Africa’s Fintechs Revenue to Hit $47bn as Investors Take Advantage of Growth Opportunities – THISDAYLIVE

By Emma Okonji with agency report 

Africa’s fintech landscape has undergone a remarkable transformation in recent years, characterised by rapid growth and innovation, according to a recent report from McKinsey, a multinational strategy and management consulting firm.  

In the report, McKinsey analysis suggests that fintech revenues could reach up to $47 billion by 2028, representing about a five-fold increase from its value of $10 billion in 2023.

This, according to the report, will depend on the continent achieving 15 per cent fintech penetration, adding that the current fintech penetration in Africa is between five to six per cent of the market, when compared with more developed markets such as Germany and the United States, whose penetration level is between 6 and 16 per cent.

Analysing the report, Senior Partner in the McKinsey’s Munich office, Max Flötotto; Partner in the McKinsey’s Lagos office, Mayowa Kuyoro; and Associate Partner in the McKinsey’s Nairobi office, Carolyne Gathinji, however, said persistent macroeconomic headwinds could temper the sector’s growth.

“Since 2021, capital inflows for fintechs have slowed substantially, driven largely by declining equity funding. Fintech funding in Africa contracted by 37 per cent from 2022 to 2023, a trend that continued in 2024, with funding in the first half of the year down by 51 per cent compared to the same period in 2023, from $864 million to $419 million.

“The funding crunch has affected fintech players, especially those that are reliant on external capital, leading some to downsize, merge with other entities, or even close. Mergers and acquisitions have also risen as funds have retreated. Debt has significantly increased, growing by 182 per cent CAGR between 2022 and 2023, which could be a sign that investors now have greater faith in more mature fintechs,” the trio said in the report. 

According to them, “As the market matures, fintech funding in Africa has shifted toward more advanced verticals such as lending to individuals and small-to-medium enterprises (SMEs) and non-commoditized payments, including merchant payments and cross-border payments, which collectively attracted around 70 per cent of funding value in 2022 and 2023. While wallets and blockchain or cryptocurrency ventures received significant investment in 2022, accounting for around 20 per cent of funding, investment in these verticals dropped sharply in 2023.”

The report however said beyond funding constraints, African fintechs also face regulatory complexities and increased competition for talent. Approximately 38 per cent of African developers surveyed in 2024 are working for at least one company headquartered outside Africa, and more than 80 per cent of executives that were surveyed by McKinsey, reported that it is moderately or very difficult to hire tech and product-related or strategic talent on the continent.

The report identified six key dynamics that are shaping the emerging African fintech landscape to include: Emergence of new partnerships; Rise in market consolidation; Product innovation acceleration; Integration of fintechs into other verticals; Fintechs taking different roles across different regions; and the Complex Africa’s regulatory landscape.

The three analysts from McKinsey, further explained that the fintech industry in Africa had been a growth market over the past decade, adding that this can continue despite headwinds.

“The past two years have highlighted the importance of profitability, scale, and specialisation to secure continued growth for fintechs in a tightening environment. Our research has identified four key themes that fintech players can embrace to unlock their next stage of growth on the continent, which include the focus on value creation.

“There are still numerous untapped opportunities in the African fintech market, as cross-border payments, asset-backed lending, SME-focused offerings, and embedded finance present potential for disruption. Additionally, under-developed markets like Angola, Algeria, and the DRC are showing promising signs of fintech growth,” Flötotto,Kuyoro and Gathinji, further said in the report.

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