Introduction
Blockchain and its most vocal application, Cryptocurrencies, are a mainstay of our society today. For a developing region like Africa, it has stepped up to fill many gaps caused by inadequate financial structure across the continent.
It was not always so. In the last decade, there was general hostility towards the digital assets industry, with different governments placing bans on the use and trading of digital assets at different points in time. This has now changed.
The increasing digital assets traction has paved the way for collaborations between fintechs and blockchain firms. Previously, fintechs, which already operate under strict regulations, avoided digital assets due to governmental disapproval. Today, many partnerships between fintechs and crypto firms are driving financial innovation and challenging traditional banking models across Africa.
Fintech is essential for addressing financial inclusion challenges in Africa, and blockchain technology is leading this effort. Crypto offers minimal entry requirements, requiring only a smartphone and an internet connection. The synergy fintechs have managed to build with blockchain products is rapidly shaping the future of financial services across the continent. This article will explore this synergy and how these trends influence the fintech ecosystem in Africa.
Mobile Money Integration
Mobile money is one of the hottest topics in the African fintech space at the moment. It’s a technology that enables users to send, receive, and store money using basic mobile phones. Leading services such as M-Pesa, Airtel Money, Orange Money, and MTN Money(MoMo) have launched and expanded financial access to millions, including those without smartphones or internet access. Unlike conventional banking, mobile money allows users to transact without requiring a formal bank account, making it very inclusive.
There is an interesting twist to this development. Many mobile money platforms in Africa now allow users to buy and sell cryptocurrencies directly within their mobile money platforms. Since mobile money can be accessed through USSD codes on 2G devices, users can access the crypto market without internet access. This development significantly enhances financial inclusion, allowing individuals in remote regions to participate in the global digital economy using mobile money platforms.
The combination of mobile money and crypto offers African users the ability to store and transfer value efficiently, making financial services more accessible than ever before.
Cross-Border Payments
One of the most fundamental applications of cryptocurrency in Africa is cross-border remittances. Before stablecoins became a thing, many already used Bitcoin to facilitate international payments, bypassing expensive traditional banking channels. Stablecoins became a thing, and it only got better.
It’s many years later, and African fintech companies are increasingly integrating blockchain-based stablecoin solutions into their services, narrowing the financial inclusion gap and expanding access to global markets. Companies like Ledig Technologies provide blockchain-powered liquidity solutions, enabling businesses and individuals to carry out seamless business transactions across Africa. Other fintech platforms, like Chipper Cash, also embraced stablecoin-based remittances, offering cost-effective and speedy transactions.
One might ask; What is driving this renewed craze for crypto and other blockchain-based solutions? Cost and speed.
Traditional remittance services often charge fees exceeding 5% of the transaction value, whereas stablecoin-based remittances typically cost less than 1% and, most times, a few cents or some dollars for very large sums. Additionally, cryptocurrency transactions settle within minutes, eliminating the long processing times associated with conventional remittance methods.
You could complete a $500 million transaction with your business partner in Australia, and your partner would receive the value on the other side within minutes. These advantages are driving fintech companies to integrate stablecoins into their operations, reshaping the financial landscape in Africa.
Youth Adoption
When cryptocurrencies first launched, most millennials and people of older age shunned the new technology; the internet money, they often said, would fail.
Bitcoin and the general blockchain industry are what they are today, thanks to the immediate and fast adoption of Bitcoin and blockchain technology by the young, tech-savvy youth. They saw blockchain and cryptocurrencies as an idea that was worth testing, and the youth started adopting it on a massive scale.
African youths were no exception; although one could argue they were not among the first to catch up, they soon caught up and started using blockchain-based products on a massive scale. That is why countries like Nigeria, Kenya, and South Africa rank among those with the highest number of blockchain adoptions in the entire world.
This is a trend fintech companies have looked into because they understand that if they integrate blockchain and crypto-based products into their services, it will appeal to the growing population of youth in their market. Now that blockchain and cryptocurrencies are presently facing massive positive regulatory direction in the entire African space, now is the time to leverage digital assets to make a difference.
Stablecoins
We mentioned earlier that cross-border remittance is one of the great crypto trends that is shaping fintech in Africa. Stablecoins itself, which facilitates this cross-border remittance, has another unique appeal to the burgeoning population of African citizens.
Stablecoins give users access to hold dollar-backed assets. This means that they get to hedge against currency fluctuations. When their country’s currency is performing poorly, they convert the money down to stablecoins. When the currency is better, they convert back to their fiat.
Stablecoins like USDT, issued by Tether and USDC, issued by Circle, are increasingly becoming popular amongst citizens of African countries, particularly in Nigeria, Kenya, and other countries with relatively volatile local currencies. Now, fintechs are tapping into this by offering users the ability to purchase stablecoins, either to hedge against local currency inflation or to access virtual dollar cards, which they can use for carrying out online transactions.
Blockchain Innovation
As blockchain adoption grows, so does the demand for skilled blockchain developers. Fintechs, on their part, actively hire from this pool of skilled developers to enhance their products and create innovative solutions for financial services. Beyond fintech, blockchain applications now cover other sectors like agriculture, healthcare, identity management, and education, further demonstrating the economic potential of this technology across Africa.
In essence, fintechs are looking to blockchain talent pools to recruit talents they then leverage to build and launch products.
Conclusion
Cryptocurrencies are reshaping Africa’s fintech landscape with accessible, swift, and cost-effective financial solutions. With minimal entry barriers, they’re ideal for enhancing financial inclusion, particularly through mobile money platforms where even basic phones can trade crypto.
They’ve transformed cross-border payments, making remittances both cheaper and faster. The tech-savvy younger population is driving this trend, making crypto integration inevitable for many fintechs. A positive government outlook across the continent has also facilitated their integration, gradually changing how financial services operate in Africa.
As we move forward, the line between fintechs and blockchain-powered companies will become thinner, and the influence of digital assets will deepen within the industry. One thing digital assets have proven is that they are here to stay. Therefore, the quicker fintechs leverage these solutions, the faster Africa can advance its financial infrastructure and close its financial inclusion gaps.
Author
Akeju Abiola F.
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