Much ado for Fintech!

The past two weeks have been nothing short of insane for Nigerian fintech, with the sector garnering nearly $ 400 million in investment during a particularly crazy weeklong period.

This surreal weeklong period began with payment giants Visa, spend $ 200 million for a stake in IPO-linked Nigerian fintech company Interswitch, Africa’s first billion dollar fintech company.

Source: TechCrunch

In the days that followed, it became known that Transsion – the Chinese company behind Africa’s best-selling smartphone brands – among other “Chinese” investors, had led a $ 40 million round in PalmPay.

PalmPay is a newly formed financial technology company that seeks to fill the void left by traditional Nigerian banks and serve the 60 million Nigerian adults who are believed to be unbanked or underbanked. The startup seems to be on a mission to create a super app that houses different digital services such as logistics, ridesharing and payments.

Indeed, if we are to remember the year 2019 for anything in the circles of Nigerian tech startups, it would be the year when the Chinese consolidated their position as the largest foreign players in Africa by putting everything implemented for the financial services space in Africa’s largest. market. And maybe no other example sums this up as much as the story of OPay.

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The China-backed OPay company and its new competitor, PalmPay, may have temporarily stolen the limelight with the announcement of its $ 40 million funding round, its heavy backers and the announcement that some 20 millions Tecno, Infinix and Itel smartphones, destined for Africa in 2020, will come with the PalmPay app preinstalled.

But when OPay retaliated with the announcement of a $ 120 million per spin involving companies like Sequoia Capital China and SoftBank Ventures Asia, following a previous increase of $ 50 million, along with its intention to expand to Kenya, Ghana and South Africa in the coming months, it became clear that the already thickened plot had come to a standstill.

Over the past six months, through a combination of disproportionately subsidized services and aggressive marketing – facilitated in large part by the deep pockets of its funders – OPay has covered a lot of ground in its mission to create a great application; one that would be a one-stop-shop for “everything,” while continuing to pursue concurrent growth across multiple verticals including transportation, food delivery, investments, payments and classifieds.

And then there is Jumia Pay; the in-house payment solution of Africa’s largest e-commerce player which is touted by the company as a PayPal-inspired spin-off that could trigger a reduction in the company’s struggling e-commerce activity in favor of a fintech.

In Jumia’s financial statements for the third quarter of 2019, the impressive figures achieved by Jumia Pay was a highlight in an otherwise moderated show and the company’s co-CEO, Sacha Poignonnec, hinted at transforming Jumia Pay into more than just an in-house payment solution and going all out for the African fintech that appears to be ripe for the taking.

In fact, Jumia recently suspended its e-commerce activity in Cameroon in a move that looks like the first in a series of ecommerce cuts in preparation for a big fintech game.

Is there such a thing as “Too Much FinTech”?

So as it stands, everyone wants a slice of African fintech – everyone from global fintech giants and Silicon Valley VCs to e-commerce giants that need a. new life and aggressive Chinese investors who know how and when to choose the chinstrap.

And it seems that many of them want to make Nigeria the epicenter of a likely pan-African fintech revolution.

Like Omobolaji Johnson, former Nigerian Minister of ICT and now a partner at venture capital firm TLcom Capital, the dish: “Regarding payments, the Nigerian market is probably quite large [to sustain a business]. And it’s much easier to start here and expand to other parts of the continent than the other way around.

Image result for people paying with the OPay agent in Lagos
Source: TechCrunch

However, with so many “big” players trying to grab the same ball, could it be possible that things could go wrong? Is it possible for the fintech space to become overcrowded where startup attrition and failure will come into play?

Do not be a prophet of doom either, but such fears are not exactly illegitimate. However, Olugbenga “GB” Agboola, co-founder and CEO of Flutterwave – one of Africa’s most valuable fintech startups – is convinced that there are mostly better days ahead.

“I don’t think Nigerian fintech is overcrowded. There are around 20 banks in Nigeria and yet there is a huge delta between the banked and the unbanked. The market is there and the more people who solve it from their niche perspective, the better, ”GB told WeeTracker in an email response.

In reference to those data, there were no less than 56 FinTech companies enabling financial inclusion in Nigeria in 2017. And that number is likely to have reached around 100 by now.

For a country where half of the adult population (about 60 million people) are still unbanked, and twenty or so traditional banks continue to be overwhelmed with the task of bringing financial services to the unbanked and underbanked, it’s easy to see why fintechs interfere with the wallets of mobile money, payment solutions, agent networks, investments, and digital loans. And it’s also easy to see why there is enough room for everyone.

But why all the fuss about FinTech?

Every year for the past 3 years, no other technology sector has attracted more funding to Africa than fintech. And for good reasons too.

Indeed, the wave of fundraising activity seen in African fintech in recent weeks is in line with a trend that has manifested itself over the past 18 months.

The past year and a half has seen Nigeria’s Paystack gain support from global payments giants, Visa and Stripe, as well as Flutterwave benefiting from Mastercard’s participation in its A-Series extension round. Mastercard is also involved with the previously mentioned Jumia Pay.

Image result for jumia pay imags

And then there is the company that Jumia Pay wants to emulate, PayPal, which lender backed by emerging markets, Tala. Plus Interswitch’s newest funder, Visa, co-leads a huge $ 170 Million Series C Round at another digital lender, Branch. All of this happened in less than 2 years.

This trend indicates increased interest and confidence in African fintech; an industry that has found a great foothold in the M-Pesa mobile money service in Kenya, which has driven financial inclusion to 83 percent in Kenya (compared to 27%) since its launch in 2007.

And beyond Kenya, there is evidence of the impact of FinTech across West Africa where the reach of the mobile money industry is 13 times larger than local banks.

For a continent where an estimate 66% of the adult population is unbanked, the nascent fintech industry has a huge opportunity to boost financial inclusion outside of traditional banking means.

This is why it seems that investors are betting on the sector with reckless abandon. While it can be argued that there are now many fintech platforms offering essentially the same thing, in Nigeria for example, great potential for success lies in the large number of underserved people and even those who are not. have not yet been.

Africa’s persistent socio-economic problems are a stumbling block, but not a deterrent

Basically, fintechs thrive on the very idea that people have money. And unfortunately there are far too many people on the African continent with very little or no money at all.

Image result for people using fintech images in Africa
Source: AfricaTalk

The World Bank says that some 413 million people in Africa live on less than $ 1.90 per day and a 85 percent of Africans live on less than $ 5.50 per day. For these people, fintech services won’t be of much use – not even quick loans, which would require repayment with interest from virtually non-existent income prospects.

Nevertheless, fintech players are starting from the path of least resistance while seeming to bet on the growing population of young people in Africa, as well as on the growing penetration of mobile telephony / Internet on the continent.

As GB told WeeTracker: “Fintechs have to come from somewhere to deliver services. Nigeria looks like where China was 10-15 years ago and we have seen how people like Alipay started from the path of least resistance and moved on to the economic maturity of the country.

Africa is is expected to house half of the world’s labor force over the next 35 years and that could mean more working class workers (hopefully) and more money in people’s pockets.

With the potential for increased purchasing power in the long run, emerging fintechs may well play the game in the long run as they vie for the reward of grabbing the best market share early on.


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