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Riding the African FinTech Safari

Yehia El Amine

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African FinTech

Over the past few years, Africa has become a hotbed for FinTech across the board, gulping up investments higher than any other sector on the continent.

This is a natural occurrence, as 66 percent of Sub-Saharan Africa (SSA) remains unbanked, these innovative financial startups have mushroomed all over to meet the rising demand for financial services.

According to the UN, over half the global population growth through 2050 will come from Africa, given that it has the world’s fastest-growing population.

Currently, while nearly 65 percent population is under the age of 35 and this represents a key demographic that’s more tech-savvy than others. FinTech in Africa is a growing sector full of opportunities especially in regional markets such as Nigeria, Egypt, South Africa, and Kenya.

The emergence of FinTech is not only granting people access to financial services but is also changing the competitive landscape by serving as a catalyst for innovation across other industries, from agriculture and retail to transport and insurance.

According to a report by WeeTracker, African FinTech startups raised a combined USD 678.73 million in funding, in 2019 alone.

African FinTech companies is the poster child of necessity being the mother of invention; an example of this can be seen through Kenya’s M-Pesa, which spotted a massive demand from people who did not have access to traditional banks and disrupted traditional financial services with mobile technology that captured a previously untapped market.

The company enjoyed massive success, offering financial inclusion to over 41 million people, as well as a safe, secure and affordable way to send and receive money, top-up airtime, pay their bills, get paid and even secure short-term loans.

M-Pesa is one of many success stories that shook up the financial landscape.

According to a report by the International Monetary Fund (IMF), these fintech businesses challenge traditional structures and create efficiency gains by opening up financial services to many.

“Technological innovation and infrastructure development can play key roles in allowing the continent to transform its demographic dividend into jobs, growth and rising living standards for all,” according to the IMF, but only if policymakers are able to navigate the perennial race between fast-moving innovation and the slow pace of regulation.

According to a report by Quartz Africa, Africa is home to more than 400 FinTech firms enabling payments, funds transfer, lending, and even wealth management. Nigeria, Kenya, and South Africa are the top FinTech hubs on the continent, accounting for the larger proportion of fintech firms and attracting the lion share of investments.

“Regionally, the Middle East and North Africa saw strongest growth, up 40 percent, sub-Saharan Africa and North America, both up 21 percent. In general, emerging markets and developing countries experienced faster growth than developed markets,” the World Bank said in a whitepaper echoing the statements made by Quartz.

While African FinTechs were able to weather the storm of the year-long COVID-19 pandemic, they were the principle financial services that people relied on when under lockdown, growing their position within the market.

The pandemic acted as a catalyst in proving that this industry is the future of Africa’s financial sector, with no signs of stopping any time soon. With this newly garnered footing in the market, it will allow them to set and follow the latest financial trends of the industry.

Let’s discuss some of them.

1. Mobile Wallets

The African continent witnessed a rapid adoption of mobile wallet payments, since more than 20 percent of adults in the SSA region own a mobile money account, which the highest figure in the world, according to Financial Technology (FT) Partners.

“80 percent of all micro, small, and medium-sized enterprises (MSMEs) in the continent have a mobile money account and 79 percent of the growth in ecommerce has been facilitated by mobile money,” FT Partners highlighted. 

This increased dependence on mobile money is widely due to the continent’s increasing smartphone penetration at 39 percent, which is projected to steadily rise to 66 percent in the next five years.

“In comparison, over 80 percent of Africans have access to a mobile phone (with SMS capabilities), providing a unique opportunity. For instance, over 37 million Kenyans have mobile phones — this outnumbers both the number of ATMs and desktop computers that they have access to,” the report by FT Partners noted.

This lays the ground for developing a more robust digital and mobile banking experience and offerings, allowing FinTech to claim the financial throne in Africa.

2. E-Payments

According to a study by Penser, a UK-based Business management consultancy firm, the African electronic payments market is worth around $18 billion in revenues, while domestic payments account for $8 billion within the same amount.

The online payments market is worth $0.8 billion and represents 10 percent of the electronic payments market.

The state of e-payments will keep increasing as the continent is looking to increase its investments within the telecoms industry, which would propel financial innovations, heighten connectivity, and incentivize investments within the FinTech industry.

3. Remittances

It comes as no surprise that the African diaspora around the world is one of the largest, with UN estimations reaching around 30 million people.

Naturally as with any country, diasporas represent a hefty contribution to the continent’s economy through money transfers back home, relying mainly on Western Union, MoneyGram, or traditional banks for said service.

FinTech has the potential to tap into this demographic and capitalize on the profits that come, mainly due to the diaspora looking for alternatives to the ones named above since they charge high commission fees, expensive exchange rates, and longer durations for the transfer to actually happen.

If positioned correctly, FinTechs across Africa could disrupt this industry trend, providing cheaper, faster, and fairer alternatives.

