West African FinTech in 2021

Published 27 September 2021
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Over the past month, 2 new African unicorns were made, bringing the current total to 6 (depending on who you ask). Both the new-made unicorns were FinTechs; first came OPay, the Nigerian mobile wallet and money transfer service which was valued at $2 billion USD following a $400 million Series C funding round. Shortly after that announcement came the Wave Series A funding round which broke records as the biggest Series A funding round secured at $200 million USD, and the first Francophone Africa unicorn, with the Senegal-based payment services company now being valued at $1.7 billion USD.

Of the rest of the African unicorns, all are in the financial service sector, apart from e-commerce and retail company, Jumia. Interestingly, all are headquartered in West Africa, except for Egypt’s Fawry. We decided to take a look at the West African FinTech landscape this year and examine the impact of VC investment on the sector.

West African VC investment on the up

Figure 1: Total investment into West African technology companies since 2015

The West African region has seen a lot of fluctuation in terms of VC investment over the past few years, but 2021 is on course to be a record-breaker. With 1 quarter left, technology companies in West Africa have secured $1.34 billion USD in investment across over 105 funding rounds. This is almost double the previous high of $711 million USD raised in 2019, with 3 months left in the year.

In terms of funding rounds, 2020 had the most reported funding rounds despite the economic slump brought on by the Covid-19 crisis, with 162 VC funding rounds (excluding non-equity financial assistance, crowdfunding and corporate rounds), meaning thus far, 2021 rounds stand at 64.8% of last year’s total.

Figure 2: Quarterly investment into technology companies across West African since 2018

The massive deals we mentioned earlier have propelled the last quarter’s numbers sky-high bringing the deal value of Q3 2021 to an impressive $866.8 million USD. Notably, even without the unicorn-making raises, West African technology companies still garnered $466 million USD in VC funding, higher than any quarter since 2018. In July, Nigeria’s FairMoney, a lending app, secured $42 million USD in a Series B funding round. In August, Kuda Bank, a digital banking solution closed a $55 million USD Series B funding round.

West African FinTech on the up

The West African financial services sector continues to grow. This year, 35 funding rounds in the region have gone towards FinTech companies. Whether in line with this growth or as a result of it, there have been a few changes in regulation pertaining to financial services in Nigeria including the Securities and Exchange Commission (SEC) limiting the operations of InvestTech companies including BambooChaka and Trove.

While this move restricted investment into foreign securities, some foreign remittances were also blocked by the Central Bank of Nigeria meaning FinTechs like Skrill were no longer authorised to process remittance from the diaspora. It appears VCs were undaunted by the regulatory changes and have continued to back the sector as the investments were at a record high, as previously mentioned.

Much of the regional investment is focused on Nigeria, as of 21st September, $729.1 million USD of the disclosed investment went to Nigerian financial services technology companies of the $866.8 million USD in the region. In terms of funding rounds, 68% of all financial services technology funding rounds in West Africa went towards Nigerian FinTech companies.

Figure 3: Total investment into West African FinTech companies since 2015

This year, one-third of all funding rounds went to technology companies in the financial services sector. This is a 2% increase from the previous year when 31% of all funding rounds in West Africa went to FinTechs. The dominant trend continues as the sector continues to draw more investment than any other since 2018. Transport and logistics companies secured the next largest proportion of deals in 2021 with 16% of all funding rounds.

Figure 4: Proportion of funding rounds closed by West African technology companies in 2020 and 2021 (year to date, as of September 2021)

West African FinTech continues to excite

On top of the increase in funding and record-breaking deals, in April, FIS, a Fortune 500 company, partnered with another of the West African FinTechs, Flutterwave, to expand their services in the continent. Does a partnership like this suggest we will continue to see great things from technology companies providing financial services in West Africa?