The Role of Fintech Startups in Transforming Global Payments in West Africa

Over the past few years, Africa has become a breeding ground for financial technology (Fintech) and related innovations, and up to date, more and more players have continued to enter this market. Statistics show that the number of fintech startups active in Africa has increased by 125.2% between 2017 and 2023. This growth trajectory shows the potential the African region has.

However, the West African region is a significant leader in fintech: it is home to most of Africa’s unicorns, such as Interswitch, Flutterwave, Chipper Cash, and OPay. Overall, the fintech industry in West Africa has become a dominant force within and outside Africa. As a result, payment innovations from these startups are impacting the global payments landscape.

How Fintech Startups are Impacting Global Payments in West Africa

Despite a few challenges fintech startups face in Africa, their initiatives, solutions, and innovations are already enabling some key transformations in the global payments landscape in West Africa. Here are some key contributions:

• Enhanced cross-border payments

Around 2018, the cost of sending remittances to sub-Saharan Africa was ranked the highest globally for several reasons, such as complex banking systems, inefficient payment systems, low financial integration, and the existence of multiple currencies. However, as of 2023, the narrative has changed. Thanks to the power of fintech startups in reducing the transcation cost of cross-border payments, unlocking an increased volume of transactions, and facilitating regional integration,

With the increased number of fintech startups in the West African market, there is also an increased proliferation of alternative payment methods that are easier (with less complexity and intermediaries) to use than traditional payment methods. This is a game changer for businesses and individuals in this region in regard to convenience and cost. It’s also worth noting that some Fintech solutions, like blockchain technology, offer more efficient means to make cross-border payments than the typical correspondent banking model. Consequently, improved cross-border transactions have great potential for unlocking economic growth.

According to Nana Banahene, the AZA Finance Country Manager, there is still much potential in cross-border payments that fintech startups should focus on. He perceives cross-border payments as the next stage of African fintech evolution.

• Increased mobile payments

The high adoption of technological advancements and fintech solutions by millions of people in West Africa has seen an increase in mobile payments. One driving force that has accelerated the need for fintech services in West Africa and across the African region is the rapid growth in smartphone adoption by underserved populations.

Also, this being one of the most active fintech markets across the sub-Saharan region, fintech startups are actively innovating solutions related to online transactions as they align with the established mobile money market in West Africa. For instance, various fintech companies in this region focus on enabling international remittances, peer-to-peer transactions, online mobile payments (for retail merchants and e-commerce businesses), and bill payments. The best part is that some mobile payment platforms don’t require users to connect to their bank accounts.

The growth of mobile payments supported by fintech companies has also significantly impacted financial inclusion in West Africa. The unbanked population with mobile phones can now easily send and receive money and access other financial services such as credit and loans.

• Improved digital payment systems and models

Fintech companies in West Africa have and continue to innovate advanced digital payment solutions that support online and offline payments. Some areas that have seen massive growth are embedded payments and real-time payment rails (RTR). With the rise of e-commerce and online marketplaces in West Africa, non-financial service providers are gradually embracing embedded payment products like "Buy Now, Pay Later."

Fintech companies like Flutterwave support A2A payments through dedicated real-time payment rails, ultimately enhancing the payment experience.

Another noticeable impact of fintech startups in West Africa regarding global payments is regulatory. With the rapid adoption of innovations by fintech companies, a country like Nigeria is actively formulating and adjusting financial regulations to foster innovations while safeguarding consumer interests. Also, with rising cyber concerns and data breaches, fintech companies are adopting enhanced security measures to protect their users’ data and improve trust in digital payment systems.

Future Opportunities 

There are still more opportunities (open gaps) in West Africa’s payment landscape for fintech startups in offline payment markets. Fintechs could also develop products and technologies catering to underserved West African SMEs. Above all, more collaborations with mainstream banks, payment processors, regulators, and technology companies could boost their overall growth and help them overcome some challenges related to infrastructure compliance, among others.