Does the rise of AI threaten fintech funding resurgence?

The year 2023 posed significant challenges for the African tech ecosystem as funding for fintech companies recorded a drop globally, marking the lowest level of funding in about six years. With the rise of Artificial Intelligence (AI) looming large, the question on everyone's mind is whether this new technology will overshadow the resurgence of funding for fintechs in the coming years. Adesoji Solanke, the Director and Head of Fintech Investment Banking Origination at ABSA Securities, shed light on the trends shaping the fintech market for 2024 in an exclusive interview with CNBC Africa. The year 2023 was indeed a turning point for the African tech landscape. The dwindling funding trends highlighted the vital role of venture capital in driving innovation and growth in the continent's venture ecosystem. Solanke emphasized the significance of funding as an indicator of the ecosystem's health, crucial for providing experimental capital to fuel innovation. Despite the overall decline in funding, Solanke pointed out the divergent trends along the value chain, with later-stage companies experiencing a more pronounced decline. The exit of international venture capital providers from the market in Africa created a funding void, though there was a silver lining with the emergence of dedicated African late-stage investors. This shift, while positive, underscores the need for continued growth and scale in the ecosystem. Looking ahead to 2024, Solanke expressed cautious optimism, acknowledging the persisting challenges in the funding landscape. The impact of interest rate fluctuations has led foreign investors to retreat to familiar markets, influencing funding dynamics across regions. While the year is expected to reflect the trends of 2023, certain themes are poised to shape the fintech market. The rise of instant payment schemes across Africa, coupled with heightened regulatory involvement, signals a shifting landscape where fintech players must adapt. Mergers and acquisitions are also anticipated to play a pivotal role, presenting new opportunities for collaboration between fintech firms and traditional financial institutions. One of the key focal points is the projected recovery in funding by the second half of 2024. Despite the challenges, Solanke underscored the resilience of well-run companies with a focus on profitability, emphasizing their continued access to funding. The evolving fintech space demands strategic agility from startups seeking angel investments. Solanke highlighted the core elements of a successful pitch, emphasizing the importance of a compelling idea and a resilient team. With the African venture ecosystem maturing, entrepreneurs now have a myriad of avenues to secure early-stage funding, from accelerators and grants to angel investors, fostering a more conducive environment for innovation and growth. As the fintech landscape navigates the uncertainties of 2024, the convergence of AI and traditional funding models poses both challenges and opportunities for the industry. The need for adaptability, innovation, and strategic partnerships will be critical in shaping the future of fintech in Africa.