Report: Nigerian fintech companies secured most investments in Africa

Nigerian fintech companies accrued most investments on the continent despite the impact of coronavirus pandemic in 2020.

This is according to a report released on Thursday by Catalyst Fund, a global inclusive tech accelerator managed by BFA Global, and Briter Bridges, a data-driven research company.

The team surveyed 177 startups and 33 investors across Africa, Asia and Latin America.

According to the report titled ‘State of Fintech in Emerging Markets’, the African fintech ecosystem secured 94 disclosed deals in 2020, including mergers and acquisitions, which amounted to a total of $1.35 billion, compared to 74 disclosed deals amounting to $1.04 billion in 2019.

Companies operating in Nigeria, Kenya and South Africa are the primary destination for fintech investments in Africa.

“Although investment flows are growing, the total volume of fintech investments in emerging markets still pales in comparison to that of fintech investment in the US or Europe. Out of the total global investment of $105 billion for fintech companies in 2020, $76 billion was made in the US,” the report read.

It explained that the growth in funding flows into Africa has been enabled by a growing population of 1.2 billion people; large bulges of digitally savvy youth; rising smartphone ownership and mobile money adoption; reducing internet cost; and wider recognition of the opportunity to reach 350 million unbanked adults, who account for 60% of the total population in sub-Saharan Africa and 17% of the global unbanked population.

“Total funding for fintech companies in emerging markets increased in 2020, demonstrating the strength of the sector, despite the COVID-19 pandemic,” the report read.

“The numbers of pre-seed and seed deals in Africa are increasing, but the average size of these deals remains lower than that of other regions; seed rounds in Africa average around $1 million, while in Latin America and India they average around $3 million.”

Although African fintechs are yet to raise funding through an initial public offering unlike their Latin American and Indian counterparts, it recorded an influx of mergers and acquisitions (M&A) activity in 2020.

The largest M&A deal on the continent was the $500 million acquisition of Wave by World Remit, followed by acquisition of DPO Group by MENA Network International for $288 million and the acquisition of Paystack by Stripe for $200 million.

The report noted that the $200 million Paystack acquisition is the biggest startup acquisition in Nigeria to date.

Recently, Flutterwave, a Nigerian digital payment platform, raised $170 million from investors which pushed its valuation to over $1 billion.

“These acquisitions bolstered excitement in the fintech investment and startup community in Africa, as these success stories are an inspiration for other entrepreneurs and will attract more global funding
for African startups, ” the report added.

It further included three Nigerian payment companies, namely: Flutterwave, Interswitch, and Paystack on the list of eight most-funded fintechs (above $100 million) in Africa and the Middle East.