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Africa’s Fintech Revolution: Mobile-First Solutions and Super Apps driving the Next Billion dollar Industry

Good morning Rain Makers!

Are you starting the new year with a bang? I sure am, and that’s why I’ve been busy launching “SaaS Sundays” on Beehiiv as part of the 30-day Newsletter Challenge organized by Indie Worldwide. If you’re looking for something beyond Fintech, make sure you check it out and let me know what you think (my DM’s are open).

From today’s update, there is only one thing to take away: the international Fintech scene is booming and hotter than ever. Don’t believe me? Grab your coffee and let’s dive in 👇.

🍿 Quick Snack

  • 🤯 Global fintech funding declined in 2022, but Africa was the only major region to see an increase in # of deals.

  • 🌍 Africa’s Fintech sector is on the rise with mobile-first solutions and super apps driving growth, forecasted to reach $150 billion by 2025

  • 🚨 A fintech Latin America, is challenging the role of traditional banks and making it easier for SMEs to access financing.

  • 👀 Are you a Fintech looking to expand globally? Don’t let your currency and payment preferences turn off your customers.

🍔 The Full Meal

Fintech Funding Falls in 2022: 58% Less Unicorns

  • Global fintech funding experienced a decline in 2022, with $75.2 billion in funding, representing a 46% decrease compared to the previous year (but still a 52% increase from 2020)

  • In the U.S, fintech funding in 2022 decreased by 50% to $32.8 billion. The fourth quarter of 2022 marked the lowest quarter for U.S. fintech funding since 2018.

  • Africa was the only major region to see an increase in deals compared to 2021, with a record 227 deals, representing a 25% YoY increase. An impressive 89% of 2022 deals in Africa were early-stage.

  • Globally, there was a drastic decline in the number of new unicorns in 2022, with fintech specifically seeing a total of just 69 unicorn births, which represents a 58% drop compared to 166 births in 2021.

  • Despite a poor showing in the public markets, insurtech was the only fintech sector to see an increase in M&A exits, surging by 40% in 2022 with 81 transactions (vs. 58 in 2021)

  • In contrast, global fintech M&A exits decreased by 20% YoY to a total of 742.

  • Read the full CB Insights report here.

⚡️ Power Take:

  • Numbers don’t lie, and Africa is becoming unstoppable. The next segment below will give you a good glimpse into what’s behind all this growth.

  • Top 5 VC deals in the region were: MoneyFellows ($31m), Moove ($30m), Tanda ($20m), Telda ($20), and Djamo ($14m)

Fintech in Africa: A Boom in Mobile-First Solutions and Super Apps

Source: CB Insights

Source: CB Insights

  • The African fintech sector is forecasted to reach $150 billion by 2025, driven by mobile-first solutions and super apps.

  • The majority of fintech investments in Africa are going towards mobile money as a large portion of the population is mobile-first and two-thirds of Sub-Saharan Africa’s population do not have a traditional bank account.

  • Mobile-phone penetration in Sub-Saharan Africa is expected to reach 50% of the population by 2025. The use of mobile apps for financial services such as loans, payments, and cryptocurrency has led to the growth of Africa’s crypto market, which reached $105.6 billion in 2021.

  • Super apps, which combine features like payments, communications, and e-commerce into one single application, have a strong presence in the African mobile market and are aiming to boost financial inclusion.

  • Many large African companies, particularly telcos, are launching their own super apps to satisfy their audience, such as Vodacom’s VodaPay and MTN’s MTN MoMo.

  • Read more about it here.

JPMorgan is Setting Stage for Latin American Takeover

  • JPMorgan and International Finance Corp. are leading a $27 million round of investment in KLYM, a data-driven fintech that provides working capital to SMEs in Latin America.

  • KLYM utilizes data such as invoices and tax forms to make credit decisions based on a borrower’s clients, sales, and employees. Thanks to its technology, the company is challenging the role of traditional banks and making it easier for SMEs to access financing.

  • The funding will be used to expand KLYM’s operations in Brazil, Colombia, Chile and potentially Mexico, with Brazil being the main priority for 2023.

  • Why did JP Morgan invest? The bank is agressively looking to form partnerships to offer digital banking services to retail customers and SMEs outside the US. Previously, it has invested in two Brazilian fintechs (C6 and FitBank).

  • Read more about it here

Navigating International Expansion: A Guide for Fintech Startups

  • As the fintech industry continues to slow down, scaling remains a crucial priority for founders looking to expand their business.

  • Scaling a fintech company internationally can present a number of challenges, including (1) navigating the regulatory landscape of different countries, (2) overcoming cultural and language barriers, and (3) managing payments and other transactions in various currencies.

  • Tip #1: Don’t make your customer’s lives harder. Pranav Sood, General Manager of EMEA at Airwallex, suggests that it’s important for fintech companies to be able to meet customer needs and preferences when it comes to the currencies they pay in, the payment methods they use, and the payment rails they are collecting in. It can be a “big turnoff” for customers if they are told they have to pay in a currency that isn’t their own.

  • When a fintech company is ready for global expansion, there is a lot to consider, particularly in light of the uncertain economic market. One way to navigate these challenges is to partner with another startup.

  • Tip #2: Save yourself some headaches and look for partners. Dann Bibas, GM International at Public.com, suggests that partnering enables a company to “pick and choose the bits that you need” and customize the deployment to your requirements. This can be especially useful when building a product and launching into new countries, as there are constantly regulatory, operational, technology, and marketing considerations to take into account.

  • Tip #3: Hiring someone with local knowledge can be critical in order to support your growth ambitions in a new market. This is especially important when navigating regulatory requirements and cultural differences of different countries. Additionally, it is crucial to surround yourself with a team that can help you scale and you can only achieve this by being selective when hiring, rather than filling a gap with just anyone.

  • Read more about it here.

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