4. The rise of investments

According to a report by Disrupt Africa, the continent has raised $320 million in funding since January 2015 and the ecosystem has surged 60 percent in the last two years.

“In 2018, fintechs raised $132.8 million, making it the sector’s best year for funding. In 2019, fintech deals with a combined (disclosed) worth of $53 million accounted for 18 percent of the nearly $290 million raised across 88 disclosed deals,” the report highlighted.

Not only that, but African FinTechs have attracted investments from heavy-hitting names such as global giants Visa, PayPal, Stripe, and the like, offering innovative payments and financial services.

OPay, the Africa-focused, Chinese-backed payments company founded by Opera, raised $170 million in 2019 across two fundraising rounds. Lagos-based Interswitch raised $200 million from payments giant Visa making it Africa’s first “home-grown” unicorn.

Visa and Stripe have also led an $8 million Series A round for Nigerian online payments company Paystack. Visa has also co-led digital lender Branch’s $170 million Series C funding round. Rival Mastercard participated in a $20 million Series A funding round for payments solutions provider Flutterwave.

Mastercard has also backed Jumia Pay, the in-house payments solution of the largest e-commerce player in Africa. Similarly, PayPal has backed Tala, the online lender operating in Kenya and Tanzania.

All these contributions, investments, and funding will help African financial startups expand their footing further into the continent as they attempt to take advantage of the unbanked population.

5. Emergence of cryptocurrencies

The financial revolution happening on the African continent is fueling the rise of cryptocurrencies as many young Africans looked to the currency to widen their earnings, the value of cryptocurrencies being transferred in and out of Africa increased 55 percent over the course of last year.

In addition, cryptocurrencies have become favored for better services within the continent since local currencies are pegged as weak and unstable.

As we enter the dawn of a new year and decade, the innovative work put forth by FinTechs across Africa has the potential to change the entire working landscape, better its position as a global leader in financial technologies, providing its people with the tools needed to grow on all levels.

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Yehia is an investigative journalist and editor with extensive experience in the news industry as well as digital content creation across the board. He strives to bring the human element to his writing.

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MTN Rwanda launches mobile money FinTech services

Yehia El Amine

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Mobile Money

MTN Rwanda announced late last week the launch of a FinTech subsidiary called Mobile Money Rwanda LTTD, to provide and manage mobile money services throughout the country.

The announcement – which was made as the operator received approval from National Bank of Rwanda to launch the FinTech service – also places Chantal Kagame as its Chief Executive Officer to drive business development, strategy, innovation, and day to day operations of the company.

According to a statement by the South African courier, the setting up of Mobile Money Rwanda Ltd is in line with MTN Rwanda’s strategy to lead digital solutions while contributing to the national economic strategy on enhancing cashless transactions that offer convenience and security to all Rwandans.

“We are very glad to announce the establishment of Mobile Money Rwanda Ltd as a wholly owned subsidiary of MTN Rwanda. One of the key pillars in our strategy is to establish platforms that our customers find valuable. This restructure will ensure that the Mobile Money business remains agile, well poised for future growth and accelerated innovation. Mobile Money has matured over the last ten years in Rwanda, and this marks a pivotal milestone in our journey toward a cashless economy,” MTN Rwanda CEO, Mitwa Ng’ambi said in a statement when speaking about the new standalone firm.

In parallel, Kagame highlighted the company’s commitment to enhance the MoMo user experience and keep innovating products and services aligned with their digital ambition.

“The transition process to a standalone business has now kicked off and we look forward to cementing Mobile Money Rwanda Ltd as a key FinTech player in the Rwandan market,” she added.

The South African-based telco already provides FinTech services under the name of MoMo, a service that has been in operation since 2010. According to figures by the company, MTN currently boasts about six million subscribers.

MTN claims the largest market and value share in the increasingly competitive telecoms sector of Rwanda.

The announcement comes in line with MTN’s ambition to expand within the large African market, as the courier placed a bid to receive an operating license in Ethiopia, as the country looks to liberalize its telecoms sector and digitize its economy.

Prior to Chantal’s appointment, she held the role of Chief Business and Corporate Affairs Officer since she joined MTN in 2018. She is a senior Telecom Executive with over 19 years of experience in Multinational Telecommunications.

She has a track record of excellent achievement in areas of Executive Leadership, Sales and Distribution, Mobile Financial Services, Strategy Development and Execution, Corporate Affairs and Credit Management.

Prior to joining MTN Rwanda, Chantal was the Deputy CEO/COO at Tigo Rwanda for 3 years and Head of Sales, Distribution and Corporate Affairs at the same company from 2011 to 2015.

The establishment of Mobile Money Rwanda Ltd does not in any way affect nor change the delivery of services to current Mobile Money customers. Mobile Money customers will continue to enjoy access to the wide range of MoMo products and services, the over 30,000 Mobile Money agents and 60,000 MoMoPay merchants across the country.

