Africa boasts $3bn fintech investment goldmine
Fintech investment in Africa is likely to be valued at $3 billion by 2020, with SA and Nigeria receiving a significant portion of these investments.
This is according toCosta Natsas, PwC Africa financial services leader, referencing the company’s research undertaken to compile the 2019 Global Fintech Report, which was released yesterday.
Now in its third year, the PwC survey charts the rapid evolution of fintech.
For this year’s survey, over 500 financial services (FS) and technology, media and telecommunications (TMT) executives worldwide were polled to figure out the factors that will determine the winners and losers in the race to develop and profit from fintech-driven business models.
Three-quarters of the FS and TMT executives said they plan to step up their fintech investment in the next two years, with more than 90% very or somewhat confident fintech will deliver revenue growth over the next two years.
Natsas points out: “SA’s financial services sector is undergoing a process of unprecedented change brought about by the disruptive impact of fintech challengers and the emerging technologies powering their business models. Fintechs are redrawing the competitive landscape and blurring the lines that define players in the FS landscape.
“Customers' behaviour, and their expectations around how companies interact with them, is changing quickly. The fintech industry is driving these changes in financial services, and the established businesses in the industry who recognise this are having to learn fast. This is leading to a reassessment of many elements of the customer experience and engagement process that will play out over the next few years.”
One of the survey’s key findings is that adopting a fintech-centred strategy is not optional but rather paramount.
According to the survey, FS and TMT industries are using fintech to improve customer experience and heighten the appeal of their products and services, as well as to sharpen operational efficiency and lower costs.
In addition, in the financial services market, digital-only banks are offering redesigned client propositions and value propositions to clients, and investment managers are deploying fully customised robo-advice. On the other hand, insurers are using sensors to monitor people’s health and drive illness prevention.
In terms of fintech efforts, the survey found 47% of TMT and 48% of FS organisations have embedded fintech fully into their strategic operating model.
Elmo Hildebrand, TMT leader for PwC SA, explains: “TMT leaders see personalisation as the key to keeping customers. In a marketplace that’s moving rapidly towards mass customisation, we expect that using fintech in this way is more likely to create differentiation, so it would be good for FS firms to learn from the TMT approach in this regard. FS companies that don’t learn and adapt may risk being left behind.”
The second finding is that FS and TMT should look to each other and retrain to fill skills gaps.
The results showed 80% of TMT and 75% of FS organisations are creating jobs related to fintech, yet 42% of both TMT and FS organisations are struggling to fill these roles.
While 73% of FS organisations are hiring from the technology sector, only 52% of TMT firms are looking to recruit from FS, according to the PwC report.
Hildebrand states: “Finding ways to attract people from TMT to FS, and vice versa, will be important to future success because each sector needs the other’s expertise. Upskilling will also be important, as will the right mergers, acquisitions and joint ventures.”
In terms of the third key finding, the PwC survey advises the FS market to look to TMT for ideas on how best to use fintech.
“TMT leaders see personalisation as the key to keeping customers. In a marketplace that’s moving rapidly towards mass customisation, we expect that using fintech in this way is more likely to create differentiation, so it would be good for FS firms to adopt a TMT approach in this case. In fact, FS companies that don’t will get left behind.”
Finally, firms should push cross-sector fusion further to avoid missing opportunities, concludes the survey. “Among organisations that are planning to pursue an acquisition, strategic alliance or joint venture to drive growth via fintech, 78% of TMT and 76% of FS firms are targeting businesses within their own sectors.
“At a time when FS firms are striving to sharpen their technology capabilities and TMT needs product and regulatory expertise to compete in the FS market, we think firms will miss opportunities if they don’t pursue more cross-sector fusion.”