Agence Ecofin TikTok Agence Ecofin Youtube Agence WhatsApp


African fintechs projected to reach $20bn turnover by 2028, growing at 30% annually (Report)

Wednesday, 08 November 2023 17:55
African fintechs projected to reach $20bn turnover by 2028, growing at 30% annually (Report)

(Ecofin Agency) - While a high proportion of their populations remain unbanked or underbanked, emerging and developing countries in Africa, the Middle East, and Latin America will be the main drivers of fintech sector growth in the coming years.

The combined revenue of startups specializing in financial technology (fintechs) operating in Africa is projected to reach $15 to $20 billion in 2028, up from $3 to $4 billion in 2022. This growth signifies an average annual growth rate of 30% during the period, according to a report published on October 24 by the consulting firm McKinsey & Company, entitled "Fintechs: A new paradigm of growth."

The report specifies that the revenue of African startups disrupting the finance world is expected to have the second-highest growth rate globally after fintechs operating in the Middle East (35% on average per year between 2023 and 2028).

In Latin America, fintech revenue is expected to grow at an average rate of 27% per year by 2028, compared to 18% in Europe and 12% in North America and the Asia-Pacific region. The global average is anticipated to be 15% per year.

On a global scale, the total revenue of fintechs stood at $150 to $205 billion in 2022, accounting for 5% of the total revenue in the banking sector. However, it is expected to more than double in the coming years, reaching $325 to $463 billion by 2028.

Emerging and developing countries in Africa, the Middle East, and Latin America will be the main drivers of this growth, considering their largely unbanked or underbanked populations.

The report also highlights that the fintech sector has experienced significant growth worldwide over the last decade. As of July 2023, publicly traded fintechs represented a total market capitalization of $550 billion, a figure twice the amount recorded in 2019. Additionally, over 272 fintech companies achieved unicorn status in 2023, with a combined valuation of $936 billion, compared to only 39 financial startups valued at over a billion dollars five years ago.

Adapting to the slowing venture capital market

Fintech companies raised record capital in the latter half of the last decade. Capital funding from venture capital funds for this category of tech companies increased from $19.4 billion in 2015 to $33.3 billion in 2020. Moreover, the sector benefitted from the acceleration of digitization triggered by the coronavirus pandemic. Fundraising peaked at $92.3 billion in 2021, and the number of transactions increased by 19%.

In 2022, a market adjustment, however, caused a slowdown in this explosive growth. The impact of this adjustment is still being felt today. Fundraising and the number of transactions have dropped, as has the pace of unicorn births. But not all fintechs are facing the same situation. Worldwide, startups in the growth phase (Series C and beyond) were the most affected by the decline in funding over the past year, with an average decrease of 50%. However, fintechs in the seed and pre-seed stages saw their fundraising increase by 26%.

Furthermore, fintech companies operating in the B2B segment have better navigated the drying up of funding compared to those operating in the B2C segment.

The report suggests a promising outlook for the fintech sector, particularly in emerging and developing countries where the demand for innovative financial products remains strong. However, the recent slowing in the venture capital market should prompt fintechs to rethink their business models, transitioning from hypergrowth to a slower yet more sustainable growth. This shift should emphasize profitability rather than solely focusing on the growth of the client portfolio or total revenue.

In a scenario where access to funding becomes more complex, financial startups should also cut their expenses, readjust their organizations, and become more open to mergers and acquisitions.



Public Management

ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

Mediamania Sarl
Rue du Léman, 6
1201 Genève
Tél: +41 22 301 96 11


Benjamin FLAUX
Tél: +41 22 301 96 11
Mob: +41 78 699 13 72


Please publish modules in offcanvas position.