This year 13% of global entries for the SWIFT (Society for Worldwide Interbank Financial Telecommunication) Innotribe Startup Challenge for Africa have come from the continent, up significantly from just 1% received last year.

According to SWIFT leadership the Startup Challenge is open to innovative technology and technology-enabled financial services companies that are headquartered in Africa, working in areas such as payments, securities, trading, social media tools, big data/data analytics, security, identity, b2b or b2b2c mobile, small business apps & services and/or IT infrastructure.

Consulting and outsourcing firms are not eligible and all applicants must have a demonstrable "beta" product.

For the second year running, the Innotribe Startup Challenge for Africa will be part of SWIFT's African Regional Conference (ARC) scheduled for 17 – 19 May in Mauritius.

The Innotribe Startup Challenge was established to offer young African financial technology startups the opportunity to showcase their products and receive expert coaching and mentoring.

Twelve companies will be selected to compete in the event, with three finalists selected to attend Sibos, SWIFT's annual global financial services conference. At Sibos, which takes place from 26-29 September in Geneva, the finalists will share the stage with fintech experts and receive a US$10,000 cash prize each.

Fabian Vandenreydt, Global Head of Securities, Innotribe, and the SWIFT Institute at SWIFT says: "With a billion-plus population, an emerging middle class, fast economic growth and a high expansion of both internet access and mobile penetration, Africa is a hotbed of fintech activity with a lot of ideas, resources and talent still to uncover. Through the Startup Challenge, we want to spotlight innovation playing a role in the future of the financial industry across the African continent and provide an opportunity for young fintech companies to use Innotribe's network and alumni to help them develop to the best of their potential."

Africa's Fin Strength

According to Fabio Maffioli, Innotribe Startup Manager, this year the focus will be on emerging FinTech ecosystems and the programme has been opened to all startups headquartered in Africa and Latin America, with regional showcases in Mauritius and Mexico City in collaboration with SWIFT regional events.

"Last year, we had a total of 48 applications from Africa - 15 made it to Cape Town and 5 made it all the way to the Finale at Sibos Singapore. This gave us a great mix of startups to select from and there was diversity in the innovation areas including lending, big data and payments," says Maffioli.

Africa's FinTech ecosystem has grown exponentially in the last few years, driven extensively by mobile payment innovation Maffioli adds.

"African FinTech is usually characterised by M-Pesa and other mobile money solutions but FinTech is much more diverse across the continent and embrace almost all innovative activities found globally. In 2015, we've seen many African startups exploring the same areas of innovation than their international counterparts – including lending, big data and payments. This demonstrated the potential of African solutions to have a global impact," he says.

Maffioli adds that appropriate regulations, policy infrastructure and well-designed financial products need to complement technology to ensure the success of initiatives aimed at financial inclusion.

While low penetration of banking, high proportion of millennials and eagerness of consumers to embrace digital innovation bode well for fintech startups hoping to establish themselves, the cost to launch a startup is in the US$100 range, with access to open source software and cloud computing significantly reducing upfront costs.

However, as Maffioli explains, the key to sustainability in this sector is to build solutions that customers want and need. "If startups do not have a problem they want to solve, they will not flourish. Using the lean startup methodology of build-measure-learn, means you can quickly build a solution, understand which bits work, and crucially which bits don't, and focus where your business will bring you customers and revenue."