive list. Consumer Lending SME Lending Software/ White Label/APIs Marketplaces/Other Alternate Lending This is not an exhaustive list. Lending Market Landscape Note: Includes active companies only. Includes foreign players that have significant business operations in the continent. This is not an exhaustive list. Note: Includes active companies only. Includes foreign players that have significant business operations in the continent.
- 11. 11AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY InsurTech Market Landscape Blockchain & Cryptocurrency Market Landscape Policy Management/Aggregators Software/White Label/APIs Claims IoT-Preventive Insurance/ TelematicsOnline First Insurance Blockchain Cryptocurrency Note: Includes active companies only. Includes foreign players that have significant business operations in the continent. Note: Includes active companies only. Includes foreign players that have significant business operations in the continent. This is not an exhaustive list. This is not an exhaustive list. This is not an exhaustive list.
- 12. 12AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY Payments Market Landscape Note: This includes active companies. Neobank/Digital Bank Market Landscape Note: This includes active companies. Software/White Label/APIs Payment Gateway/Processors Mobile/Digital Wallets PoS/Mobile PoS Bill Payments Other Neobanks Licenced Digital Banks This is not an exhaustive list. This is not an exhaustive list. This is not an exhaustive list.
- 13. 13AFRICA FINTECH REPORT2020 | EXECUTIVE SUMMARY What’s Inside Africa FinTech Report 2020 Research Methodology Introduction Africa FinTech in Numbers • Regional Break-Up • Country-Wise Analysis Investment Activity • Segment-Wise Funding Analysis • Stage-Wise Funding Analysis • M&A Analysis in the Continent Segments • WealthTech • Lending • InsurTech • Blockchain & Cryptocurrency • Payments Neobanking & Partnerships Conclusion
- 14. Get your copyof the full report! DOWNLOAD goMEDICI.com/afr2020 About MEDICI is the world’s leading FinTech Research and Innovation Platform. MEDICI is a partner to banks, tech companies and FIs globally with over 13,000 FinTechs on the platform, enabling FinTechs to scale and create global economic impact. MEDICI is committed to supporting the complex financial services ecosystem and enabling stakeholders benefit from the industry’s accelerated growth and global impact. Website: www.goMEDICI.com | Twitter: @gomedici Global Contacts Salil Ravindran Head of Digital Banking & Research salil@gomedici.com Aditya Khurjekar CEO and Founder ak@goMEDICI.com Amit Goel Founder and CSO amit@goMEDICI.com Giuseppe Marchese Head of Business Development, Europe giuseppe@gomedici.com DISCLAIMER The content in the report is for informational purposes only. It does not intend to be or constitute financial advice or any other advice; rather, it is general and not specific to any reader. Before using the information given in the report to make an investment decision, please exercise due diligence and seek advice from a registered professional. All third-party trademarks (including logos and icons) referenced by MEDICI remain the property of their respective owners. Unless specifically identified as such, MEDICI’s use of third-party trademarks does not indicate any relationship, sponsorship, or endorsement between MEDICI and the owners of these trademarks. Expert opinions and industry viewpoints shown in this report are those of the individual or the company. MEDICI does not endorse them.