Africa’s fintech market to reach $65bn in revenue by 2030, says new study 

The African fintech market is projected to reach $65bn by 2030, representing a 13-fold increase over 2021, according to a new study conducted by consulting firm Boston Consulting Group (BCG) and QED Investors, a global VC based in the US.

This will make it the world’s fastest-growing region, alongside Latin America, which is predicted to see 12.5-fold growth. North America, in contrast will only see a 4.4 times increase, although revenues there and in the Asia Pacfic region will remain far ahead of the rest of the world.

The study also projects a compound annual growth rate (CAGR) of 32% for African fintech revenue until 2030.

BCG tracks global revenue pools for financial institutions and services (such as banking and insurance) and applies a proprietary methodology to project these revenue pools until 2030. The firm also tracks funding and descriptive data for nearly 32,000 fintechs worldwide.

Aparna Pande, a consultant at BCG and co-author of the report, explains that the projections rely heavily on these two proprietary data sources, along with the input of internal and external experts, the experience of VC partner QED in the sector, and interviews with top global fintech CEOs to test the projections against historical and expected performance.

“While we can never project anything with utmost certainty, we feel the projections are good directional indicators for the success of tracked segments and regions,” she says.

Growth due to ‘leapfrogging in technology’ and new fintech champions

BCG attributes Africa’s fintech sector growth to “leapfrogging in technology” and the emergence of new fintech champions. 

The continent’s youthful population, which is increasingly digitally literate, combined with its low credit card penetration, presents a tremendous opportunity for digital banking.

“In Nigeria, 73% of adults own mobile phones, yet the penetration of credit cards is a mere 2%. This discrepancy presents a significant opportunity for fintech companies to bypass the limitations of traditional banking systems,” says Pande. 

According to the New-York based consultant, payments and remittances are the most funded segments in African fintech and are likely to remain areas with the greatest immediate potential for innovation. Banking services, on the other hand, offer opportunities for disruption in the long run.

Key challenges

Currently, most of Africa’s fintech revenue is generated by companies based in Nigeria, Egypt, South Africa and Kenya. BCG predicts that this trend will likely continue until 2030.

But the study also acknowledges key challenges that need to be addressed before 2030. 

Apart from regulation, which has traditionally hindered African fintech growth, the low level of large-scale funding and the increasing brain drain pose obstacles to the full potential of the African fintech market.

Pande states that in Africa, challenges beyond regulation include slower ecosystem activity due to relatively lower levels of large-scale institutional funding and the departure of highly skilled labour to other global regions.

“However, the increasing interest from institutional investors is expected to boost funding and facilitate successful business exits, thereby encouraging local talent to innovate within the region,” she says.

Recently, Nigerian fintech Flutterwave, valued at $3bn, acquired a payment services license in Egypt as part of its preparation for an initial public offering (IPO) on Nasdaq. 

Successful exits are expected to create a positive feedback loop for the ecosystem, according to Pande.

In addition, the African fintech market is becoming more open with the entry of new players that compete with traditional telecom companies. 

While telecom companies are anticipated to continue leading the way, “we also anticipate the emergence of regional fintech champions working either in partnership with telecom companies or independently,” says Pande. 

An example of this is Wave, a mobile money provider operating mainly in Senegal, which became the main competitor to Orange Money, the mobile money service of the French multinational telecom company Orange, in only two years of operations.