Banking the unbanked: Lessons from African fintech

Nicole Dunn
6 min readDec 28, 2019


The rise of African fintech has been nothing short of revolutionary. Over the past decade, emerging startups have leapfrogged local banks by providing deposit, transaction and lending services to otherwise unbanked individuals. Disruptive business models have rewritten the rules of the financial services industry − redefining finance as an enabler, far beyond a means by which to transact.

This disruption has led to unprecedented advances in financial inclusion. In Sub-Saharan Africa, the proportion of people with access to financial services increased from 23% in 2011 to 43% in 2017, representing more than 200 million new account holders in the region alone. This trend is set to continue, with digital finance projected to reach over 1.6 billion additional customers in emerging markets by 2025.

Emerging technologies therefore offer a dual promise — as a catalyst for inclusion, and as a significant emerging market opportunity for financial services providers. Increasingly, traditional players (both local and global) are looking to target unbanked consumers, where the economic profile and market dynamics differ substantially to their existing customers.

To help executives effectively bridge this market gap, we have identified five lessons from African fintech’s success. Customer-centricity is the golden thread that runs throughout — African fintechs have placed consumers at the heart of their solutions and business models, resulting in market-creating innovation that successfully meets unbanked customers’ most pressing needs.

Meet your customers where they are

Until recently, banks, policymakers and innovators adopted the entrepreneurial misnomer — if you build it, they will come. Financial inclusion efforts focused on expanding access to the formal financial system, with the aim to diversify financial products to meet the low price points of unbanked customers. However, geographic, financial and cultural barriers resulted in low levels of uptake, and banks failed to convert low-income consumers to the formal financial system.

To overcome these barriers, African fintechs have leveraged an important existing channel — mobile. In countries where bank penetration is as low as 20%, approximately 80% of the population own a mobile phone. Coupled with increasing internet penetration, mobile provided an alternative to non-traditional banking already in the hands of target consumers — cue mobile money.

Today, there are 100 million active mobile money accounts in Africa, used by one in ten African adults. Since the launch of M-Pesa in Kenya in 2007, more than 85% of the country’s population have adopted mobile payment applications, and 66% of the combined population of Kenya, Rwanda, Tanzania and Uganda use mobile money on an active basis.

This unprecedented reach has been made possible by meeting customers where they are, with fintechs capitalising on the untapped mobile channel and distributing services through commission-based agents (or cash merchants) operating in low-income communities. Agent networks now out-size traditional financial and remittance service networks, reaching customers in locations where no bank has ever established a branch.

If you want to go far, go together

While internet and mobile penetration provide an enabling environment, the key to African fintech’s success has been partnership. In a market that relies deeply on trust, forming partnerships with established consumer brands has enabled fintechs to successfully engage customers outside of the formal system, overcoming consumers’ deep mistrust of financial services. For example, BIMA’s partnership with Ghanaian Tigo allowed the startup to access the mobile operator’s ~5 million customer base, and leverage its existing network of airtime-sellers as mobile money agents to enable mobile transactions.

Beyond market access, these partnerships provide the opportunity for product diversification and cross-selling. By leveraging mobile usage data, mobile carriers are able to develop a deeper understanding of customer purchasing behaviour, which can be used to develop highly relevant financial products. Since the inception of mobile money, mobile financial services are increasingly expanding to include a diverse portfolio of financial services, such as credit, insurance, and cross-border remittances (see Branch, MobiLife and Wave respectively).

Look for patterns in unusual places

Globally, 2 billion people are excluded from the financial system — of these, 1.1 billion cannot prove their identity. This prevents access to financial and other basic services, as individuals are unable to verify even the most basic of personal data — including their full name. Where unbanked consumers do have basic proof of identity, they often lack the documentation and credit records required by financial service providers to assess creditworthiness and perform consumer due diligence.

In the absence of formal credit histories, African startups are leveraging alternative data to determine an applicant’s creditworthiness and create financial identities for previously ‘invisible’ consumers. These data sources include mobile phone usage, social media profiles and utility bills, processed through advanced behavioural APIs.

For example, Kenyan startup Mkopo Rahisi uses detailed mobile phone data to make enhanced credit underwriting assessments. According to the company founders, if at least 40% of an applicant’s contacts are saved with both a first and second name, the individual is more than 16 times more likely to repay their loan on time. Social Lender, a Nigerian fintech, analyses applicants’ social media activity and reputation to determine their credit score. Loan applicants can bolster their credit rating by providing social collateral and guarantors from their social network.

These methods have been shown to be more accurate than traditional credit scoring, opening new markets and enabling more personalised customer experiences. Moreover, alternative data enables lenders to automate onerous manual tasks in the loan approvals process, significantly reducing the time and cost of borrowing, and removing the need for brick and mortar stores.

How you sell is as important as what you sell

Upfront deposits or single payment models can immediately exclude low-income customers, regardless of how effectively a product or service meets their needs. By creating flexible, accessible and responsive business models, African fintechs have effectively unlocked access to new target markets and business opportunities.

For example, while solar energy technology has existed for decades, it has been inaccessible to the vast majority of African households. Using the pay-as-you-go model popularised by mobile phone companies, M-Kopa Solar provides affordable rent-to-own solar energy solutions to rural consumers. The instalments are paid on a pay-as-you-use basis through mobile money platform M-Pesa, meaning that customers do not need a bank account to purchase the product.

Another subscription solar company, Azuri Technologies, has partnered with a local television content provider, Zuku, to create a pay-as-you-go energy and satellite package that targets households without electricity in Kenya. Through this revenue sharing agreement, both companies have been able to successfully target an untapped customer segment, proving that it’s not just technology that needs to be disruptive — it’s the way that technology is sold that can create new markets.

Context is key

Africa is not a single market. Despite the global tendency to view the continent as largely homogenous, African countries vary substantially along cultural, social, institutional and economic lines. Importantly, each market has specific regulatory requirements, infrastructure and financial literacy levels that determine the viability and uptake of financial services propositions. Despite succeeding in both Kenya and Tanzania, M-Pesa failed to gain traction in the South African market, due to an inadequate distribution network, low mobile subscription rates and stricter digital wallet regulations.

In response to lower e-payment adoption, Uber has rolled out cash payment options in 12 African markets — contrary to its otherwise frictionless finance model. These examples highlight the criticality of a localised strategy — to successfully serve the unbanked, market players must understand the nuances of the system that they are looking to disrupt, identify consumers’ most pressing needs, and target channels where network effects can be efficiently achieved.

The time is now

Despite encouraging progress in recent years, more than a third of the world’s adult population lack access to formal financial services. The inclusion frontier therefore represents a significant opportunity — for business value and economic empowerment.

The stage has been set — mobile and internet penetration now surpass bank penetration in most emerging markets, providing the landscape for further disruption. To capture the opportunity, financial service providers should look to African fintech for guidance. The secret may be as simple as putting the customer first.

This article was originally published on Elixirr’s website. To understand how Elixirr can help you realise the potential of your business in Africa (and beyond!), please feel free to reach out.



Nicole Dunn

Strategist, writer, and venture builder; passionate about impactful innovation in emerging markets