KPMG Forecasts Boom in African Fintech Investments

There is growing interest in African fintech investments, with special focus on payment services and digital banking. This is according to KPMG’s Pulse of Fintech report, which says while fintech investment in the Europe, Middle East and Africa region dropped in general, increasing focus on underdeveloped fintech markets, including Africa, is anticipated.

According to the report, investments in the payments space in the first half of 2022 accounted for $43.6 billion, compared to the $60.3 billion seen during all of 2021.

Globally, the report notes that 2 980 fintech deals worth $107.8 billion were recorded in the first half of 2022.

For Africa, the anticipated fintech investments are expected to coincide with the massive growth of the sector, as it has been tipped to play a catalytic role in boosting financial inclusion on the continent.

The KPMG report predicts a continuation from last year’s success, which was a milestone for the sector.

“As we know, 2021 was a record year for fintech investment in Africa, and the momentum is increasing,” says Shamit Govind, partner, digital consulting at KPMG SA.

“While the focus remains on payment services and digital banking, we still expect to see more development of other areas − such as cyber security automation − and certainly, B2B solutions will become even more attractive to investors, which we believe means fintech firms will continue to focus on data-driven solutions.

“Whether you’re the CEO of a large financial institution, or the founder of an emerging fintech, understanding how market dynamics have shifted could be critical to your competitiveness and sustainability,” notes Govind.

“Fintech investors are now becoming more discerning with their investments – focusing on profitability and cash flow when evaluating opportunities. Investors are also likely to pay more attention to areas adjacent to traditional financial services offerings, such as open data and decentralised finance. Certainly, the B2B space is also expected to be a high priority for investors.”

Cautioning on fintech market prospects, the report says there is an uncertain future ahead. It says in the first half of 2022, numerous challenges affected the broader investment market, including geopolitical uncertainty, turbulence in the public markets, and rising inflation and interest rates.

With no end in sight to many of these challenges, the report cautions the fintech market could see activity slowing considerably – particularly compared to the major record highs seen in 2021.

“Challenger banks continued to attract a significant amount of attention during the first half of 2022 in many regions of the world, including Africa, as many remained focused on evolving and growing their value propositions to include stronger hyper-personalisation, data-driven predictive analytics and predictive banking services, as well as adaptive customer banking experiences,” says Govind.