Rise of Fintech companies makes SA attractive to investors.

In an article from US education provider PSB Academy, the launch of smartphones and now the invention of technologies such as Artificial Intelligence (AI) and cloud computing is what has fuelled the breathtaking rise of Fintech firms around the globe.

Andrew Maren, founder and CEO of Fintech cash access provider ProfitShare Partners says financial advisory and consulting firm Deloitte notes that investments in Fintech increased to US$131.4 billion in 2021, up a massive of 144% from $53.9 billion in 2020.

“The fastest-growing start-up industries in Africa, Fintech companies are being driven by a number of trends,” says Maren. “These include on-the-rise smartphone ownership, internet costs becoming more accessible, and network coverage reaching rural areas in some provinces.”

Add to that a growing young population and rapid urbanisation, and the stage is set for a number of industries to take advantage of the speed, simplicity and value Fintech-based firms offer.

“Areas of growth in the tech sector in Africa are finance and banking (Fintech); cross-border payment gateways; insurance (InsureTech); wealth technology (WealthTech), and regulation technology (RegTech),” Maren notes, largely because the agility users get through these smaller, web-based platforms suits a population spread across large areas with a number of different languages.

“The simplicity of being able to request products via smartphone – or ask for assistance – makes achieving the users’ goals fast and friendly.”

Attracting interest from Africa and beyond

According to management consulting firm McKinsey, Africa’s financial services market could grow around 10% per annum, to $230 billion in revenue by 2025, or $150 billion excluding South Africa, which is the largest and most mature market on the continent.

“The service offerings available right now to foreign investors is huge,” Maren says. “Buying into a South African Fintech company is made easier by the strength of the US dollar, British Pound and Euro against the Rand.

“Where a buy-in or outright purchase is approved by regulatory bodies, Fintechs that have proved their mettle could set their founders up for more inbound funding and further tech development.”

“From ProfitShare Partners’ standpoint, we note that the sector as a whole is growing and investors in the various industries tallying up the cost of investing compared to the cost of starting from scratch.

“Right now, it seems that those who produced a highly desirable product early on are the firms that will continue to improve. That is a very attractive purchase. No matter where in the world you are.”