The African fintech industry has grown by leaps and bounds, no doubt. VC dollars have flooded the startup market, mobile money is all anyone can talk about, and regulators are watching this space ever so closely.

A number of other trends have also become apparent within the African fintech industry. Crypto, for instance, has become a breakout trend in the continent, even outside of fintech hubs such as Nigeria or South Africa. Central bank digital currencies are also gaining popularity rather quickly, especially with the recent launch of the eNaira.

Amidst all this growth, it may seem that traditional banks in Africa may be left behind. But that may not be the case, a report from CR2 suggests.

Established commercial banks may be able to “gain an edge over VC backed ventures” by using the “right mix of innovation and partnerships,” the report contends. How true this will be depends entirely on how these traditional players and regulators respond to the wave of fintech innovation taking over the continent right now. However, here are four highlights from the report that currently define the African fintech industry, and that could be leveraged as a potential opportunity.

Fintech accounts for the bulk of VC funding

The report noted that VC investments in Africa were on track to cross US$2 billion this year. This is on the back of years of growth, from US$400 million in 2015 to US$1 billion in 2018.

This would make Africa one of the fastest growing tech markets globally by year-on-year VC investment growth. Interestingly, over 50% of these investments go to fintech focused companies on an annual basis.

Chipper Cash became the third fintech company to reach unicorn status this year (and the sixth overall), aside from Wave and OPay. Meanwhile, African fintech companies raised US$1.44 billion between January and September this year already, beating the total funding raised over the past decade in nine months.

Payments innovation is on the rise

The arrival of M-Pesa completely changed how mobile payments were seen as a use case in the continent, the report said. Safaricom’s M-Pesa turbocharged Kenya’s mobile money penetration to one of the highest in the world, drawing VC and founder attention to this space. In the past decade, “hundreds of fintech startups” have taken to addressing mobile money-related opportunities in key African markets, the report said.

Key players in Africa’s payments market can be placed across five distinct categories, according to the report. These are startups, such as the earlier mentioned unicorns, global financial players such as Visa and PayPal, established banks, local giants such as M-Pesa, and global giants such as Stripe.

Collaboration between fintech players needs to pick pace

Established banks in Africa enjoy the benefits of sturdier client networks and a relatively well-defined regulatory landscape. At the same time, however, they need to consider fintech startup partnerships, the report said.

As a case study, the report explained how the Amole digital wallet, launched in 2018 by Ethiopia’s Dashen Bank and Addis Ababa-based Fintech Moneta Technologies, was able to garner 3 million registered customers through its payments solutions.

It also pointed out that African payments startups and neobanks were doubling down on new product launches and customer acquisition, backed by hefty investments. In this context, traditional banks were at risk of “missing the moment,” the report suggested.

Consumers continue to trust banks

On the flip side, a key asset that traditional banks in Africa continue to retain is trust. The report pointed out how in Nigeria, which copped 44% of the total startup funding deals last year, a majority of banked customers still preferred traditional banks. In fact, 67% of them trust their bank more than fintech companies, the report highlighted.

So while access and convenience are driving fintech adoption in Nigeria, banks continue to remain relevant in the consumer’s mind on account of the trust factor. This creates room for traditional banks to play a more concrete role in the African fintech industry going forward, the report suggested.