Five trends shaping the future of African fintech

In the dynamic landscape of African financial technology (fintech), invention is the name of the game. Fueled by a surge for more financial inclusion and innovation, this sector has been rapidly transforming how Africans manage their money and access essential services, from artificial intelligence (AI) powered solutions that personalize banking and detect fraud, to embedded finance that puts financial tools in people's pockets.

Five key trends are shaping the future of the African fintech landscape by unlocking growth opportunities and driving positive change in Africa – moving beyond mobile money and other traditional fintech trends. Connecting Africa has compiled a list of these trends, below.

1. Embedded finance

Embedded finance seamlessly incorporates financial services into non-financial platforms, enabling companies to provide banking, payments, lending, and insurance within their own ecosystems. Consider it from this perspective: A traveler is booking a flight ticket on an airline's website. Right after booking, they are offered insurance cover, without leaving the airline's website.

Another way to look at embedded finance: A shopper being offered a quick loan to cover their groceries before leaving the shopping app.

Embedded finance has the potential to revolutionize the fintech industry by bringing more financial services options to people's fingertips.

2. Regtech

As Africa's financial markets grow, so do the rules. That's where regtech comes in. Short for regulatory technology, regtech refers to the use of technology to help businesses comply with regulations efficiently and effectively.

The African fintech landscape is unlocking opportunities for growth and driving positive change on the continent. (Source: Image by senivpetro on Freepik)

Streamlining compliance and efficiencies, regtech solution trends are not going anywhere. Powered by technology, these tools automate Know Your Customer (KYC) verification, detect fraud and simplify reporting requirements.

Regtech uses technologies like AI, machine learning, big data analytics and blockchain to automate and enhance compliance processes, especially in the fintech ecosystem.

3. Open banking

Open banking is a practice in the financial services industry whereby third-party providers can access consumer banking, transaction, and other financial data from banks and non-bank institutions using application programming interfaces (APIs).

Some key points on open banking include consumer control, which means consumers have control of their financial data and can choose whether they want to share their data with third party providers or not.

Open banking also encourages innovation, as it allows fintech companies to create new apps and services that can help consumers manage their finances better. Furthermore, by opening data, open banking increases competition among financial service providers, leading to better services and lower costs for consumers.

4. Blockchain

Blockchain technology is revolutionizing the African fintech sector, sparking innovation and reshaping financial services throughout the continent.

There are key considerations that make blockchain a notable trend, like promoting financial inclusion by offering secure and accessible financial services to those who are unbanked or underbanked.

From AI-powered solutions that personalize banking and detect fraud, to embedded finance that puts financial tools into people's pockets, fintech in Africa continues to evolve. (Source: Image by freepik)

Furthermore, blockchain's qualities, like immutability and decentralization, improve the transparency and security of financial transactions.

Additionally, the increasing adoption of cryptocurrencies offers an alternative to traditional currencies and opens up new investment opportunities, especially on the African continent.

5. AI adoption

The impact of AI is profound and undeniable. AI is revolutionizing African fintech by detecting fraud, enhancing credit scoring, personalizing customer experiences, and automating processes. As fintech evolves, the integration of AI technologies brings forth a range of emerging trends, opportunities, and nuanced implications that require thoughtful consideration. African fintech companies are using AI for credit scoring, predictive analytics, fraud detection and process automation.

The African fintech ecosystem is dynamic and exciting. As industries continue to evolve, embrace innovation, and prioritize financial technology – this sector has the potential to empower economic growth on the continent.

— Matshepo Sehloho, Associate Editor, Connecting Africa