Last year saw an unprecedented rate of change in the financial sector, with huge growth in the use of digital financial services. A report by CB Insights entitled ‘State of Fintech’ revealed that the third quarter of 2021 was the second highest on record for fintech financing, up by 147 percent year-on-year, and 2022 is looking like more of the same.
Fintechs will continue to drive financial inclusion, assisting in the creation of an accessible and sustainable digital economy for all, particularly across developing nations. Africa’s large unbanked and underbanked population, together with the increase in mobile penetration creates fertile ground for fintech innovation, providing much-needed economic independence to those outside the formal banking system.
Some of the biggest fintech trends poised to make an impact in the financial sector this year include:
Mobile money
According to the Global System for Mobile Communications (GSMA), the number of registered mobile money accounts grew by 12.7 percent globally in 2021 to 1.21 billion, with sub-Saharan Africa making up 548 million of those accounts. With mobile subscriber penetration across Africa predicted to increase by four percentage points to hit 615 million by 2025, an upsurge in mobile transacting is certain.
The fastest adopters of mobile payments are small, medium and micro enterprises (SMMEs), which, according to the African Development Bank (AfDB), account for more than 90 percent of businesses and almost 80 percent of employment in Africa. Traditionally dealing only in cash, the ease of use, affordability and accessibility of digital wallets, mobile POS solutions and QR code payments, such as those offered through Ukheshe’s Eclipse API, are changing the way these merchants transact, giving them access to loans, insurance and other vital financial services previously out of their reach.
Taking it further and integrating digital financial services into the messaging experience, chat banking is fast becoming the next big thing, allowing users to do their banking on their favourite chat platform. By combining the ease and enjoyment of messaging apps like WhatsApp with the convenience of online banking, users have a fast and personalised way to manage their finances. Banks and mobile network operators are partnering with fintech enablers such as Ukheshe to bring this service to market and become players in the mobile network operator space.
Cross-border payments
In 2021, remittance inflows in sub-Saharan Africa amounted to over USD$45 billion, a figure which is expected to more than double in the next two years. A large proportion of the technology supporting these cross-border payment systems remains on legacy platforms, but this is set to change this year, thanks to innovations focused on revolutionising the time-consuming, unsecure and expensive remittance industry.
A key focus for Ukheshe this year will be the acceleration of remittances in Africa and beyond. Its joint venture with ForexPeople – boostXB – assists our customers in the acceleration of cross border remittance. Through boostXB, Ukheshe enables seamless cross border remittance services for the likes of Chipper Cash, Sasai and many more.
Buy now pay later
The buy now, pay later (BNPL) movement is gaining momentum after kicking off during the COVID-19 economic crisis when companies sought to help customers struggling to pay their bills. This method of deferred payment allows buyers to increase their cash flow and budget more easily by splitting payments into four or six instalments – interest free – and is expected to drive the growth of ecommerce further as more retailers get on board.
BNPL is predicted to increase by 66.9 percent annually in South Africa, with other African countries closely following suit. Globally, this figure is expected to move from US$176.2 million in 2020 to US$ 1,673.7 million by 2028. A study by PYMNTS.com shows that 48 percent of BNPL platform users will not buy from a merchant if they don’t offer BNPL and a recent survey revealed that almost 80 percent of shoppers would not have made their most recent online purchase if not for the BNPL service. With consumer interest being this high, banks are looking to partner with fintechs to help accelerate their technology development and bring BNPL products to the market faster.
At the heart of these trends is the willingness to collaborate, create partnerships and engage with innovation – all of which Ukheshe continues to drive by working closely with players in the payments space to create solutions that are seamless and efficient.
FAQs
“Fintech gives less affluent people in emerging markets access to financial services they wouldn't get from traditional banks. From a payments' perspective, it makes it easier and cheaper to send development sector payments, remittances, and trade payments, all of which benefit emerging market economies.”
