Fintechs, or financial technology company, have been on the rise over the last couple of years. This brand use software to speed up, automate, and improve access to financial services for both service providers and customers. Lately, many entrepreneurs are jumping into the fintech space due to the ease of getting funds and the high returns they offer. Fintechs company in Africa raised nearly $3 billion in the last financial year. This makes the most funded companies in 2021.
As much as it’s a profitable business venture, there is still a lot of fintech company in Africa that goes down the drain yearly. Most probably because of the competitive marketplace, economic downturn, and having mediocre team members. With the right guidance, launching a fintech can change your entire life.
How to Start a Fintech Company in Africa: A step by Step Guide
I’m excited to show you how to start a Fintech company in Africa and scale it to the global market!
What is a Fintech?
A fintech is a company that uses technology to improve and automate its customers’ financial needs. In contrast to traditional financial service providers, fintech are more reliable, secure, and efficient as they apply the use specialized software and algorithms commonly used in computers and smartphones.
From using credit cards to make online purchases to online money transactions using ApplePay, Google Wallet, or PayPal, that’s Fintech!
Starting a fintech company in Africa can set you ahead for the next coming years due to the Compound Annual Growth Rate (CAGR) of 13.9%. This means that the Global Fintech Market is set to hit a whopping US$16,652,680 million by 2028.
Digital banking is one of the key contributors to the growth of fintech startups. Further, a rise in interest in cryptocurrencies and blockchains will increase the growth of fintech in the coming years.
That’s reason enough why starting a Fintech company in Africa is one of the profitable investment opportunities in 2022.
How to Start a Fintech Company?
Here is exactly what you need to do to start your fintech company in Africa:
Find your Niche
Instead of targeting a broad population, your fintech startup could target a small portion of prospects. This will increase your potential of becoming the best at what you offer.
For example, you can combine your knowledge of the financial market and passion for Agriculture to build your Fintech. What does this mean? Your customers will mostly be smallholder farmers that have a specific interest- a financial solution that can help them access secure mobile banking.
Identifying your niche will help you in terms of saving money, becoming more productive, and offering greater competition in your niche since you know exactly what your customers need.
Common niches in the financial market include mobile banking, investment management, lending, global money transfers, Insurance-tech, and crowdfunding.
Let’s have a look at some fintech startups in Africa to help you understand better:
|Global Money Transfers||Fintechs that help people make international money transfers.||Flutter Wave|
|Crypto-based solutions||As the name suggests, they offer the easiest ways to sell Bitcoins, Ethereum, and Tether instantly at affordable rates||Yellow Card|
|Lending||Fintech startups that help people borrow money through their smartphones||Branch|
|Payments Apps||Financial technology apps that help people send money without passing through banks||Paga|
|Insurance tech||Fintechs that offer insurance services to their customers||Bimaleo|
Check for Regulations
Before jumping into the Fintech space, it is prudent to understand each rule governing the industry. Since Fintechs deal with both personal and sensitive data, it is a requirement that they comply with General Data Protection Regulation (GDPR).
Other than that, you need to abide by the Payment Card Industry Data Security Standard (PCI DSS), Know Your Customer (KYC), and anti-money laundering policies (AMC).
Common regulatory bodies for Fintechs Include:
- Office of the Controller of Currency (OCC)
- Commodity Futures Trading Commission (CFTC)
- Consumer Financial Protection Bureau (CFPB)
- Federal Deposit Insurance Corporation (FDIC)
Having a transparent operation procedure can save you from breaking any laws intentionally. Additionally, you need to employ a team of specialists and consultants that will ensure that all your company’s operations are in check.
TIP: Conduct regular internal audits that focus on technological, financial, and regulatory aspects. This should be done before, during, and after launching your fintech startup.
Understand your Competitors
The benefit of knowing who your competitors are and what they offer is that you are able to make your services and marketing unique.
Having in-depth knowledge about your competitors can help you create marketing strategies that improve your company’s performance. Often done by taking advantage of your competitor’s weaknesses.
Most fintech entrepreneurs are afraid of launching their startups since they believe that they ought to bring something new into the fintech space.
That’s 100% incorrect.
Just by observing other fintech in Africa, you can start a business that aims at improving the quality of an existing service or software. Let’s say you are eying at Insuretech, create a fintech that eases the process of getting insurance services by making the process fast and simple as compared to what others are doing.
Some of the best places to learn about your competitors include:
- Exhibitions and trade fairs
- Press reports
- Customer feedback
- Local business directories
- Questionnaires, etc
Analyze your competitors in terms of how they optimize their websites/apps, advertise themselves, and mode of operations.
TIP: Most fintechs don’t necessarily stick to the same plan year in and year out. Therefore, you should conduct regular analysis to note any new trend or change.
Build a Strong Team
Unfortunately, most Fintechs launched each year tend to fail. But why is that?
There are very many reasons to justify these startups’ failures such as lack of finances, lack of proper understanding of one’s marketplace, etc. But the one predominant factor is always having mediocre team members.
Let’s face it. Even Jeff Bezos never scaled Amazon to such levels without the help of a team. There is a lot that needs to be done for Fintechs to reach the global market. No matter how good your idea might seem, it cannot prosper without a goal-oriented team working together.
By team members, I mean finding an App development team with the right tech skills to develop your Fintech apps and optimize the company’s website.
Brands such as Birdeye, Good Firms, and Clutch are the best way to find software development partners. Additionally, you can ask for recommendations from fellow Fintech founders on how they got the right partners.
Explore Various Funding options
There are very many places to get funding for your fintech company in Africa. Some include angel investors, venture capital, bank loans, crowdsourcing, grants, and startup competition, just to mention a few.
Recently, African fintech startups reached $1 billion in investments. This means that with the right idea, you can get instant funding for your Fintech in Africa.
Before seeking funds, ensure that you have a minimum viable product (MVP) that’s able to attract attention from the customers. From there, you can use money from MVP to build software and apps for your Fintech business.
This is the most critical part of your Fintech journey. Because unlike other steps mentioned above, this is more of a long-term plan. After you’ve got your team, funds, and location, you have to put all your vision into practice.
You’ll have to make critical decisions about your fintech, develop new technologies, and diversify alongside market trends and changes.
3 Successful Fintechs Company in Africa
Founded by Daniel Jung and Matt Flanner, Branch is one of the largest money-lending fintech company in Africa. Branch uses a machine-learning algorithm that analyzes data gathered from users’ smartphones. This data may include users’ contacts, geographical locations, text messages, and calls. Branch’s team then uses this data in determining the creditworthiness of users.
The company has raised over $260 million in funding as of 2022.
Jumo is a B2B firm that creates predictive data products and models for mobile network operators, financial service operators, and related companies. The company has raised $91.7 million in funding so far.
Flutterwave is a fintech company launched in 2016 in Lagos, Nigeria. The company allows you to sell online, process payments, build financial products and use business tools to grow your business. So far the company has raised over $170 million in funding.
I bet you want to create one of the biggest Fintech startups this year. The secret is quite simple; find your niche, get the right team, and stick to the plan. Don’t be afraid of what you’ve heard out there about starting Fintech companies. Trust your gut instincts and watch your dreams come to life.