Fintech across Africa has had to concentrate on building out nonexistent infrastructure or finding alternatives to these structure as opposed to their counterparts in the western world who already have structures in place and have to look for ways to disrupting the status quo.
Fintech across Africa is growing to not only in payments but to encompass agricultural finance, insurtech, alternative credit scoring and savings and wealth.
Insure tech is blossoming of out an insurance industry that has typically low rates across Africa, South Africa leads and 16.7% and markets like Nigeria are at a penetration 0.4% the lowest in Africa. At 16.7% South Africa accounts for almost 80% of insurance premiums across Africa.
The insure tech starts ups Africa leading the way to insure first time insurers in different spaces and expanding the penetration of insurance in Africa
The firms that are doing well in reach and revenue seem to be have aligned on a number of tactics:
Strategic Partnerships with Mobile Network Operators(MNO): Insure tech Players like BIMA have built up partnerships with Operators in their countries in order for them to get instant access to a large pool of potential clients. BIMA provided free instant cover for all the subscribers of Tigo Ghana, the MNO they partnered with and then invited Customers to pay additional premiums via their mobile credit to have better cover and that seems to have been a successful strategy.
Concentrating on Mobile: Almost all the insure tech companies are heavily focused on using mobile to register and acquire customer(USSD and Apps), even though some have agents on the ground, they are cutting out cumbersome paper work by enabling their agents with mobile to sign up or allowing customers to self-register . The mobile strategy works to significantly reduce cost of doing business and premiums. Most premiums are deducted via mobile phone credit or mobile money
Focusing on the bottom of the pyramid: A larger pool of insure tech’s have provided flexibility in how premiums are paid and deducted. This means those with little or fluctuating income can make daily , weekly or monthly deductions . MobiLife out of South Africa enables a never lapse insurance policy, which appeals to customers with inconsistent income, when premiums are missed the cover is reduced not terminated
Mining Data Analytics religiously: The Insure Tech’s that are partnering with MNO’s are also using the call time, mobile spend to help determine behavior and better ways to access premium calculations for customers.
Alternative scoring: Anyone who has done and continues to do business in Africa, understand one of the biggest challenges is data availability . The banks and lending organizations bear a huge brunt of this challenge. Outside of countries like South African, most African countries do not have a reliable addressing system, making it hard to find debtors, they might also have a large informal economies with inconsistent inflows and even without a bank account. Additionally many banking systems in many African economies not have structured and credit scoring data.
These reasons and many more make it especially expensive for financial institutions to lend and also lead to a large number of defaulters.
Startups on the African continent are building tools to solve this problems by creating credit scoring platform that enables direct lending of the platforms themselves or the provision of Credit scoring as a service data to banks and other financial institutions.
A number of these alternative credit scoring platforms on this platforms are using mobile usage data, amount spent , mobile money usage etc in their credit scoring algorithms
An example in this space is Branch , who use mobile date and analyze smart phone date for their alternative credit scoring to give direct short term loans to their clients,