How has fintech changed payments? ›
Examples of fintech
For example, you can now open a bank account over the internet, without physically visiting a bank. You can link the account to your smartphone and use it to monitor your transactions. You can even turn your smartphone into a “digital wallet” and use it to pay for things using money in your account.
What is the trend of fintech? ›
Among many fintech trends in 2024 include the widespread adoption of Embedded Finance, the transformative impact of Open banking, the rise of sustainable finance practices, the continued evolution of Artificial Intelligence (AI), and the dynamic growth of models like "Buy Now Pay Later" and alternative lending, shaping ...
How fintech is changing the financial industry? ›
Fintech is bringing about change by making it easier for underbanked and unbanked populations to obtain financial services. Access is being democratized through fintech at a level that has yet to be seen through traditional banking methods.
How does FinTech affect the financial market? ›
Democratization of financial services
FinTech has played a pivotal role in democratizing financial services and has made them more accessible to a wider range of individuals and businesses. FinTech is leveraging digital platforms & mobile technologies to break the barrier to enter into the financial ecosystem.
What is the effect of FinTech development on financial stability in an emerging market? ›
They found that shock to FinTech innovations decreases the fragility of financial institutions in emerging financial markets but increases the fragility of financial institutions in developed financial markets.
How does fintech payments work? ›
There are many ways to use fintech, but in general terms, fintech works by digitally transferring money. How this money is transferred, and which parties are transferring the money and why, are the circ*mstances that dictate different types of fintech. One popular method is through mobile payments.
How does fintech disrupt the banking industry? ›
Disruption of Traditional Banking Models: One of the main ways in which Fintech is disrupting traditional banking models is through digital payments. Fintech companies have made it possible for customers to make payments seamlessly, securely, and at a lower cost than traditional banks.
How fintech is changing the face of the stock market? ›
It is changing the stock market by bringing data analytics to the masses with innovative solutions such as rule-based investment engines that can analyze more than a billion data points at once. Just a few years ago, investors had to spend months analyzing data to make a sound investment decision.
What is happening in fintech right now? ›
Fintech funding faced a 40 percent year-over-year funding decline, down from $92 billion to $55 billion. Yet, when analyzed over a five-year period, fintech funding as a proportion of total VC funding remained fairly stable at 12 percent, registering only a 0.5 percentage point decline in 2022.
Coinbase. Perhaps the greatest example of fintech's disruptive capabilities, cryptocurrency, has changed the way the world views finance by splitting off currency from the influence of banks and governments.
How does fintech affect emerging economies? ›
Fintechs could revolutionize the delivery of financial products, particularly if they support their digital money management capabilities (in remittances and payments) with a clear strategy to educate the population, while in the process moving the customers from the informal economy to a formal one.
How is fintech a threat to banks? ›
In parallel, the threats posed by FinTechs have the ability to disrupt four categories of incumbents' business – market share, margins, information security/privacy and customer churn – at higher rates when compared to other financial sectors.
How does fintech make money? ›
Fintech companies are making money by using technology to offer financial services to consumers and businesses. They are able to offer these services at a lower cost than traditional financial institutions and are also able to reach a wider audience through the use of technology.
How has fintech impacted the economy? ›
Fintech is transforming the financial sector landscape rapidly and is blurring the boundaries of both financial firms and the financial sector. This presents a paradigm shift that has various policy implications, including: Foster beneficial innovation and competition, while managing the risks.
How can you succeed with fintech in emerging markets? ›
Succeeding in fintech in emerging markets requires understanding customer needs, conducting market research, segmentation, and user testing.
How does technology impact financial markets? ›
Key technological trends, such as the rise of AI and machine learning, the integration of blockchain and cryptocurrency, and the adoption of collaborative financial planning tools, could make financial services more accessible and personalized and help investors to be more informed and engaged.
How can fintech help developing countries? ›
The fintech revolution is also reducing the costs of remittance services, a lifeline for families in developing countries who are dependent on financial help from relatives working abroad.
