Entering Africa’s Market: Effective Strategies for PSPs
Africa is fast becoming one of the most promising regions for Payment Service Providers, given the increased use of smartphones, improved access to the internet, and rapidly growing fintech ecosystem. With the fintech market on the continent projected to grow up to $65 billion by 2030, PSPs venturing into the African market are positioned favourably to drive financial inclusions and tap into this exponentially expanding industry. Yet, diversity and complexity make Africa a unique challenge that requires very deliberate planning and execution. Today we will observe the African Fintech market opportunities, point out the challenges, and discuss the strategies necessary for PSPs to enter the region
A Growing Fintech Powerhouse
The African fintech market has grown exponentially in the last few years. From only 450 fintech companies operating in 2020, the number increased to over 1200 fintech companies operating as of the year 2024. Accompanying this growth are key drivers such as:
Increasing Smartphone Adoption
With over 46% of the population owning a smartphone, mobile-first solutions have become the backbone of Africa’s fintech ecosystem
Demand for Financial Inclusion
About 57% of the adult population in Africa still do not have bank accounts, hence there is a dire need for accessible financial services
Investment in Innovation
Over $2.7 billion in venture capital went to African fintech startups in the period between 2021 and 2023, indicating strong investor confidence
Africa’s payment landscape is varied and skewed towards mobile money solutions such as M-Pesa in Kenya and MTN MoMo in West Africa. Cross-border trade and remittances also form a demand for digital payment solutions. This means that the diverse landscape for PSPs brings along opportunities as well as complexities in integrating with multiple local payment systems and fragmented markets. Now let’s find out the key issues PSP may face while entering the market
Key Challenges of African Market Entry
Regulatory Complexity
The regulatory environment in Africa is very fragmented. Each country has its own set of financial laws. PSPs must therefore deal with diverse licensing requirements, AML regulations, and data protection standards, which complicates market entry and increases costs due to these many regulations
Infrastructure Gaps
Unreliable electricity and poor internet connectivity in many regions across Africa impede the functionality of digital payment systems. Sub-Saharan Africa, for instance, has one of the lowest internet penetration rates in the world, making consistent delivery of service a problem
Trust and Security Issues
However, fraud and data security may also be concerns that could make consumers and merchants wary about adopting new PSPs. It will require big investments in cybersecurity infrastructure measures, as well as consumer education to establish trust and understanding
Payment Preferences
The preference for mobile money over traditional banking means PSPs must adapt their systems to integrate with dominant mobile money providers like M-Pesa and Airtel Money. Balancing this integration with the provision of universal payment solutions can be complex
Strategies for Effective Entrance
Understand the Local Market
PSPs must invest in deep market research to understand local consumer behaviours, payment preferences and regulatory requirements. For example:
- Directly focus on integrating mobile money systems, which are leading payment preferences in East and West Africa
- Tailor solutions to specific sectors, for example e-commerce or SMEs, which are rapidly adopting digital payment systems
Build Strategic Partnerships
This can give PSPs the infrastructure and credibility to succeed. Key partnerships can include the following:
Mobile Money Operators
Integrate smoothly with providers such as M-Pesa or MTN MoMo
Banks
Relationship building with local banks allows for real-time settlements and access to a greater number of customers
Regulatory Advisors
Work with experts who know how best to overcome the often complex compliance landscapes
Invest in Scalable Technology
This development of modular and scalable systems makes sure PSPs are able to grow according to any market demand. Cloud-based solutions and APIs enable fast integration with local payment platforms, while advanced analytical tools help in optimising operations and enhancing fraud detection capabilities
Features for Effective Entrance
For PSPs seeking to fast-track their entry into Africa, white-label payment gateways offer a practical solution. These pre-built, customisable platforms allow PSPs to focus on growth without the burden of developing complex payment infrastructures. Here are some benefits:
Quick Market Entry
White-label gateways are ready to deploy and integrate, enabling PSPs to launch services quickly. This is particularly valuable in Africa, where time-to-market can be critical for capturing early adopters
Cost Efficiency
From scratch, developing the payment infrastructure involves huge investments. White-label solutions save them from such costs and free resources for customer acquisition and operation scaling
Security and Compliance
Advanced white-label providers guarantee enterprise-grade security compliance with international standards like PCI DSS. By outsourcing the technical burden, PSPs can meet regulatory requirements without assigning internal resources
Scalability
White-label platforms are designed to handle varying transaction volumes, making them ideal for scaling across Africa’s fragmented markets. PSPs can adjust capacity based on regional demand without significant reinvestment
Focus on Core Business
By leveraging white-label solutions, PSPs can concentrate on branding, marketing, and customer engagement rather than technical development. This focus ensures a more strategic approach to market entry
Conclusion
Africa’s fintech market is a huge opportunity for PSPs, considering the rapidly increasing demand for digital payments and financial inclusions. However, this requires a thoughtful approach because of diversity in the continent, complicated regulatory environments, and infrastructural challenges. With local market knowledge, strategic partnerships, and white-label payment gateways, PSPs can easily overcome these challenges and reach a winning position in the African Fintech Market. Applying appropriate strategies will enable PSPs not only to gain a market share but also to take an active part in the continuous digital transformation of the continent
Sources:
- Transferty: “How to start a PSP. Comprehensive Guideline for Businesses”
- Disrupt Africa: “Finnovating for Africa 2023”
- Statista: “Africa Digital Payments Market Insights 2024”
- Mordor Intelligence: “Africa Fintech Market – Growth, Trends, COVID-19 Impact, and Forecasts (2023-2028)”
