On 8th-12th November 2021, the Afro-Asian Fintech Festival (AAFF) took place virtually and in Kenya and underlined the potential prospect of a cooperation between Singapore and African countries in the fintech sector. Hosted by the Central Bank of Kenya (CBK) as one part of the Singapore Fintech Festival (SFF), the AAFF brought together a variety of speakers such as Dr. Patrick Njoroge, the Governor of the CBK; Sopnendu Mohanty, the Chief Fintech Officer at the Monetary Authority of Singapore (MAS); Dr. Nuri Purswani, a Senior Manager of Data Science at Visa and various other high-level speakers with a background in fintech, finance and business in Africa. Emphasizing that Singapore has the aim to, if possible -physically- come to Africa in 2022, Mohanty expressed that the interchange of ideas between Africa and Asia was a fundamental step towards creating meaningful innovation with an impact on citizens around the world. Especially, because some commentators have mentioned opportunities for Singaporean businesses in Africa before, this article will attempt to understand what Singapore and Africa have to offer to each other with regard to fintech and AI development for the fintech sector.
The Singaporean Fintech and AI Space
According with the findings of the Asia Pacific AI readiness Index 2021, Singapore is not only the most ‘AI-ready’ country in the Asia Pacific region, but it also scored highly with regard to consumer readiness, business readiness and government readiness, which speaks for its capacity to coordinate innovation across various channels. Meanwhile, in terms of fintech, Singapore ranked 4th out of 83 after the US (1st), the UK (2nd) and Israel (3rd) in Findexable’s 2021 Global Fintech Rankings. Whereas investments in fintech balanced at US$331,1 million in Q2 2021, they were at an extreme peak in 2019, namely at US$5014,7 million. However, both in 2019 and in 2021, the number of secured investments is still remarkable. While digital payments (2021: US$12,223 million) constitute the biggest pillar of Singapore’s fintech market in 2022, neobanking is also particularly popular with its 2021 transaction value stabilizing at US$9,074 million. Next to the two, digital investment (US$1,665 million) and alternative lending (US$320) are still developing with alternative financing still constituting a niche.
According to Traxcn, 1,557 fintech start-ups were home to Singapore in December 2021. Traxcn states that among some of the most ‘exciting’ start-ups in 2021 were Grab, NIUM, M-DAQ, TSLC, OurCrowd, Singlife and SKY MAVIS. With TSLC and, especially, OurCrowd having international headquarters, either in Mumbai or in 7 countries across the globe (i.e. the US, Israel, Canada, the UK, Spain and Australia), Singapore certainly seems ready to scale-up abroad. Whereas OurCrowd offers an equity-based crowdfunding platform for start-ups, TSLC is a digital bank, M-DAQ offers trade investment solutions to investors, Nium works in cross-border money transfer, Grab calls itself “an all-in-one platform” offering deliveries, mobility, financial services and more, Singlife operates a life and health insurance app, and SKY MAVIS is all about gaming and blockchain. Witnessing the great variety of fintech services and applications, which Singaporean start-ups have on offer, their cooperation with African start-ups could certainly be fruitful.
The African Fintech and AI Space
As indicated in earlier articles, Africa’s fintech sector is huge and thriving on digital payments, which is underpinned by the fact that 95% of 20 sampled jurisdictions across Sub-Saharan Africa had already established associated regulatory frameworks by November 2021. According to TechCrunch, fintechs raised US$3 billion in 2021 with fintech founders constituting the most successful entrepreneurs within Africa’s tech industry. While early stage start-ups (i.e. incubator, pre-seed, seed, Series A) received the most funding in the past three years, with a considerate increase in investments occurring since 2019, investment deals for Series B, C and D start-ups was particularly lower. Whereas it technically makes sense for investments to decrease as success increases, Series B start-ups certainly rely on funding to secure their position on the market, expand market reach and scale-up. Especially, because funding trends from the US suggest that there has been an increase in investments into Series B start-ups in healthcare and finance, it might also become important to find out whether such a trend exists in African countries.
Arguably, it makes a lot of sense that Series B start-ups in healthcare and finance get invested in more than start-ups in e-commerce and security for instance. Similar to healthcare services, financial services cater to the most basic needs of citizens and our economies. However, in a 2021 article by Maher, Laabi, Ivers and Ngambeket, it says that “African startups rarely survive beyond the Series B funding stage”. With the average return for investors after 5 years being admittingly low compared to that of other regions such as Europe, the US and Asia Pacific, there is certainly a need to reinterpret the real value of investments. Both AI and fintech development do not only deliver cash, but also knowledge that can be used to scale-up around the world at a later stage or simultaneously. If accessible and effective innovation is designed, scale-ups within Africa might also create a different kind of ‘multiplier effect’ thanks to its huge population. In a nutshell, investing into fintech and AI solutions in Africa might be a mid- to long-term project with returns depending on the scalability of innovation. Whereas Egypt, Tunisia and Morocco have been identified as the most ‘AI-ready’ countries in the Middle East and North Africa (MENA) region, Sub-Saharan Africa was one of the two regions, who scored the lowest in Oxford Insight’s ‘Government AI Readiness Index 2021’.
Towards More Cooperation between Singaporean and African Businesses?
Based on the above findings, which hint at some of Singapore’s and Africa’s strengths and weaknesses, intensified mutual cooperation could certainly be interesting. For Africa, cooperating with an ‘AI-ready’ country such as Singapore could lead to further developing innovation and skills, which bring about scalable solutions. For Singapore, Africa could constitute a huge market with a population in desperate need for effective solutions, which based on local skill development, innovation and content, will enable access to finance and credit as well as tools to deal with corruption, facilitate intra-regional trade and support businesses of different scale. The latter arguments reemphasize that building up further ties for a cooperation in the Singaporean-African fintech and AI space should coincide with the conscious choice to contribute to sustainable development.
Only by putting the emphasis on sustainable development, hence by aiming for mid- and long-term changes and respecting the need for the positive changes at local levels, will investments eventually result in trade cooperation and a long-term knowledge exchange. Especially, because Africa has been working towards strengthening regional integration through the African Continental Free Trade Area (AfCFTA), it could be very interesting for Singaporean businesses to design innovation as a contribution to the effective functioning of trade flows in this area. Finally, with Parayil having laid out that ‘information capitalism’ is also ‘knowledge capitalism’, a cooperation between Singaporean and African fintechs, and other stakeholders in this domain, could also put an emphasis on skill training and knowledge exchange more directly. Merging fintech, AI and edtech to learn from each other could certainly lead to raising the fintech entrepreneurs and tech specialists of tomorrow.
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