MTN foresees an even brighter future to further expand and deepen its offerings to the public in line with Rwanda’s vision to become a fully cashless economy.

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UK to explore Central Bank digital currency

Karim Husami

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digital currency

The Bank of England and the British Treasury have announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential new form of digital money issued by the Bank of England and for use by households and businesses.

While the announcement was made by Chancellor of the Exchequer Rishi Sunak as part of the UK Government’s response to the Kalifa Review, the new digital currency would be alongside cash and bank deposits, rather than replacing them.

Aims of the task force

In addition, the Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore the digital currency, in line with their statutory objectives, and to promote close coordination between them. The Taskforce will:

  • Guide evaluation of the design features a digital currency must display to achieve our goals.
  • Coordinate exploration of the objectives, use cases, opportunities, and risks of a potential UK CBDC.
  • Support a rigorous, coherent, and comprehensive assessment of the overall case for a UK CBDC.
  • Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.

The Taskforce will be co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and the Treasury’s Director General of Financial Services, Katharine Braddick.

Commenting on the announcement, John Whelan, MD Digital Investment Bank & Innovation, Banco Santander expressed his excitement “to see this development from the Bank of England supporting the opportunity to use tokenized cash assets on next generation payment systems, enabling on-chain wholesale exchange of value.”

In parallel, the Bank of England announced the establishment of a CBDC Unit, which will lead its internal exploration around the currency, as well as leading the Bank’s external engagement on CBDC, including with other UK and international authorities.

Banks searching for digital currency

“We’re launching a new taskforce between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC),” British finance minister Rishi Sunak told a financial industry conference.

Other central banks are also looking at whether to set up digital versions of their own currencies, essentially widening access to central bank funds which only commercial banks can use at present. This process would speed up domestic and foreign payments and reduce financial stability risks.

While China is a front-runner to launch a CBDC, the European Central Bank said it was studying an electronic form of cash to complement banknotes and coins, but any launch was still several years away.

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Bitcoin millionaire puts money on Greens in German election

Associated Press

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Greens in German election

A German software developer who made a fortune from bitcoin has given the environmentalist Green Party one of the biggest political donations in the country’s history in hopes it will win this year’s national election — and consider banning the digital currency.

Moritz Schmidt’s donation of 1 million euros ($1.2 million) to the Greens made headlines this month, as the party traditionally receives only small sums. Such a large gift is rare in German politics. Parties in the country receive most of their funding from members’ dues and state aid linked to election results.

“I have benefitted immensely from the bitcoin bubble. It’s been a wild ride, and the proceeds are unearned riches really,” Schmidt told The Associated Press in an email interview this week. “I’ve been sort of waiting for the right opportunity to donate a larger sum.”

The 39-year-old from the northeastern town of Greifswald, who hadn’t previously featured on any lists of major political donors, said he bought “a couple thousand euros” worth of bitcoin in 2011, shortly before it crashed, wiping 90% off the value of his holdings. Since then, bitcoin and other cryptocurrencies have repeatedly surged and slumped on investors hoping to turn a quick profit.

The value of a single bitcoin has dropped from over $64,000 to about $50,000 in the past ten days.

Schmidt, who made about 2 million euros ($2.4 million) by gradually selling his bitcoin over the years, said he learned in 2017 that the virtual currency consumes a vast amount of electricity. While the details are hotly debated by bitcoin fans and critics, experts say the power required to generate and trade cryptocurrencies is considerable.

“Being an energy hog is built into the bitcoin system,” said Schmidt.

The Greens advocate strong environmental policies to curb greenhouse gas emissions and fend off the threat of climate change.

Schmidt, who is cautious about the Greens’ prospects of winning the election outright despite their current high poll ratings, says he decided to help fund their campaign rather than donate toward an environmental project because “giving it to a political party that has environmentalism as its core value will have a much bigger impact.”

The Greens nominated 40-year-old lawmaker Annalena Baerbock as their candidate Monday to succeed long-time conservative leader Angela Merkel as chancellor in the Sept. 26 election. While the party doesn’t mention bitcoin’s environmental footprint in its program, it does want such currencies to be “traceable” — making bitcoin less attractive to many of its fans.

“I don’t think regulation will do anything unless it crashes the price down to levels that make bitcoin uninteresting as an asset and unusable as a global currency,” said Schmidt. “I believe that, in effect, bitcoin will need to be banned.”

Schmidt dismissed comments that suggested he might be trying to redeem himself for having traded in the cryptocurrency.

“Had I looked for absolution, I’d have turned to the Catholic Church,” he said.


BERLIN (AP) — By FRANK JORDANS Associated Press

Follow AP’s coverage of climate change: https://apnews.com/Climate

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