south africa
Blockchain News Latest News

Is South Africa the Biggest Fintech Destination in Africa?

by Giorgi Mikhelidze (Partnership Manager, Forex News Now)

The Fintech industry in South Africa has been going through quite a lot of growth lately. In fact, it’s one of the fastest developing industries in the country, accounting to around 4-5% of FDI in total.

The Fintech industry managed to grow its investment value from $15 million $170 million within 2018 alone and it’s still on a positive trajectory in 2019.

Compared to the rest of Africa, SA has the most number of fintech startups as well as Fintech projects in development as we speak.

Most of these projects focus on the online payment processes as well as the provision of banking services to the demographics that need it most.

How did the trend reach this level?

South Africa is quite a popular destination for multiple financial companies from places like Europe and North America. However, it was quite hard for these companies to integrate themselves with the local market effectively as the perception of the simplest forms of Fintech like online banking and digital transactions were virtually non-existent.

Through the perseverance of local entrepreneurs and one too many success stories of South Africans making a fortune through the financial markets, the government started to see the massive potential of developing their digital economy for easier access to global markets.

South Africa is quite a popular destination for multiple financial companies from places like Europe and North America.

Furthermore, a large chunk of the population was unbanked, which was a serious problem for the local financial institutions. Banks were not able to perform that well, and we all know what happens to a country’s economy when such important companies fail.

One of the primary examples of banks facing issues is the African Bank fiasco in 2014, which almost went bankrupt.

Having such an event occur with a large company like African Bank, convinced the governments that alternative financial projects were required in the country. Not only to provide diversification but also to add educational value to the population as well.

Therefore they left it up to the FSCA which governed most of the financial industry in the country to deal with this issue. The institution has since introduced a small task force for the implementation of Fintech innovations in the country.

The emergence of blockchain in South Africa

Although lending and payment systems provider Fintech startups are arguably the most notable in South Africa, it is essential that we mention the blockchain’s emergence in the region.

The interest in cryptocurrencies sky-rocketed after so many South African investors managed to churn out thousands in profits from the 2017 market boom. Ever since then South Africa has been in the top lists of countries googling terms like “Bitcoin” and “cryptocurrencies”.

the country has been named #1 in the world in terms of crypto holders per internet-savvy citizen in 2018.

Naturally, the popularity of blockchain in South Africa was sparked by the population’s desire to make money in the beginning, but it has quickly turned into a branch of the Fintech industry contributing to the people’s well-being financially.

The poverty rate that was plaguing many regions in South Africa, alongside a high unemployment rate which prompted the local youth to search for alternatives. Those alternatives turned out to be trading in the financial markets. It first started with markets like Forex and stocks, but quickly spilled over to cryptocurrencies in 2017.

Three types of Fintech startups in South Africa

Although there are quite a lot of Fintech startups to speak of, there are only three that stand out the most, and all three of them target key market niches that South Africa is lacking in.

The first example is JUMO, whose primary focus is to digitalize every South African’s banking experience, in order to make services accessible not only to urban areas but rural as well.

Next is the blockchain as already mentioned. The leader of this industry in South Africa is the Sun exchange, which uses the blockchain for allowing locals to purchase solar cells.

Finally, there’s the industry for targeting card payments and online payments in general. This is headed by YOCO which aims to provide small businesses an easier alternative to get paid without too many fees.

Overall, understanding the Fintech industry in South Africa is pretty simple. The innovations which are well known in places like Europe and the United States are just getting started in Africa, which is a major development as the 1.2 billion population is an amazing addition to the global economy.

Please follow and like us:

Related posts

The Bank of England calls for more cryptocurrency regulation

thefintechtimes

Finance Sans Frontières – Notes on the Cross-Border Payments Revolution

The Fintech Times

Avoka Releases 2018 State of Digital Sales in Banking Report

thefintechtimes

Enjoy this blog? Please spread the word :)