Among all the challenges of the pandemic and current climate, African fintech is holding its own. Overseas and domestic investors are putting money into innovative start-ups offering all kinds of services.
From cross-border transfers to payments and lending and much more, the kinds of fintech developments in Africa are busting through the various barriers in their way to offering better services.
Digging deeper into African fintech success stories
Each financial service being tackled by fintechs is subject to its own unique challenges. For example, cross-border payments are held back by super-high rates and regulatory issues between African countries. And a start-up that’s coming up with solutions for this exact problem can be seen with Chipper Cash.
The fintech start-up has been going since 2018 and has recently (May 2021) closed its latest funding round (Series C) with $100 million. This financial backing from investors will allow the company to expand its team and develop more products.
Also read: Africa Impact Investment: the future is green
Chipper Cash raised $30 million in its Series B funding round in November 2020, attracting investors including Bezos Expeditions (Jeff Bezos’ fund), Ribbit Capital, and SVB Capital. Prior to this, they raised $13.9 million in the Series A funding round back in June 2020. So, Chipper Cash has completed three funding rounds and raised a total of $143.8 million in less than 12 months.
Founders Maijid Moujaled and Ham Serunjogi worked at Yahoo, Facebook, and Flickr before deciding to launch their own fintech start-up. Chipper Cash covers P2P payment services that have no fees and are mobile-based between the following African countries:
- South Africa
- Kenya
- Rwanda
- Tanzania
- Nigeria
- Uganda
- Ghana
Recently, the pair told TechCrunch that they have expanded into the UK. This is their first move outside of Africa.
Successful funding rounds allow the fintech start-up to grow
Showing strong signs of growth, the start-up employs more than 200 people and aims to increase this to 300 by the end of 2021. The number of users of the platform currently stands at around four million, which is up by a third in 2020’s figures. And since June 2020, Chipper Cash has processed $100 million worth of payments.
New additions to its payment platform include new business payment solutions, investment services, and cryptocurrency trading services. The latter is likely to go down well in Africa, given the strong uptake of cryptocurrency transactions on the continent.
Figures show that African traders on crypto platforms are responsible for a large proportion of the transactions. For example, cryptocurrency trading platform Luno shows that users from African countries account for $7 billion of its total trading volume of $8.3 billion.
Small businesses in Kenya, South Africa, and Nigeria are home to most of the cryptocurrency activity in Africa. So, for innovative fintech start-ups, this sector is a logical way to go. Growing products and services within cryptocurrency are becoming a major concern of start-ups across Africa.
The biggest cryptocurrency market in Africa can be found in Nigeria. And here we can see one of the regulatory barriers against fintech start-ups that want to cross borders. Chipper Cash isn’t active in Nigeria as a service, because the regulations implemented by the Central Bank of Nigeria (CBN) prohibit users from converting fiat currency into cryptocurrency from their bank account. Crypto users have to set up P2P platforms, but these regulatory concerns can block some services from being offered in Nigeria.
Creating a strong fintech ecosystem in African countries
The CBN has, however, been instrumental in creating the kind of ecosystem that is necessary for fintech to thrive. Central banks of Uganda, Rwanda, and Kenya are also creating these vibrant technological ecosystems, but in many ways are following the lead of CBN.
While some fintechs have complained that CBN stifles innovation, CEOs of some of the most successful start-ups appear to disagree. The likes of Flutterwave and Chipper Cash work hard to comply with the regulations, and this is partly why they have become so successful.
Up until recently, there were currently two private unicorn (valued at over $1 billion) start-ups active in Africa – one is Flutterwave and the other OPay. While OPay is backed by Chinese investment, its services are all in Africa. OPay is currently valued at $1.5 billion. These gave been joined by fintechs Interswitch, Fawry, and Chipper Cash along with e-commerce start-up Jumia, Africa is now home to six tech companies worth more than $1 billion.
Successful African fintechs view investors as major partners with a say in the business – this is what strengthens their companies. As well as providing capital, these kinds of investors can also bring experience and ideas to the table.
Major Chipper Cash investors SVB Capital, based in the US, says that this is its first investment into Africa. Tilli Bannett, MD of SVB, told the press that the venture capital fund opted to invest in Chipper Cash because: “it [Chipper Cash] has created an easy and accessible way for people living in Africa to fulfill their financial needs through enhanced products and user experiences.”
Also read: Venture capital investment in Africa soars to record levels in 2020, report shows
African fintech sector will grow even more throughout 2021
African fintech, therefore, remains the most positive part of tech investment in the continent. In 2020, around $1.5 billion was raised by start-ups in African countries, and more than a quarter of this was raised by fintech start-ups.
Throughout 2021, we can expect this figure to increase for African fintech start-ups. So far this year, four fintech start-ups have raised rounds of $100 million or more already:
- TymeBank in February 2021.
- Flutterwave in March 2021.
- OPay in May 2021.
- Chipper Cash also in May 2021.
This is all extremely impressive and bodes well for the fintech sector across the whole continent. It will be interesting to see what the next 12 months bring.
N’Gunu Tiny, Founder and Executive Chairman of the Emerald Group, is an expert in transformative tech and social innovation. His book ‘Impacting Lives’ will be published in Fall 2021…
