Decode Fintech Logo
Issue 154
Oct 31 - Nov 06, 2022

Hi there,

Last weekend, I watched Enola Holmes 2 starring Stranger Things’ Millie Bobby Brown, and I thoroughly enjoyed it. I thought it was a layered, fun, and thrilling sequel that combined a whimsical tale of teenage rebellion with a multi-threaded mystery and an empowering history lesson in women workers’ rights. This weekend, I’m looking forward to a trip to Wakanda for the Black Panther sequel. If you see a 6-feet tall bearded man in glasses wailing in a Lagos IMAX cinema this weekend, just say hi.

The Paystack Developer Roadshow is still happening right now in Ghana! Join us at one of our meetup-style events, where you can get a peek at the product roadmap, learn how to get new client leads from Paystack, and score some cool merch from Paystack and Stripe!

Spaces are limited so you should reserve your seat ASAP!

Tochukwu Ironsi
Market Intelligence Specialist, Paystack
NigeriaPayhippo acquires Maritime Microfinance Bank. Payhippo, a Nigeria-based SME credit provider, has acquired Maritime Microfinance Bank. This acquisition enables Payhippo to accept deposits in addition to its existing credit offerings. Nigerian lending startup Payhippo acquires Maritime Microfinance Bank - Disrupt Africa

MFB acquisitions are a fairly common strategy for digital lending in Africa. With an MFB, Payhippo can upsell their base of existing SMEs with other revenue-earning financial products like interest-earning bank accounts and card issuing. This also allows Payhippo to accept deposits at a lower cost of capital which can be used for its core lending business. We should expect an expanded offering from Payhippo in the coming months.

Zooming out though, if most of these B2B fintechs are maturing into banks, there are a number of interesting questions that come up.

First, becoming a bank not only expands product offerings but can potentially reduce costs by removing middlemen. For example, an MFB in Nigeria has access to a central switch for money movements and issuing cards directly. So how do existing payment and banking infrastructure providers evolve if their fintech customers move some of their previously outsourced financial operations in-house? How do they account for this risk in their business strategy, and how will they manage the disruption to their long-term business models?

On the market side, there’s an increasing amount of attention turned on MSMEs which make up a significant portion of economic activity but are still relatively underserved by legacy providers. If these fintechs converge on the same set of services, how can they differentiate themselves in the market? What attractive levers can be pulled for sustainably cheap customer acquisition? And what control points can be set up for strong retention? Will these players have to dive into deeper niches to seek differentiation (e.g an SME neobank just focused on retailers)?

Finally, becoming a bank requires strict compliance with very exhaustive regulatory requirements. Today, these MFB-type strategies act as cheap regulatory cover for product expansion but if everyone becomes a bank, how will regulators react to the trend? Will there be even more pushback on who can become a bank? Or will the regulations evolve to accommodate this new paradigm? (Digital banking license maybe?)

These questions will eventually be answered by the market but they’re interesting to explore right now.
AfricaMTN finalises approval for partnership with Sanlam. The MTN Group has finalised its partnership with Sanlam, a leading insurance provider on the continent. The strategic alliance will be implemented through MTN Group’s InsurTech platform aYo Holdings (aYo) and each partner will hold 50% of aYo. BusinessDay

This is a very significant alliance due to the market share and distributive strength of both companies. aYo, which already provides insurance services through digital platforms, reported 6.3 million active policies and 16.1 million registered customers in 2021. With this partnership, MTN can take advantage of Sanlam’s position as a regulated insurer in multiple markets, and ramp up the aYo platform. For Sanlam, aYo offers a platform to both acquire users and also drive user payments, particularly in Africa where a significant percentage of digital payments are made with mobile money.

As we’ve noted before, Africa is still largely underinsured. With the market-leading power of these two giants, we might begin to see a seismic shift for the better. 
AfricaBuilding Cyborgs, not Androids. In this piece, Stephen Deng (@MrStephenDeng), a partner at DFS Lab, makes a case for African startups embracing and combining informal offline infrastructure with digital tools and services. DFS Lab

The brilliant people at DFS Lab have written extensively about the merits of embracing physical ubiquity in African markets. In some ways, there are some potential answers to the questions we posed in the Payhippo note above.

A fairly common and reasonable view, given the history and trends in mobile, smartphone, internet, and financial technology, is that eventually, most Africans will live very digital lives. The underlying infrastructure may be physical, but the interface to cash and commerce will be mostly digital.

A fully-digital African economy is a long way off, especially for a continent where most commerce and payments are cash-based and done offline. It’s also quite hard to gauge when “enough” of a market has made the transition to online, such that certain digital financial products have a higher probability of succeeding. One of the challenges African startups face is that access to capital is limited, and it’s hard to get financing for companies that don’t show immediate returns. This makes it difficult to explore long-term opportunities with risky outcomes.

There’s therefore value in solving problems for a largely offline economy that exists now. Building for an offline informal economy allows startups who are waiting for a full transition to a digital economy, to make profits in the mid-term and satisfy stakeholders now. This profit is essentially a fee that lets them wait till their ideal, digital-friendly future comes into existence.

At the same time, these startups get to learn which parts of the informal machine are ready to be digitised and which parts are not. In some self-fulfilling way, they can ultimately contribute to the digital-friendly future they wish to see.
South AfricaPick n Pay extends the pilot of in-store crypto payments. Pick n Pay - a leading South African retailer - has completed the first phase of its in-store crypto payments pilot. The pilot which started out with just 10 stores has been extended to 29 stores and will reportedly launch across all stores in the coming months. TechCabal

Given Pick n Pay’s market position — 2,000 stores and about 16% of food and grocery in South Africa — this could be a potentially big deal. A common criticism of crypto is that most of its use has been restricted to the cryptocurrency space. Pick n Pay’s decision to accept cryptocurrencies as a means of payment could be a big step toward wider adoption, as consumers become more comfortable using crypto as a method of payment. There’s no guarantee of success, as payments still require customer-side participation. But if there are enough merchant-side touch points, then convincing consumers will be a much easier conversation.

As we’ve written previously, South Africa’s recent acceptance of crypto as a financial product makes it a sandbox for the rest of the continent. If adoption is positive and risk is contained, then we should expect similar approaches from other African countries. 
EgyptMoney Fellows raises $31m in Series B funding. Money Fellows, an Egyptian fintech that digitises the operations of informal savings groups, has raised $31 million in Series B funding. The round was led by led by CommerzVentures, Middle East Venture Partners (MEVP) and Arzan Venture Capital. The new funding will be used for product and geographic expansion. TechCrunch
Share a tip
Do you have an announcement, event, or job posting you'd like to share, or have you come across an interesting bit of African fintech news recently? Hit reply and let me know! I might be able to include it in next week's newsletter.
Know someone who'd enjoy Decode Fintech?
Shopify Johannesburg Hangout
Nov 15, 2022, Johannesburg, South Africa
The Fintech Summit 2022
Nov 26, 2022, Lagos
Chipper Cash
Senior Risk Data Analyst
Nigeria, Uganda, South Africa
Director of revenue Strategy
(Remote) UK, South Africa, Nigeria, Rwanda
Decode Fintech is powered by Paystack
Want to control the emails you receive from us? Update your preferences.
Want out of the loop? Unsubscribe.

We’re at 126 Joel Ogunnaike, Ikeja GRA, Lagos,