Will AI tip the scale for African fintech funding?

In recent years, African fintech funding has experienced a significant decline, with a 37% drop from 2022 to 2023 and a further 51% decrease in the first half of 2024, mainly due to declining equity funding. However, a report from McKinsey suggests that there is potential for fintech revenues to soar to $47 billion by 2028, up from the $10 billion valuation in 2023. As the industry navigates these challenges and opportunities, Uzoma Dozie, the CEO and Founder of Sparkle, delves into the role of artificial intelligence (AI) in tipping the scale for African fintech funding. During the CNBC Africa interview, Dozie highlighted the global landscape of fintech investments, indicating a substantial surge in funding despite regional fluctuations. He emphasized the integration of AI intelligence in various solutions, citing a surge in AI investments and the adoption of AI models in financial services. He noted the introduction of DeepSeek as a game-changer, driving down costs and sparking further investment in AI technologies. Looking forward to 2025, Dozie underscored the importance of creating an enabling environment for innovation in Africa, particularly Nigeria. He highlighted regulatory initiatives such as Open Banking deployment and the development of a digital public infrastructure to enhance connectivity and inclusion. Moreover, he discussed the integration of AI solutions in financial institutions, enabling services like creditworthiness assessment and robotic customer support to drive operational efficiency and customer satisfaction. In response to a query about the competitive landscape between African banks and fintechs, Dozie acknowledged the enduring relevance of banks due to their capital, trust, and customer data reservoir. He forecasted a continued role for banks in the next 10 to 20 years while emphasizing the necessity for banks to adapt and leverage AI to stay competitive. He highlighted the transformative potential of open banking in empowering consumers and prompting banks to invest in digital infrastructure to enhance customer experience and retain market share. Drawing parallels to the UK market, Dozie illustrated how disruptive fintechs like Monzo and Revolut have pressured traditional banks to enhance their digital offerings, fostering overall industry improvement. As the African fintech ecosystem evolves, driven by technological innovation and regulatory advancements, Dozie's insights shed light on the transformative impact of AI on the industry's future. With a strategic focus on leveraging AI models, enhancing digital infrastructure, and fostering regulatory support, African fintech players are poised to navigate challenges, unlock opportunities, and drive financial inclusion and growth across the continent.