A report by Boston Consulting Group and QED Investors has projected a fintech revenue compound annual growth rate (CAGR) of 32% until 2030 in Africa. But financial inclusion is still a problem on the continent.

Despite its challenges, Africa’s fintech sector appears to be heading toward unprecedented growth. The sector is projected to hit a revenue compound annual growth rate (CAGR) of 32% until 2030, according to a new report [pdf] released by an American strategy firm, Boston Consulting Group (BCG) and Alexandria-based venture capital firm, QED Investors. South Africa, Nigeria, Egypt, and Kenya—also known as the Big Four—are projected to be the key markets for this growth.

Per the report—Global Fintech 2023: Reimagining the Future of Finance—the global fintech sector is expected to hit $1.5 trillion by 2030, growing sixfold from $245 billion. The sector currently holds a 2% share of the $12.5 trillion in global financial services revenue. However, it is estimated to grow up to 7%, of which fintechs are expected to constitute almost 25% of all banking valuations worldwide by 2030.

In 2022, fintechs globally were hit by the dramatic slowdown in the venture capital landscape, losing more than half of their market value. To bring it home, investment in Africa’s fintech sector dropped by a whopping 40%. But the report says this plunge was merely a short-term correction in an otherwise long-term positive trajectory.

“Fintech sits within financial services which is a massive, profitable industry, and the opportunity ahead of us to democratise access to these services on a global scale is tremendous. We expect to see continued growth not only in developed markets in the US and Europe, but also in developing fintech markets in LatAm, Asia, and Africa, where the inertia and friction are even greater,” said Nigel Morris, QED Investors managing partner and coauthor of the report. 

According to the report, Asia-Pacific (APAC) is poised to outpace the US and become the world’s top fintech market by 2030, with a projected compound annual growth rate (CAGR) of 27%. Similarly, North America—which currently has the world’s largest financial services industry—will remain a critical fintech market and innovation hub, projected to grow fourfold to $520 billion in 2030, with the US accounting for a projected 32% of global fintech revenue growth (a CAGR of 17%). 

The UK and European Union—which represent the world’s third-largest financial institution market—are expected to witness major growth through 2030, estimated at more than fivefold over 2021. Similarly, Latin American markets, led by Brazil and Mexico, which have established fintech landscapes, are projected to show a revenue CAGR of 29% over the same time frame. 

Growth, but with a darker side

Beyond the interesting projections, the overall financial services industry has its fair share of setbacks. According to the report, almost 80% of adults in the world are still either underbanked or unbanked. In Africa, cash is still king in most markets, with more than half of the population without bank accounts. This, of course, presents an opportunity for fintechs who want to “bank the unbanked”. According to a McKinsey report, Africa’s financial-services market could grow at about 10% per annum, reaching about $230 billion in revenues by 2025 

But while fintechs have now become go-to platforms for payments and transaction banking globally including in Africa, they are yet to solve the global inclusion debacle. McKinsey lists four key challenges facing fintech startups in Africa on the road to sustainability: reaching scale and profitability, navigating an uncertain regulatory environment, managing scarcity, and building robust corporate governance foundations. 

Per the BCG and QED report, there is a pressing need for proactive regulation in the fintech sector, as overregulation can stifle innovation. “Regulators should consider levelling the playing field via such actions as enabling faster pathways for banking and payment institution licenses, supporting digital public infrastructure, and facilitating an open banking ecosystem,” the report said.