FintechGFA Opinion

Fintech: The Future Of Africa’s Financial Sector

WHAT IS FINTECH?  

Fintech (financial technology) refers to the integration of finance and technology to provide advanced methods for improving business operations and delivering financial services more efficiently, thereby displacing old techniques. Fundamentally, financial technology is used to assist companies, business owners, and consumers in efficiently managing their financial operations, processes, and lives via specialized software and algorithms that are used on computers and, extensively, smartphones. 

HOW DOES FINTECH WORK? 

Broadly, we can say that any company that undertakes or connects with financial services through the internet, mobile devices, software technology, or cloud services is a fintech firm. 

Fintech has been in use for a long time now, dating as far back as the 1950s (the birth of credit cards), but it has gradually evolved over the years. Advanced fintech is driven by artificial intelligence (AI), data science, robotic process automation (RPA), and blockchain technology, all of which have completely transformed how companies transfer, store, and preserve digital currency as well as the way consumers track, manage, and facilitate their finances. 

Start-ups in the finance industry impede existing firms by enhancing financial inclusion and using technology to reduce operational costs…this is starting to fundamentally change the way financial services are provided. 

Some of the technologies used in the fintech sector are:  

  • BLOCKCHAIN:  

A blockchain is a decentralised collection of data that is shared between computer network nodes that are linked together using cryptography. Blockchain enables digital information to be recorded and distributed while also preventing it from being altered, deleted, or destroyed.  

Each transaction made with the blockchain technology is encrypted and the possibilities of major cyber-attacks are comparatively lower, thereby enforcing the extensive use of blockchain in the financial industry.  

  • ARTIFICIAL INTELLIGENCE (AI):  

Artificial Intelligence is a machine’s ability to exhibit human-like attributes such as reasoning, learning, planning, and creativity which helps technical systems to comprehend their surroundings, deal with what they see, resolve issues, and respond to achieve a specific goal.  

AI and ML has the capacity to help companies in reaching their growth objectives, gain a strong competitive advantage, and become much more relevant to their customers. AI can be used to effectively perform tasks such as security and fraud detection, credit scoring, customer support, and asset management. 

  • DATA SCIENCE:  

Data Science is the study of substantial amounts of structured and unstructured data with modern analytical tools, incorporating data-driven knowledge and real-time insights across a wide range of domains.  

Big data is used to evaluate information needed to make changes, provide user verification services, develop product improvement strategies, and conduct effective marketing. 

  • ROBOTIC PROCESS AUTOMATION (RPA):  

Robotic process automation implements advanced technology to emulate back-office responsibilities carried out by human workers, as well as API and User Interface (UI) system integrations to connect and perform repetitive tasks between company and productivity applications.  

RPA engages protocol software to undertake high-volume business procedures, relieving human resources to focus on more complex tasks such as regulatory compliance, policy management, anti-money laundering, and so on. 

DIFFERENT CATEGORIES OF FINTECH 

Now that we have established what fintech is, it is important to note that it is always modifying, and the several types mentioned here can change completely in the nearest future.  

  • CROWDFUNDING:  

Crowdfunding is a means of raising lesser amounts of capital from many people (family, friends, investors, etc.) using the internet to finance a new project, business venture or social courses. Most crowdfunding platforms have simplified and user-friendly interfaces making it easier to gather funds from multiple sources and highly minimize the back-and-forth between entrepreneurs and investors.  

A fundraising campaign typically has a financial goal in mind and a deadline to achieve it. Some of the types of crowdfunding are reward, debt, and equity crowdfunding.  

  • MOBILE PAYMENTS: 

Business models and individuals are increasingly relying on technology and integrated payment solutions to facilitate and carry out payment operations. This mode of operation has made it easier for people to send and receive money, make bill payments without physically going to the bank, and avoid the dreaded bank charges. 

The need for mobile wallets and digital payments skyrocketed during and post-COVID.  

  • INSURANCE (INSURTECH):  

Insurtech refers to the development and implementation of technological innovations to improve the efficiency of the existing insurance industry.  

It entails the use of modern technologies such as mobile software, Internet of Things (IoT), data science, and so on to perform routine tasks such as payment processing, claim filing, purchasing policies, and so on. 

  • INTERNATIONAL MONEY TRANSFERS: 

Traditional methods of payment are now less practical and reliable with the birth of more effective methods of payment, hereby making the entire process more automated, secure, quicker, and simpler for customers and business organizations. 

Through the incorporation of technology into payment channels that may be utilised to enable international money transfers, limitations have been removed.  

  • BLOCKCHAIN/CRYPTOCURRENCY:  

Blockchains are being used to build, power, and safeguard cryptocurrencies which enables value to be transferred online without the use of an intermediary, such as a bank. Cryptocurrencies, such as Bitcoin and Ethereum, are digital currencies that can be used to purchase goods and services. They employ blockchain as a public ledger as well as an advanced cryptographic security system, ensuring that online transactions are always recorded and secure. 

  • ROBO-ADVISING AND STOCK TRADING APPS: 

Robo-advisors are digital platforms that offer automated, algorithm-driven financial planning services with consulting a financial advisor and little to no human supervision. These software products assist in investment management by providing simple account creation, thorough goal planning, account services, asset management, security protocols, responsive customer support, comprehensive education, and affordable costs.  

Stock trading apps are mobile applications that assist you in buying and selling stock investments and achieving your trade objectives. These applications make it easier and better to transfer funds from your bank account to your investment portfolio, provide you with some level of customer service and have low costs and a diverse choice of assets to trade with.  

  • LENDING:  

Nowadays, acquiring loans can be done online through more accurate and simplified methods, making it easier and faster than the conventional method of going to banks for them, which takes a long time. The inclusion of technology in lending processes helps to facilitate the assessment of the borrower’s track record, appraisal of collateral value, evaluate future income prospects and predict changes that may occur.  

CONCLUSION

These fintech categories, as well as many others, have assisted in the conduct and regulation of seamless digital financial transactions in Africa, thereby striving to remove the barriers that prevent people from fully participating in the financial sector and improving their lives with these services. 

Africa has begun to experience unprecedented financial growth, and it is currently considered as the world’s second-fastest expanding and lucrative payments and banking market after Latin America. Fintech is progressively delivering digital solutions to close the gap in access to financial services at an affordable rate and promoting innovation and growth in key areas like as small and medium-sized companies (SMEs) and agriculture, which are the backbone of the African economy.  

African fintechs on the rise are Flutterwave, Chipper Cash, Wave, Palmpay, OPay, Piggyvest, Yoco etc.

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Silas Ugochi

Silas Ugochi is a Staff Writer and Content Creator at GetFundedAfrica. Ugochi is an educated content writer who relishes using her skills to help GetFundedAfrica's Media Team achieve the goal of sharing the success stories of African entrepreneurs. When she isn't writing articles, she can be found listening to music, reading, or DJing.

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