The fintech and technology business community witnessed impressive spikes in 2020 – from companies surpassing their yearly targets to big mergers and acquisitions.
Consequently, many industry experts have made certain predictions for digital payments and African venture investments for 2021.
Here are some from Adedeji Olowe – Founder and CEO of Trium Networks and Elliot Pence – Senior Associate at CSIS.
Jumia Group may partner Stripe
- According to Eliot Pence, since Stripe needs SMEs to adopt its platform, it needs to seed the e-commerce ecosystem wherever it does business. What better place to do that than in Africa, where online commerce is growing 75% faster than the global average.
- Jumia proved to the market this year that it can reduce operating costs (reducing operating costs by nearly 50% in ’20) and seed the broader continental e-commerce ecosystem.
- This will help Stripe to achieve its goal of seamlessly connecting online businesses and payment processors, allowing more businesses to accept online payments in the African market.
Plaid for Africa will emerge
Plaid helps all companies build fintech solutions by making it easy, safe, and reliable for people to connect their financial data to apps and services which is what Mono is doing in Nigeria.
The fastest-growing sector in African venture is fintech.
- “The combination of slow-moving banks ignorant regulators and savvy consumers are a blessing for future seekers. Until now, the focus for many entrepreneurs has been on leapfrogging the old institutions – Neobanks, quasi-credit/lending platforms, or crypto exchanges,” Eliot stated.
While these are important, a more immediate opportunity is simply creating a single API that the old (institutions) and new can talk through, that is why Mono created this new way to connect to financial accounts without screen scraping.
Free interbank transfers to go mainstream
As more people get accustomed to digital banking and the zero charges they offer, commercial banks might soon adopt the zero charges policy.
As Adedeji puts it,
- “Kuda made noise about this (and it seems to be working), and Sparkle is now leading the charge. But guess what, a major bank (think Access, GTBank, or Sterling but not UBA) will decide to reduce their charges for interbank transfers below a certain amount, say N5K, free.”
Such a move has excellent optics and most importantly, it’s the singularly free feature nobody can abuse. The question is, what would be the implication on digital-only banks like Kuda and the rest when it becomes mainstream?
Fierce competition in the Logistics sector
- According to Eliot’s predictions, there will be fierce competition in “logistics marketplace” start-ups, Kobo360, LoriSystems, appTrella, and new platforms like Salesforce-backed Angaza, which have transformed how manufacturers send and how consumers afford things.
- Expect logistics and pay-as-you-go platforms to merge more in 2021 as the continent looks to make real the promises of the Africa Continental Free Trade Agreement. We are already seeing this happening with MVXchange partnering with Japanese firm Digitrad.
Interbank transactions to cross half a billion a month
- Adedeji predicts that in 2021, interbank transactions will cross half a billion in a month. This prediction seems feasible seeing as in November 2020, interbank transactions were at N224million. From these numbers, the pace will continue, and it will cross the 500m transactions per month before the end of the third quarter.
Africa to have highest Crypto users
- Throughout the 2000s, Journalists endlessly cited “7 out of 10 of the fastest-growing countries in the world are in Africa.” In the 2020s, they will cite “3 out of 10 of the biggest users of crypto are in Africa.” says Elliot
- We are already seeing this happening as Nigeria has become the second-largest bitcoin market on Paxful.
- Elliot expressed that the widespread adoption of crypto, and its parent decentralized finance (DeFi), is driving investment into the region by global investors – from Asian entrepreneurs looking to grow exports into Africa to Western “crypto evangelists” that are calling for the end of centralized finance – with deep pockets.
Even though Africa constitutes a small portion of global volume on aggregate, its consumer use is a larger share of activity than any other region.
Local Investors will step to the plate
- Adedeji predicts that the percentage of investment by local investors will grow to be at least 30% this year, largely because a lot of people missed out on the Paystack investment train when it came calling years ago. Investors will be looking for the next big thing to put their money. There will be a lot of Angel investors this year.
- Adedeji warns future investors and founders that angel investment is not for the impatient and the weak of heart. Not every cash you see is good for your cap table.
Agent locations to surpass 1million
- Despite the pandemic, Agency banking has grown rapidly. According to the world bank, 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services. “Companies like Opay that adopted the Agency banking have seen a spike in transactions totalling N1.4b in a month,” says Adedeji
- He also stated that Teamapt is almost pivoting to this as well. Unofficial numbers of locations hit 530K last year. At the same time, SANEF seems a bit quiet about a target; I’m sure the market will drag this over to 1million locations before the end of the year.
Toptal may partner Andela
- Eliot presumes that Toptal – the world leader in connecting businesses with software engineers, will achieve greater global reach by acquiring Andela (and potentially other remote ‘talent marketplace’ businesses around the world) and signals it will go public in 2022, building on its acquisition of Skillbridge. This one seems a little unlikely but let’s see how the year pans out.
CBN will cave in as MTN gets a PSB license
- Adedeji already predicted in 2020 that MTN will get a PSB license but that didn’t happen. He hopes that it will happen subsequently this year.
- MTN has been unsuccessful in acquiring a PSB license from CBN, so their chances of joining the financial service industry are slim.
- Olowe hopes that with Karl Toriola running MTN from March 1, 2021, we can be sure that he will do something as he has a track record of performance, and banking has a track record of minting cash. MTN won’t give up until they get this license.
