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Issue 101
Aug 02 - Aug 08, 2021

Hi there,

Last week, we celebrated our 100th issue and announced our first-ever Decode Fintech Community Roundtable. In case you missed it, you can still sign up! Come meet and discuss with friends in African fintech. We can't wait to meet you!

We're still taking feedback on how Decode Fintech can better serve you and you can let us know in this short three-minute survey.

Please stay masked up and enjoy the rest of your week.

Folu & Tochukwu
Product Specialists, Paystack
NigeriaCellulant acquires license to launch Tingg in Ghana. Cellulant received a Payment Services Provider (PSP) license from the Central Bank of Ghana to launch Tingg, a digital payments solution for businesses in Ghana. This comes after the launch of the payment platform in Zambia and Tanzania last month. TechCabal
SubstackBNPL in Africa. In this issue of the Frontier Fintech newsletter, Samora Kariuki gives a brilliant overview of the global "Buy Now Pay Later" (BNPL) landscape and how it could potentially scale in Africa. Frontier Fintech

Point of sale loans or Buy Now Pay Later (BNPL) offerings provide customers with the option to pay for their purchases in instalments spread over a fixed period of time. This option is designed to drive customer conversion and merchant sales as the customer only needs to provide a fraction of the price at the point of purchase.

In Africa, informal credit purchase options have long existed, mostly in small high-trust communities. Digital BNPL providers like Carbon Zero (Nigeria) and PayFlex (South Africa) have introduced more automated and scalable solutions but adoption is still nascent. Like Samora points out, the lack of mature credit and identity infrastructure poses strong challenges to scale. However, with tightening economic conditions that have seen prices of goods rise as incomes have fallen or stagnated, we might see accelerated adoption of these BNPL solutions sooner than later. 
NigeriaCBN releases new guidelines for setting up a Payment Service Holding Company (PSHC). According to the new Central Bank of Nigeria (CBN) guidelines, a PSHC will allow financial institutions looking to provide multiple payment services through the newly re-categorized payment licenses, to set up holding companies and provide these services through two or more subsidiaries. The Guardian

In Issue 91, we first wrote about the CBN's re-categorisation of existing payment service licenses. In a December 2020 circular, the financial regulator consolidated existing payment licenses into three main categories: Payment Solution Services, Mobile Money Operator, and Switching and Processing.

As fintechs continue to expand and compete with each other across multiple payment services, it becomes important that they are able to comply with this. This is what a PSHC should accomplish. However, the PSHC guidelines introduce new rules that could potentially set high barriers to entry for eligible financial institutions. This includes setting up multiple boards of directors and a minimum paid-up capital that must exceed the sum of the minimum required paid-up capital of all subsidiaries.

On the surface, these regulations may seem complex to comply with, however, we believe the CBN's intention here is to design a regulatory environment that reduces risk while encouraging innovation. We're curious to see how payment companies will adopt these guidelines and continue to innovate competitively.
NigeriaKuda raises $55 million in Series B round. The Nigerian digital bank, which previously raised $25 million Series A in March 2021, has raised more funding in a round co-led by existing investors - Target Global and Valar Ventures. They plan to build new services and expand into other African markets. TechCrunch

This brings the total funding for the almost two-year-old startup to $91.5M, at an estimated valuation of $500m. This is yet another positive signal about the future of banking and financial services in Africa. With the current per capita economic profiles, there are interesting questions to be asked about sustainable customer acquisition costs and payback periods on investments into digital financial services. That said, opportunities still abound in a predominantly cash-based continent that includes millions of people without access to formal financial services.

In this report, Renaissance Capital provides detailed information into Kuda's business and the Series B funding.
AfricaUnion 54 and Payhippo selected for Y Combinator's S21 cohort. Union54, a Zambia-based card issuing service, and Payhippo, a Nigerian SME lending platform, will join 11 other African tech startups in the 2021 summer cohort of the accelerator program. All startups will receive mentorship, $125k in capital, and access to a network of investors for potentially larger funding. Disrupt Africa

It's interesting to note that Union54, which is Zambia's first entrant into YC, spun out of the co-founders' experience running Zazu, a digital wallet that offers both physical and virtual cards. A recurring theme that we've explored in the last two issues of this newsletter is how fintechs are expanding horizontally into multiple financial services. However, there's still a lot of value to be unlocked by digging deeper into the rails of an existing financial utility. The goal here is not just to reduce cost and optimize margins but also to fundamentally re-orient and improve legacy financial infrastructure for today's fintechs.

In Issue 96, we reported Payhippo's $1 million pre-seed funding which was to help drive their expansion and growth. We're excited to see how this new opportunity impacts the company's trajectory. 
South AfricaNaked completes $11m Series A funding round. Naked allows users to purchase car and home insurance via their mobile app. This funding round will help Naked expand their team and continue to develop its product. The round was led by Naspers with participation from Yellowwoods and Hollard. Tech Central

Like we reported last week, there's an opportunity for digital insurance platforms to improve existing processes and drive market penetration. While South Africa makes up the bulk of gross written premiums on the continent, insurance processes are still analog and penetration is still relatively low compared to the rest of the world. Startups like Naked and Pineapple are leveraging the ease and distribution of the internet and mobile apps to reduce signup time, and generally automate most of these analog processes. 
KenyaWapi Pay raises $2.2 million in pre-seed funding. The Nairobi-based startup, which facilitates digital payments between Africa and Asia, has raised pre-seed capital from Chinese and African investors which includes MSA Capital, Transsion Holdings, Future Hub amongst others. This funding round is to help support regional expansion, product diversification, and acquire relevant licensing from African regulators. Afrikan Heroes
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