NicoElNino/Shutterstock.com Tom Minney The pandemic has put the emphasis on banks cutting costs and digitisation, with customers handling transactions on their phones and computers instead of queues at crowded bank branches. This puts the emphasis squarely on mobile money, fintech and digital currencies. Banks and fintech companies are jostling for position, sometimes working together, sometime poaching business, and competing intensely to recruit top IT staff.
A majority of Africa’s newly emerging “unicorns” – tech companies valued at over $1bn each – focus on payments. Nigeria’s Interswitch, which offers payment cards and digital payments and processes most of Nigeria’s electronic bank, government and corporate transactions, passed $1bn in 2019.
Its compatriot Flutterwave was valued at $1bn after closing funding of $170m in 2021. The firm offers partnerships with Visa and with Chinese e-commerce giant Alipay (part of Alibaba) for digital payments between China and Africa. Egypt’s Fawry offers financial services to customers and businesses through 225,000 locations and offers e-commerce with 29m monthly users and 3.1m transactions a day.
Other financial technology valuable firms with an African focus including OPay, Wave, Paga and Paystack. A young market seller makes a mobile money transaction. (Photo: i_am_zews / Shutterstock) Nigeria snatches Kenya’s crown
Investors from Silicon Valley to China have caught the African fintech bug. Lagos is attracting the lion’s share of investments after stealing Nairobi’s crown as leader of Africa’s tech revolution. Nigeria entices investors with the world’s seventh biggest population.
But there are many inefficient processes to improve and 95% of transactions are still in cash, entailing huge costs including the need for large bank branches to store the cash. Nearly 36% of adult Nigerians still do not have access to financial services.
Nigeria has attracted more than $1bn in venture capital investment in the last two years. In one week in November 2019 the inflow totalled $400m: Visa invested $200m in Interswitch, a group of investors led by Sequoia Capital China and SoftBank Ventures Asia invested $120m in OPay, and China’s Tassion invested $40m in PalmPay. This was a significant proportion of the total $1.2bn invested via venture capital tech in Africa in 2019.
In October 2020, US and Ireland-based payments giant Stripe acquired Nigerian payments company Paystack for a reported $200m in cash and stock, giving an exit for earlier investors such as Visa and China’s Tencent.
According to Mitchell Elegbe, Interswitch chief executive, the investment represents a virtuous circle. “Lagos . . . is […]