The African fintech landscape is entering a transformative new era—one that promises not only staggering growth but also long-sought financial sustainability.
With revenues projected to reach $47 billion by 2028, the sector stands at a pivotal juncture. No longer defined by blitzscaling and sky-high valuations, the playbook for success is being rewritten in boardrooms from Lagos to Nairobi: build sustainable, resilient enterprises—and consolidate to win.
This evolution is visible in the sector’s surging M&A activity. Investors and founders, once enamoured with customer acquisition at any cost, are now backing strategic mergers that create larger, leaner, and more profitable fintech entities. The consolidation trend, fuelled by dwindling venture capital and a ruthless prioritization of unit economics, marks a shift as significant as the mobile-money boom that first put African fintech on the global map.
From Boom to Balance: Why the Market is Recalibrating
Between 2018 and 2023, Africa’s financial services sector grew at a steady 8% annually. That pace is expected to accelerate to nearly 10% through 2028, with fintech leading the charge. Yet, even as the continent’s young, digitally savvy population drives adoption, the sector has faced harsh macroeconomic and operational headwinds: inflation, FX volatility, and a dramatic pullback in global VC funding.
Indeed, fintech funding dropped 37% in 2023 and plummeted a further 51% in the first half of 2024. Investors are no longer interested in moonshots—they want sustainable businesses. The result? A reckoning. Companies unable to demonstrate profitability or scale have shut down or are being acquired in what one investor calls “the great sorting.”
The M&A Moment: Efficiency Through Scale
In this new climate, mergers and acquisitions have become both a lifeline and a launchpad. Paystack’s acquisition of business-banking start-up Brass, Lesaka Technologies’ $85.9 million buyout of Adumo, and Moniepoint’s strategic entry into Kenya via Kopo Kopo are emblematic of this wave. These aren’t just opportunistic land grabs; they are strategic plays aimed at creating “super apps” and full-stack fintechs capable of surviving funding droughts and regulatory headwinds.
Often, it’s the investors themselves pushing for these unions. Venture Platforms, a Nigerian VC firm, played an active role in facilitating the Paystack-Brass and OmniRetail-Traction App mergers—driven by the thesis that bundled value will outperform siloed innovation in the long term.
New Rules of the Game: Unit Economics Over Unicorn Hype
The dominant narrative has shifted. Fintech leaders are now laser-focused on positive unit economics, localized cost structures, and operational discipline. As McKinsey analysts put it, “grit and resilience, coupled with effective burn-rate management, will differentiate winners from losers.”
There’s also a renewed emphasis on governance, with investors demanding robust internal controls, regulatory compliance, and a clear path to profitability. “We’re seeing founders act like CFOs,” says the partner at a Lagos-based growth fund. “Valuations are down, but the quality of thinking has gone up.”
The Future Is Embedded—and Regional
Beyond the financial fundamentals, innovation remains vibrant. Embedded finance—where banking services are integrated into non-financial platforms—is rapidly expanding across sectors like energy, healthcare, and logistics. From M-KOPA’s pay-as-you-go solar financing to Moove’s vehicle loans within ride-hailing apps, fintech is being baked into the everyday.
But the real story might be regional diversity. While telco-led models dominate East Africa, bank-led innovation is surging in North Africa, and West Africa is emerging as a battleground for disruptor-led growth. Meanwhile, markets like Angola, DRC, and Algeria—long overlooked—are now flashing green on investor dashboards.
Regulation: A Double-Edged Sword
Yet, for all the dynamism, the regulatory environment remains highly fragmented. While initiatives like PAPSS and GIM-UEMOA promise cross-border fluidity, the pace of regulatory reform varies drastically across countries. Inconsistencies in licensing, taxation, and data protection laws remain major barriers for scale.
Still, some governments are stepping up. Egypt and Morocco are actively supporting cashless policies; Nigeria and Kenya are tightening fraud controls. The path is uneven, but the trend is toward greater clarity—and for those who can navigate it, opportunity abounds.
The Next Chapter: Fintech 3.0
As Africa’s fintech sector matures, four imperatives define its next chapter:
Focus on Value Creation – Profitable growth is non-negotiable.
Explore Untapped Markets – From cross-border payments to SME credit, massive white space remains.
Verticalize Offerings – Deepen penetration in health, agriculture, and retail through embedded finance.
Think with the End in Mind – Build with exit strategies, regulatory fit, and resilience in mind.
Despite the funding crunch and operational challenges, optimism among fintech executives remains sky-high—averaging 4.5 out of 5 in McKinsey’s sentiment surveys. That optimism isn’t naive; it’s anchored in demographic trends, rising digital adoption, and hard-won lessons.
“The best of fintech in Africa,” the report concludes, “is yet to come.”
It may no longer be a Wild West of billion-dollar bets, but make no mistake: a new kind of gold rush is underway. This time, it’s not about who can scale fastest, but who can scale smart—and stay standing when the tide goes out.
