The world of finance has been irrevocably changed in the face of the ongoing pandemic.

Truthfully, this change has been nudged by fintech startups and firms for years now but it took a pandemic for many to see the value modern financial tools hold.

“Fintech has gone mainstream and is no longer a niche sector. There are now over 26,000 fintech companies globally that employ half a billion people,” explains head of AlphaCode and senior investment executive at Rand Merchant Investments, Dominique Collett, pictured above.

Looking at the African fintech market, Collett points out that funding for firms on the continent increased to $2 billion in 2021 compared to $500 million in 2020. This growth has been spurred on by significant funding for Entersekt, Jumo, Yoco and Ozow which drew in offshore investors during their respective rounds.

The good news is that fintech growth is set to continue, particularly here in South Africa where many fintech firms are based. What we may see however, is a race toward investment.

“Africa is popular and trendy now. It seems that venture capital firms have cottoned on to the unbanked population in Africa,” explains Collett. “A lot of money was raised with emerging market mandates and these funds have to be deployed soon. We are seeing extraordinary evaluations for fintech businesses and I suspect a lot of it is fuelled by the sky-high valuations for fintech globally.”

Given Africa’s dearth of assets, Collett notes that a bidding war could be on the cards. We’re curious to see whether these “sky-high valuations” hold water over the long term.

Speaking about the long term, climate change and humanity’s efforts to make the world better for all will become a focus for fintech solutions over the next few years. The changing climate could prove to be a cause for innovation among startups. One example Collett gives is the use of parametric insurance which could payout in the event of a flood thanks to a combination of smart contracts and the Internet of Things. Expect a few startups that look to address climate change or how climate change has affected us in their particular solutions.

While traditionally mobile money efforts haven’t proved successful in South Africa, the changing face of digital banking could change it.

“I think 2022 could be the year when MNOs go mainstream from a mobile money point of view. There will always be a challenge here in SA because we have such a competitive banking sector. However, the fact that MTN in Nigeria obtained a mobile money licence is going to be a game-changer, giving MNOs the opportunity to dominate the payment space across Africa,” says Collett.

We are curious to see how the mobile money sector evolves over the next year, especially locally. Yes, we realise solutions have been hit or miss in the past but the rise of digital banking could be enough to get folks moving away from traditional banks.

Finally, the buy now, pay later space is set to become a big theme in 2022. This growth will be driven by the fact that customers don’t need to disclose credit card details if they are concerned about fraud. This means being able to participate in ecommerce, and firms which facilitate these transactions are set to rise in popularity.

The next few years are going to be very interesting in the fintech space and we’re keen to see what sort of solutions folks come up with.