This is an excerpt from the
Future of Embedded Finance in Africa 2025 report.
Africa is leading the world in growing mobile banking and embedded finance solutions. The growth in technology hubs in African nations has led to mass adoption of digital banking apps and high mobile penetration among the population.
With more digital adoption in African countries, mobile banking and embedded finance solutions can provide the underserved populations with easier access to finance and banking tools, encouraging financial inclusion through online banking.
The embedded finance industry in Africa is growing 45.3% annually, making $10.3 billion, and is expected to reach
$39.8 billion by 2029. The
Central Bank of Egypt reported that ownership of transactional accounts has reached 64.8%.
How are people using embedded finance on their mobiles?
Rajesh Parmar, founder and CEO of Indelible Inc., listed numerous ways in which people are utilising embedded finance services on their mobile devices. He cites peer-to-peer transfers on social media networks such as WhatsApp and Facebook Messenger as an
example, along with embedded bank accounts, savings accounts, microinsurance on travel apps and e-commerce platforms, instant loans, credit building, integrated utilities, subscription management, expense tracking, spending insights, international money transfers,
and cashback and rewards programs on e-commerce apps.
There has been a boom of cryptocurrency usage in Africa, and users are using embedded finance to make crypto transactions within their mobile baking apps. Despite the ban on cryptocurrencies in some nations in Africa, such as Cameroon, Ethiopia, Lesotho,
Sierra Leone, Tanzania, and the Democratic Republic of Congo, the crypto industry continues to flourish. Along with payments, crypto users are also able to manage their crypto balance, trade, invest, and apply for crypto-credit on their phones through embedded
finance.
In Egypt, embedded finance is also being incorporated into the hospitality and pharmacy sectors, with fintechs such as
OneOrder providing supply-chain platforms to hospitality companies, and
Grinta forming a marketplace for pharmaceuticals.
Mozare3, an agri-fintech company that gives Egyptian farmers access to financial services has embedded finance
integrated into their business model. The firm provides farmers with digital wallets, crop insurance, equipment leasing, and more that can support and advise the farmers in their business and building their credit scores.
According to a
Research and Markets report, Mpesa, which operated in Kenya and East Africa, has a mobile money platform that is facilitating digital payments in the region and setting up a foundation for embedded finance.
In January 2024, embedded finance platform Alviere partnered with digital payments network
Onafriq to extend the continent’s digital payments network. The collaboration aims to serve the underbanked populations throughout Africa, and extend the digital payments network to include more financial products and services.
E-commerce platform,
OmiRetail plans to expand embedded financial services to Nigeria, Ghana, and Cote d’Ivoire.
How is embedded finance opening a path towards financial inclusion?
The beauty of embedded finance is that it integrates everyday needs into the digital experience, making payments, credit, and financial services within applications easily and without disruption. This allows for more accessibility to underserved populations
who may not have the facilities to set up traditional bank accounts, savings, insurance, and other essential financial needs.
Paula Hunter, executive director at the Mojaloop Foundation, states: “Embedded finance is about improving the user experience by integrating financial services seamlessly into everyday activities. Assuming efficient, interoperable, and seamless instant payment
systems are delivered, the challenge then becomes driving adoption of these rails. This is where embedded finance is critical, as it can significantly increase adoption and, consequently, encourage financial inclusion in several ways.”
Embedded finance is convenient for the underbanked. Hunter points out that embedded finance fills in gaps of trust that customers face when encountering new financial products and services, as embedded finance allows them to utilise systems that they are
already familiar with on an accessible interface. Additionally, the options available in embedded finance ecosystems allows for more flexibility.
On top of that, the use of third-party transactions opens up a gateway of instant payments and will allow a faster transition to open banking and open finance throughout the continent.
Hannes Wessels, country head of Binance South Africa, explains: “Embedded credit solutions can offer microloans and financial products to those with limited credit histories. Additionally, easy access to digital payments and investment opportunities through
embedded platforms enables users to participate in the financial system more fully. This approach not only broadens access to essential financial services but also fosters greater economic participation and empowerment for marginalised communities.”
Wessels states that they are able to reach those underserved by traditional banking services by embedding financial tools in popular apps and platforms.
Parmar adds that embedded finance is furthering financial inclusion “through IMTOs (remittances), but areas such as Crowdfunding where my new venture Indelible is focused on impact investment towards sustainable projects addressing climate change, conservation
are a huge untapped area of development finance for Africa.”
The future of embedded finance and financial inclusion
Many African countries have seen rapid digitalisation in the last few years. Along with digital adoption, there have been strides in financial inclusion in reaching out to underbanked populations. The fintech boom in Africa offers new solutions for the financially
underserved, and the next steps for the fintech industry is to ensure that the digital transformation of the financial sector reaches every corner of the continent and shrinks the size of the underbanked population.
Embedded finance is a key aspect of financial inclusion, and moving forward, more and more fintechs will dial in to the needs of the people and include embedded finance within their business models, if they are not already.