The recent McKinsey Report “Fintechs A New Paradigm of Growth" is well-researched and well-worth reading. The report is global in scope including my favorite fintech market, Africa. Some key takeaways from McKinsey:
After decades of hyper growth fintechs have entered a new era of value creation where the focus is on sustainable, profitable growth.
The 2022 market correction ended an era of fast and furious growth, deal-making making and unicorn creation. Funding and deal activity have declined and there are fewer IPOs and SPAC (Special Purpose Acquisition Company) listings.
The last era was about firms being experimental, taking risks and pursuing growth at all costs. In the new era a challenging funding environment means fintechs can no longer afford to sprint, they must run at a slower and steadier pace.
Even with those changes African Fintechs remain a vital and attractive industry. 2022 revenues estimated at $3 to $4 billion are expected to reach $15 to 20 billion my 2028.
My perspective is consistent with the McKinsey view.
Success will depend on delivering operating leverage to help maintain margins, demonstrating management has a clear understanding and command of its business.
Know your customer, assess, segment and serve appropriately. Identify and truly know your best customers and hold them close.Take care of the customer. Solve for their needs not for your wants.
Rather than trying to be a “unicorn” make sure your company is not a “one trick pony”, a fintech with a single product of market success. Investors will be looking for fintechs that prove they can grow into new markets and extend product lines while leveraging what they have built.
Changing and challenging times for fintechs in Africa, times that separate the winners from the also rans, times when great companies are built.
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