The biggest challenges for Fintech in Africa in 2024

When we published our piece on the top tech companies in South Africa, we highlighted the importance of the Fintech sector to the country’s ambitions. South Africa is one of four countries – alongside Nigeria, Kenya and Egypt – that combined have secured 90% of all funding made into the Fintech sector and represent 77% of the industry across the whole continent^[1].

And while there are other countries following suit, it’s the above four that are setting the pace. In May this year, Boston Consulting Group forecasted Fintech revenue across the continent to grow at a compound annual rate of 32% until 2030^[2], with much of that growth expected to come from the Big Four.

Much of that optimism can be attributed to a growing population, currently underserved by traditional banking, that is adopting digital solutions at an accelerated rate. Across the continent, smartphone adoption has led to more people gaining access to lending, insurance, trading and other services that are at the heart of Fintech.

There’s reason for concern, though. In 2023, investment is forecasted to decrease to only $809 million for the year, down from $1.8 billion in 2022 and almost $2 billion in 2021^[3].

It’s against this backdrop that we asked several experts in the region one question: What will be the biggest challenges for the Fintech sector in Africa in 2024? 

We selected the best answers and grouped them by the challenge they illustrated. Here is what they said, abbreviated and edited for ease of reading and clarity.

Cybersecurity & Data Privacy

I think the biggest challenge for the Fintech sector is combating cybercrime. Cybercrime is a challenge that the financial industry has to grapple with because it will not go away. There is, therefore, the need for the sector players to develop a framework for collaborations both between nations and across borders to fight the menace of cybercrime. This can be decentralised through associations as a self-regulating system or centralised in collaboration with regulators. We cannot just be talking about the challenge, it’s time to take action as a group, working in silos is not an option. 

Dr. Babatunde O. Obrimah, Chief Operating Officer, FinTechNGR

The Fintech industry is anticipated to encounter some challenges in 2024, primarily stemming from the confluence of resource scarcity, cybersecurity vulnerabilities and the escalating threat of fraud. Against the backdrop of a global economic downturn, companies within this sector will confront formidable obstacles in retaining skilled personnel and sustaining financial stability, particularly if they have not yet achieved profitability. The continuous erosion of customer purchasing power poses an additional hurdle, suggesting a potential reduction in revenue streams.

Umar Abdullahi, Head of Engineering, Mono

The funding drought may continue to linger, as Fintechs either downsize or shut down, though a rebound is plausible. Regulatory policies, and competition from the incumbent, traditional companies, who are now fully embracing digital transformation will also pose a challenge, as well as lacklustre consumer trust, and low levels of financial literacy. Undoubtedly, cybersecurity will take centre stage in 2024 as the one challenge to rule them all. 

The continued adoption of digital payment solutions, mobile money, cryptocurrency, blockchain technology, virtual wallets etc, as well as the projected rise in internet and mobile penetration, will likely increase cybersecurity incidents. With increased access to technical know-how, expertise and cutting-edge technology like AI or deep fakes, the threat becomes even greater and more daunting. 

Grillo Adebiyi, Lead, Marketing & Growth, Cowrywise

The biggest challenge I believe for 2024 carrying over from this year is data privacy concerns in Africa.  

The issue of data privacy has become a prominent worry for Fintech enterprises in the current era of rapid technological progress. The Fintech sector extensively depends on acquiring and examining substantial quantities of confidential client data, encompassing financial data, personal particulars and transaction records. Failure to sufficiently safeguard this data can result in significant repercussions, including but not limited to identity theft, fraudulent activities, and unauthorised entry into financial accounts.

Furthermore, the occurrence of data breaches and security vulnerabilities can adversely impact the credibility and trustworthiness of Fintech enterprises among their customer base, resulting in possible business losses. The rising frequency of malevolent hacking strategies and the possible misuse of personal data for unlawful purposes further accentuate the imperative to address data privacy concerns within the fintech sector.

Revon Singh, Head of Enterprise Risk Management, Onafriq

My response below is focused on the East Africa Fintech scene.

1. Mobile money: People in East Africa rely heavily on mobile money to pay for things, but this can be risky if the mobile money system is not working properly. There is a need for mobile money networks to improve the robustness of their systems both in terms of service and security by using advanced encryption techniques and multi-factor authentication.
   
2. Competition from banks: Banks are starting to offer their own Fintech services, so Fintech companies need to find ways to be different and better. Banks are looking to cut their expenses, so they are hiring in-house developers to develop their own systems, Fintech have to do more R&D to keep up and explore strategic partnerships with banks to leverage their established infrastructure and customer base.
   
3. Data privacy: Fintech companies need to be careful with the data they collect about their customers and make sure that it is not used for anything that the customer does not agree to. This is a major issue currently. There is a need for Fintech companies to do regular security audits of their systems, and use industry-standard encryption techniques, access controls and data breach prevention systems to ensure that there is no breach of customers’ data.

Priscilla Kemigisha, Projects Team Leader, Fintech Group

Macroeconomics and Big Banking

To begin, most Fintech companies will need to continue monitoring and anticipating the impact of macroeconomic factors. We have already seen trends of reduced consumer spending that have had a direct impact on payments.

Several African economies were hit by inflationary pressures, and though this did not fully come to bear in 2023, I expect that in 2024, the impact will be felt more strongly. The macroeconomic challenges will also affect funding for Fintechs which rely heavily on investor financing. Based on these, it’s fair to say macroeconomic factors will be extra crucial for performance and survival in 2024.

The second issue I believe deserves close attention is cybersecurity, especially on the back of the increasing complexities that come with digitisation and automation. Notably, there seems to be a gap in the availability of the skills needed to counter some of these cybersecurity issues. Navigating cyber security will remain one of the biggest challenges for Fintechs and businesses in general and will require a deliberate strategy to mitigate its potential impact.

Solace Kidisil, Group Chief Operating Officer, Nsano

The biggest challenge I already feel about Fintech is that financial institutions have begun to act as if they were Fintechs. They did not see the wave coming and now that it is smashing they try to imitate Fintechs. 

I identify various behaviours, going from funny to irritating. Let us be honest, Fintechs are not welcomed by Financial Institutions. They are a disruptive annoying element in their arena. According to them, Fintechs are not supposed to play within the adult arena but should be restricted to sandboxes with kids. But the fact is that Fintechs often beat pure players within the financial arena. 

Sébastien Le Blanc, Chief Growth Officer, MIPS

In 2024, Fintechs in Africa will have to watch the currency fluctuations very closely. As the infrastructure and most of the costs are priced in dollars, it is a key variable for success. The other important challenge involves scaling across the continent. Very few companies have been able to cover this wide and diverse continent at scale. Coverage is key for sustained growth, reduction of risk and increased valuation far beyond the national complexities.

Charles Kollo, Chief Marketing Officer, Kowri 

References – biggest challenges for Fintech in Africa in 2024

[1] – Period between 2021 and 2023

[2] – Page 18 of Reimaging the Future of Finance report

[3] – Page 3 of Unlocking the Fintech Potential in Africa report