Determinants of Penetration of Financial Technology Among the Heterogeneous African Economies

Wide-spread financial exclusion and the inability of banks to meet the customers’ expectations in service delivery in Africa have made most central banks seek technology-enabled solutions, especially as the global trend moves towards diversifying the range of financial service provider types. Some authors attributed these problems to the significant financial infrastructural gap in Africa. This study, therefore, investigated the determinants of fintech spreads in a panel of five emerging, 24 frontier, and three fragile African economies from 2002 – 2018. The dynamic panel system GMM estimation technique based on the epidemic and rank theories revealed heterogeneity and significant difference in internet and mobile banking penetration rate among economy types in Africa, with emerging markets reporting higher intercept and lower slope than frontiers and fragile markets. Also, information spread promoted penetration across units; whereas, population growth and literacy only increased it among frontiers and fragile economies but dampened it in emerging economies. This means that users of fintech among emerging markets began to diversify to new innovations aside from those used in this study, hence the decline. Moreover, Africa’s average fintech adoption rate stood at 24%; in South Africa and Morocco, it stood at 43% and 40%, respectively, compared to the global benchmark of 33%. We, therefore, recommend that banks should collaborate with fintech companies to enhance their benefits in Africa.