“Fintech Penetration Resembles Swiss Cheese: Plenty of Holes!!!”

The latest BCG and QED Fintech report paints a global fintech reality that we also observe in the African Fintech market: Fintechs’ success is very concentrated with top scaled Fintech companies with $500m+ revenue commanding 60% of all industry revenues.

Fintechs have really penetrated only a handful of use cases, payments being a clear winner (roughly 55% or ~$126 billion), followed by neobanks, crypto, BNPL. There are at least dozen BIG Fintech opportunities yet to be improved for consumers and business users, and many more use cases where FinTechs can complement the incumbents and improve their ability to address underserved users.

In Africa, we see opportunities for technology startups in Insurtech, Fintech SaaS, Embedded finance, Financial infrastructure, Open banking and more to help African Banks, Mobile MoneyOperators, Microfinance and Insurance incumbents to improve their operations, manage risk, improve liquidity and Treasury management, access and serve new segments of consumers and businesses by reducing the costs and improving the business case. In addition to SaaS-led and infrastructure-led solution, these businesses then move to embed other financial services, predominantly credit and drive credit penetration in a scalable and profitable way.

At First Circle Capital, out of 15 portfolio companies, eight are partnering with incumbents to improve the way they work, and work across several African markets:

Balad, remittance infrastructure in Egypt helps Banks connect with more MTOs and channel remittances into this $30bn annual flows remittance market

Opareta, SaaS for managing mobile money agents, serves Mobile money operators and Banks to manage their branchless banking distribution in a more efficient manner, reducing costs and embedding credit for agent liquidity needs

Power, banking infrastructure partnering withpan-African banks to enable them offer Earned-Wage-Access credit to their clients and clients’ employees

Credrails, reconciliation software helps banks,fintechs and mobile money players reduce reconciliation issues, improving treasury function and reducing associated risks

Orca Fraud, fraud and security SaaS helps Fintechs, Banks and mobile money players detect and tackle  fraud in real time and reduce related direct and indirect losses

Pumpkn, SME agri-lender pioneer partners with banks and institutional lenders in South Africa to help them serve this segment better

Scale, card-as-a-service infrastructure serves enterprises, mobile money operators and fintechs who want to offer their customers cards, in partnership with Mastercard.

eDoc, open banking infrastructure helps banks serve their customers better by monetizing and improving data pools, across Nigeria and Ghana.  

Key African Fintech theme is PARTNERSHIPS. Partnerships between fintechs and incumbents will help us build a more resilient, transparent and inclusive financial services industry, doubling the current rate of growth.