Africa will Emerge as Fintech Powerhouse in Global Payments Evolution

In a rapidly evolving global payments landscape marked by disruption and innovation, the shift from traditional cash transactions to digital payment solutions has been pronounced.

The epicenter of this transformative wave appears to be Africa, set to become the fastest-growing fintech market between 2023 and 2030.

According to insights from Boston Consulting Group's 21st annual Global Payments Report, total worldwide payments revenues experienced remarkable growth, surging at an annual rate of 8.3% from 2017 to 2022, ultimately reaching an impressive $1.6 trillion by the close of 2022.

South Africa, a prominent player in the African fintech arena, played a pivotal role, contributing $10.3 billion to this global revenue pool and growing at an annual rate of 6% since 2017.

Projections indicate that South Africa's payment sector will skyrocket to $22 billion by 2032, underscoring the nation's robust growth trajectory.

Globally, the report anticipates a slowdown in revenue growth to 6.2% annually through 2027, with the revenue pool reaching $2.2 trillion by that time.

This deceleration can be attributed to a shift in the retail payments mix from cards to account-to-account transactions, along with squeezed card margins in certain markets.

However, Africa, driven by its unique operating environment and abundant opportunities, is expected to continue experiencing double-digit growth rates.

One standout finding from the report is the explosive ascent of payments-focused fintech companies, numbering over 5,000 globally and contributing roughly $100 billion to the industry's revenues. Projections suggest that by 2030, these fintechs could amass an astounding revenue pool of $520 billion, intensifying competition for established players.

In Africa, where the fintech ecosystem is flourishing, the top six fintech hubs host a total of 681 companies.

The continent is poised to outpace the rest of the world, with revenues predicted to surge 13 times faster than the global average.

According to Tijsbert Creemers, managing director and senior partner of Boston Consulting Group (BCG) South Africa, "Africa is indeed the place to be for global payments. We have seen the advanced speed at which regulators, banks, and fintechs have worked to enable new payment solutions. These solutions not only enable opportunities for the private sector but also play a crucial role in the continent's economic development."

The rise of digital currencies is also a notable trend, with over 90% of central banks globally actively experimenting with digital currencies as a complement to cash. The transition from concept to reality may see retail and wholesale central bank digital currencies operational in select countries within the next decade.

Furthermore, the report highlights the significance of technological modernization and the emergence of GenAI in the payments landscape. GenAI-enabled software coding alone has the potential to enhance productivity by 20%, revolutionizing product development and operational efficiency.

Amidst this era of transformation, regulatory scrutiny is intensifying, with regulatory authorities expanding their rule sets and enforcement measures. They are testing the risk management and compliance practices of both traditional and non-traditional players in the payments industry.

As disruption continues to reshape the payments landscape, industry leaders are being urged to revamp their strategies, reconsider partnership structures, and modernize their technological infrastructure.

Safeguarding shareholder value and embracing cost excellence will be of paramount importance in preserving and growing shareholder value in this dynamic landscape.

Ivor Price / Ventureburn