OPINION: Diaz - Fintech plays a critical role in bridging financial gaps, empowering businesses and individuals

It involves a range of innovations designed to adapt traditional financial services to modern technological platforms such as online platforms and smartphone applications. 

The global fintech landscape in last year continued to be dominated by North America, home to more than 12,000 financial technology companies, showing modest growth from 2023.

Data shows that last year, total global investment fell from 51.7 billion dollars to 43.9 billion dollars. Americas accounted for the largest share of fintech investment. 

Fintech basically encompasses technology-driven solutions such as the use of mobile applications (Apps), artificial intelligence (AI), block chain and big data, prioritizing simplicity, convenience and cost efficiency for general mass use. 

According to available data by Statista Market Insights, the digital payments segment dominates the fintech market in terms of user base. As of last year, it boasted over three billion users and is projected to reach 4.45 billion by 2029. 

Other segments trail significantly behind: digital assets with 860 million users, digital investment with 590 million users, and digital banking with 300 million users. 

Examples of Fintech services include mobile payment platforms like PayPal and M-Pesa, cross-border money transfer services, mobile loans platforms, mobile banking services and crypto currency among others. 

With global fintech market projected to reach 460 billion dollars by end 2025, and is expected to reach 686.8 billion dollars by 2030.  

Fintech has become increasingly popular around the world. This is partly due to increased accessibility that it affords. In places like Africa, a majority of the population remains unbanked or under banked and mobile banking has moved in to fill this void.

It also affords speed and convenience such as enabling real-time payments, quick loans without visiting banking institutions, security and movement without carrying huge amounts of cash. 

The use of AI and data analytics offer an opportunity to personalize and tailor make financial advice, services and products while the incorporation of advanced encryption, biometrics and fraud detection systems offer enhanced security. 

Fintech and economic development

Fintech is especially having a profound on Africa by addressing long-standing challenges in financial inclusion, economic development, and access to financial services.  

Fintech companies in Africa, according to a report from the European Investment Bank, the number of African companies offering new products and services in finance jumped over the years. Nigeria is the leading country in the fintech market with 28% of all the fintech companies on the continent.

About a year ago, 33% of African fintech firms were offering payment solutions. Lending was the second most popular product area, offered by 19% of African fintech companies.

Over 60% of Africa's population remains unbanked and fintech has filled the gap by providing financial services through mobile money platforms, digital wallets, and microfinance apps.

It is also helping the continent’s majorly poor population overcome high banking costs that have traditionally hindered the uptake of banking services. 

With poor infrastructure linking rural communities to major towns, fintech has also made it possible to communities to overcome the physical access challenges that made traditional banking inaccessible. This has been made possible by the high mobile phone integrations and usage that is currently being seen in Africa.

Fintech is also playing a critical role in empowering small and medium enterprises. Digital lending platforms like Branch, Tala and M-Pesa Business provide microloans to small businesses, fuelling entrepreneurship and local economies while services like Flutter wave and Chipper Cash lower the cost of cross-border remittances, enabling those abroad to support businesses back home. 

The fintech sector has also created an impact on job creation and skills development with start-ups and established fintech companies employing skilled professionals in technology and software development, sales and customer support.

Fintech companies continue to support the development of skills in software development, data analysis and cyber security in their endeavours to create a tech savvy workforce to support the industry.

Indirectly, agents for mobile money platforms have created businesses and employment in both urban and rural development. 

Governments and central banks have additionally supported the increasing uptake of fintechs by creating supportive regulatory frameworks thus creating fintech friendly environments.

This has resulted in the sector attracting significant investments with start-ups springing up with innovations to address the communities’ diverse needs. 

In summary, the benefits of fintech to Africa can be described as increased financial inclusion, cost efficiency, the promotion of entrepreneurship and empowerment of communities through increased access to credit and platforms for savings.  All these are ingredients for economic transformation and business growth.

Like with all industries, the fintech sector also continues to experience some challenges. Being a nascent industry, there are issues with regulatory compliance and policy advancements. For example, some loan platforms have been accused of higher than normally acceptable interest rates, challenging communities and certain unethical use of private data. 

Lack of adequate data protection protocols have in turn led to data breaches and fraud, exposing people to cyber security issues.

Other challenges include infrastructure such as limited electricity in some rural areas and lack on internet access and mobile phone signals in some areas. Developing trust in digital solutions, solar systems, especially in the wake of data privacy breaches and cyber security is also an ongoing process. 

Despite the challenges, the future of fintech is full of promise and growth potential, especially in Africa. Africa’s young population, growing urbanization and increase mobile phone and internet access ensures that fintech will continue to be critical driver of economic growth and digital transformation. 

After initial resistance by the traditional banking communities, there is now more collaboration between fintechs, banks and governments and this is expanding access to services and creating much needed innovation.

Finally, emerging technologies like AI and block chain can only drive fintech to the next level of development, leadership for growth, focused on efficiency and superb client experience, and bring economic transformation and connectivity to the world of business. 

Fintech therefore continues to play a critical role in bridging financial gaps, investments, empowering businesses and individuals, and helping in creating a more inclusive financial ecosystem, by transforming how individuals, private and public sectors, and businesses manage money, making financial systems more efficient, accessible, and inclusive across the world.

Chris Diaz                                          Business leader and Chairman              Adili Group