In short, my best friend, Howard Chiao, recently left his job at Google as a Product Manager. 

He is one of the smartest, most goofy minds that I trust. During one of our recent conversations, we briefly toyed with the idea of starting a company together.  

But why Africa? 

Howard recently embarked on a six-week journey to Africa with his wife, Charlene. The trip served as an inspiration for my best friend to delve into the continent’s potential further.  

Interesting enough, the deeper I delve into the subject, the more excited I become by its economic opportunities, especially within the realm of FinTech.  

Of course the continent is not without its challenges.  

For instance, inadequate access to electricity, political instability, and the adverse effects of climate change on families’ crops and livestock.. the list goes on.

Regardless, I’ll outline some critical facts about why FinTech in Africa- cross border payment to be specific and why now. 

A.) Crazy population growth will fuel a ridiculous increase in both the labor force and the African diaspora 

In October, 2023, The New York Times published an article titled “The World is Becoming More African, “ which helped me gain a better understanding of the urgent need to develop Africa and the fast-evolving relationship that Africa has with the global economy. 

By 2050, Africa’s population will reach close to 2.5 billion, representing more than 25 percent of the world’s population 

– United Nations

By 2050, 1 in 4 people will be African. With tools like GPT, knowledge is being disseminated at an astonishing rate. 

Foondamate, an EdTech aimed to democratize study materials through WhatsApp and GPT, is a great example of how developers in Africa are leveraging technology in fixing problems experienced growing up. Read more: here.

Yet the truth is there is not enough work opportunities in Africa.  

With the newly educated generations hungry for work, in a few years’ time, we could possibly see a remarkable African diaspora— Africans traveling overseas for work and for better lives. 

B.) The African diaspora needs infrastructure to support family back home. 

When African “japa”- run away in Yoruba slang- the continent, they need an infrastructure to remit money back home. 

“The African diaspora has become the largest financier of Africa”

– Dr. Akinwumi A., President of the African Development Bank Group 

Global remittance from African diaspora are set to exceed $100 billion. According to World Development Bank, the total remittance amount has exceeded the total investment and official assistant amount 3x in Africa.

Moreover, the cost of remittance is exorbitantly high. For context, the remittance costs is ~4.3% to countries in South Asia. In contrast, remitting money incurs a much higher fee, ~7.9%, making it the most expensive region for remittance. 

Not to mention the high inflation that is taking place globally, the money remitted by the diaspora represents the lifeline to families back home.

C.) No, the infrastructure is not there yet. 

Aren’t there apps already doing that? This is one of the most common questions asked, when I bounce ideas with friends about FinTech in Africa. 

Articles by Benjamin Fernandas, founder of Nala, summarized pretty well

Companies like Wise and Remittent serves only ~5% and 3% of the global remittance market

Any competitor who is willing and capable of securing part of the market represents a significant opportunity.

Amongst the African daispora, only ~50% of the people remit money digitally. 

The rest use manual cash transfer with a system called Hawala, Arabic word for transfer, which have carriers physically carry cash from for example, Boston to Nairobi. 

I literally saw screenshots on WhatsApp in which people looking for carriers. Crazy right?

Sure there are apps out there. The point is that there is market untapped, money remitted untracked, people unbanked and communities unaware of emerging services. 

But does that mean that Howard and I will tackle this cross-border payment enabling the exodus to remit money back home directly?

I don’t know. 

We are both in our early stage of due diligence.

Perhaps more so for me to understand the market landscape, market opportunities, and how to leverage our strengths and backgrounds in entering the market.

Therefore, taking a step back, a simple analogy could be: in our grandparents’ generation, opportunities lay in China; in our generation, they may lie in Africa.

Sources:

• The World is Becoming More African– New York Times, 2023
• African Century– International Monetary Funds, 2023
• Remittance Flows Continue to Grow in 2023 Albeit at Slower Pace, World Bank, 2023
• Are African Remittance Finished– Benjamins F., 2024

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