African Fintech raised over US$1.3-billion in 2021 and according to research by McKinsey & Company, is poised to generate US$30-billion by 2025. However, Fintech businesses have called for comprehensive regulatory policies for regions rather than countries.

Fintech industry watchers and researchers say this is the fastest-growing start-up industry in Africa and is fuelled by several trends, including increasing smartphone ownership, declining internet costs, expanded network coverage, and a young, fast-growing, and rapidly urbanising population.

They also say Fintech could be poised to advance the continent’s global competitiveness by exporting services globally.

At the same time, researchers point out that there are challenges, notably regulatory uncertainties and differences between countries. This has led to a general call from Fintechs for a pan-African regulatory body to define comprehensive regulatory policies for regions rather than countries.

According to McKinsey & Company, certain governments and the private business sector are working on providing regulatory policy frameworks and the focus is on:

• Regulations - digital-only banks and Fintech are influenced by- but independently regulated from the traditional financial system regulations.
• Anti-Money Laundering Scrutiny – more regulatory bodies are insisting on compliance herewith, worldwide there is a clamp down on non-compliant companies. This requires the verification of information received from the client to avoid fraudulent, terrorist, or other illegal activities being facilitated, supported by other processes such as Know Your Customer (KYC).
• Consumer centrism – Fintech must be vigilant in consumer education, especially the consequences of services and products that did not exist before, protecting the consumer from being exploited.
• Protection of Privacy and Security of Data – stored personal consumer information is susceptible to cyberattacks. Fintech companies must comply and have the necessary security systems and protocols to secure sensitive data

According to the Global Fintech Index of 2020, which lists the top 100 Fintech ecosystems, four Sub-Saharan African cities feature and include: Johannesburg, Nairobi, Lagos and Cape Town. These cities account for most of the continent's Fintech start-up funding.

A statement from the research firm reads, “The countries represented by the four cities above have taken significant strides towards regulatory systems designed to protect stakeholders. Each country's approach to regulations shares similarities, while others are unique to the challenges faced in their market. What is definite is that these regulations evolve rapidly as access to technology empowers this market to scale significantly.”

Automation tools are gaining popularity in markets as Fintech businesses look to comply with data management and cyber security regulations.

In August this year, data released by McKinsey showed that payments and mobile wallets from Africa are likely to grow fastest at around 20% per year up to 2025.

The research company added that South Africa has a bigger share of this market at about 40%, other regional markets such as West Africa, including Ghana and Francophone West Africa are also poised for growth of 15% and 13% respectively over the next three years.