The African fintech space is growing fast, but there are a number of mistakes entrepreneurs make when entering the industry, according to Johan Meyer, founder and chief executive officer (CEO) of South African fintech company Wallettec.
As a fintech entrepreneur, I must say, there are times when our industry can be confusing but still exciting at the same time. There are too many fintech startups but are all promising “disruption”. In Africa, for example, we currently host over 200 fintech startups. It’s an explosive and promising industry and its bright future is undeniable. Our contribution in bringing in new and innovative ideas and inclusiveness cannot be underestimated.
According to KPMG, fintech investments hit an all time high reaching US$19.1 billion in 2015. It can come across as too crowded though, as some ideas seem recycled and irrelevant to the market. This has also given birth to countless conferences and seminars, which cost an arm and a leg to attend, let alone speak. We’re searching for that next big idea. Fintech is defining its space and we’re always asking, how can we make financial services better, cheaper, exciting and inclusive with no boundaries?
At Wallettec, for example, we partner with other fintech companies in seven countries. One thing we have in common with other fintech entrepreneurs we connect with throughout Africa and the world, is we believe financial technology has the power to truly empower people, not only by giving them the tools to trade but by also enabling them to expand their income by means of new services they can offer to the community access to financial services to protect their income and their families.
As someone who’s been operating in the fintech space for over a decade, I’ve observed a few challenges and mistakes new African entrepreneurs make when entering the industry. Below are five of them.
Solving African problems with a global person in mind
Our challenges should be solved with a local in mind. A massive percentage of Africa is underbanked and still using feature phones. Why do most fintech companies concentrate on disrupting the banking industry by developing digital banking apps for smartphones, if most of their market is still on feature phones? Out of the 550 million mobile phone subscribers in Africa, less than one-third owns a smartphone.
If it works in the UK or US, it will work in Africa
Most fintech companies copy what’s being done in America or Europe and try to bring it to Africa. Once again it’s a no! Africa is a very unique market and should be treated that way. The same applies in the USA and UK, they look at African countries such as Kenya and think products like M-Pesa would work – it fails almost all the time.
The financial inclusion theory
All fintech startups claim that they work on financial inclusion. True financial inclusion isn’t just payments only. It helps a street merchant gets access to income protection. It gives the elderly the ability to get funeral cover or claim social grants without travelling for hours just to stand in a queue and get their grant money.
Doing it yourself in fintech is like trying to win a war with one soldier, the market is massive. If fintech companies could start working together and develop a true solution that will unify different fintech industries, they’d all benefit. For instance, in South Africa, when banks formed the Payments Association of South Africa (PASA), they unified. There’s no way single fintech companies can disrupt the industry in Africa if they don’t work together.
Not doing research
Before developing a solution, find out what your market needs. The only way to develop a true workable solution is to know what the problem is. Most fintech startups develop solutions without an idea of what their market needs.