(Ecofin Agency) - With two months to go before the end of 2022, the volume of financing raised by African fintech startups is down by more than 15% compared to 2021. The dynamic may point to a shift in investors’ perception.
As we move towards the end of 2022, data and analysis published by Africa the Big Deal suggest that fintech startups accounted for 32% of the venture capital financing secured in Africa. The segment has continued to be the main destination for investments targeting African startups but transaction volumes seem to demonstrate that investors’ interest is waning.
According to Ecofin Pro’s African Private Placement Log, despite a US$250 million deal for Nigerian fintech Flutterwave in February 2022, the sector attracted US$1.6 billion in VC financing this year.
In 2021, a US$400 million deal for Nigerian fintech Opay, and a US$200 million deal for Senegal-based Wave Mobile pulled funding for fintechs in the region to nearly US$2.5 billion. The decline in the volume of VC financing attracted by fintech companies may be cyclical.
But an analysis of sectoral dynamics shows that the companies that have benefited the most from the funding are those that offer payment solutions and compete directly with telecom operators’ mobile money services. According to Muriel Edjo, chief editor of We Are Tech Africa, at first, telecom operators were hit by the new entrants’ innovations but, they are now devising strategies to meet the competition from those fintechs.
Apart from telecom operators, commercial banks are also moving, not to directly compete with fintech startups, but to improve their digital services by adding new features and making them more user-friendly. In light of those developments, the investment community seems to be waiting for the next stage of growth in the African fintech segment.