FINTECHS in Africa continues to show their resilience despite the drying-up of venture capital during 2023, as startups begin to enter strategic partnerships with each other and with larger financial institutions.
Over the past two years, the continent has recorded 26 fintech startup acquisitions. That compares to just seven between 2019 and 2021 according to Disrupt Africa’s latest report, Finnovating for Africa: Reimagining the African financial services landscape 2023.
“This suggests Mergers and Acquisitions (M&A) activity in the space is hotting up, which will serve as positive news for investors and entrepreneurs alike,” said authors of the report.
South Africa and Nigeria experienced significant activities compared to other startup ecosystems with 10 and nine of the deals made since July 2021 respectively.
The acquisition of Maritime Microfinance Bank by Nigerian Fintech startup Payhippo and that of troubled e-commerce startup, Sky Garden by Kenya’s Lipa Later are among the deals completed by the end of 2022.
South Africa’s digital Bank, TymeBank completed its acquisition of Retail Capital as Pan-African fintech Chipper Cash acquired Zambia’s Zoona, UAE-based Galaxy acquired Underlie, and Egypt’s MNT-Halan acquired Talabeyah, during this period.
In 2022, giant payments firm, Visa announced it would invest US$1 billion in Africa over the next five years to expand operations and strengthen partnerships with local partners, including fintechs, to increase financial inclusion. PayPal and MasterCard also have their eyes fixed on bolstering capital access to small businesses on the continent.
Since the beginning of 2023, some noteworthy acquisitions include the acquisition of PayForce by Nigerian lending technology firm, FairMoney, Pan-African Cross Switch acquisition of Moroccan fintech, Vantage Payment Systems (VPS) and Private Equity firm Infinite Partners acquisition of South African fintech, e4.
These acquisitions were all geared towards helping expand product offerings and funding to small and medium-sized businesses, spotlighting how these activities are helping to provide enterprises with a lifeline by lowering dependency on their original markets and opening up new revenue streams.
Startups in Morocco, Ivory Coast, Egypt, Kenya, Rwanda, Zambia and Tunisia recorded a single acquisition each in the last two years.
South Africa has made the most acquisitions in this market so far, with a total of 16 transactions. The biggest notable acquisitions in South Africa to date have been Standard Bank’s purchase of SnapScan in 2016 and Visa’s purchase of mobile banking services startup Fundamo for US$110 million in 2011.
Paystack’s US$200 million acquisition by Stripe in Nigeria in 2020 was a significant event that sparked more interest in the continent’s fintech sector.
According to Disrupt Africa, these developments show investors’ eagerness to “buy in” to new services offered on the continent and show that consolidation is finally taking place within the larger financial services industry, with the majority of these acquisitions being “startup-on-startup.”
“All of this will serve to embolden both investors and entrepreneurs in the sector,” said Disrupt Africa.
Overall, 115 startups, 20 per cent of the 576 startups active in 2021, ceased operating by July 2023. South Africa had 36 startups closing their doors- the largest, followed by Nigeria (24) and Kenya (25).
“The closure rate appears to be slowly falling but remains high, something which is to be expected in a popular yet cluttered space that has so much potential but so many pitfalls,” according to the report.
Consulting firm Boston Consulting Group (BCG) and global venture capital firm QED Investors project the African fintech market to grow by 13 times over the next few years, reaching US$65 billion by 2030.
In their report, Global Fintech 2023 Reimagining the Future of Finance, the two firms say Africa will record the fastest growth (12.5 times) alongside Latin America.
The report forecasts fintech revenues in South Africa, Nigeria, Egypt and Kenya will grow by 32% annually until 2030.
