| Nigeria | African Development Fund approves a $3.9 million grant to upgrade Liberia's payment system. The grant, approved by the ADF's board of directors, will be used to upgrade Liberia's automated cheque processing and clearing house (ACP/ACH) and real-time gross settlement (RTGS) systems. The fund will also improve the Central Bank of Liberia's data centre. Guardian Nigeria |
| | EDITOR'S NOTE | The African Development Fund (ADF) is the concessional window of the African Development Bank (AfDB) Group. The AfDB, through the Nigerian Trust Fund, has also approved a $3.2 million loan to São Tomé and Principe to upgrade its national payments systems. Time and again, we’ve seen that improving national payments infrastructure directly impacts the economy. We’re keen to see how this new development impacts Liberia’s payment industry in the next decade. |
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| Africa | AWS launches inaugural accelerator for African Fintechs Amazon's cloud computing subsidiary, Amazon Web Services (AWS), has launched its accelerator program for African fintechs. Participants will benefit from workshops and consultations, along with the opportunity to receive up to $25,000 in AWS Activate credits. Disrupt Africa |
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| Africa | Trends in African Fintech. Wiza Jalakasi, Former VP of merchant payments at Chipper Cash, joined the Fintech and Web3 Founders podcast to talk about emerging trends and opportunities in African fintech including the state of funding, regulation, and mobile money. Spotify |
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| Africa | Union 54 and tackling fraud in African markets. In this interview with TechCrunch, Perseus Mlambo, CEO of Union54, discusses Union 54’s chargeback fraud issues in 2022 and offered an honest perspective on handling fraud in Africa. TechCrunch |
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| South Africa | Fin acquires Thuthukani. Lending and banking startup, Fin (formerly Finclusion Group), has acquired Thuthukani, a housing finance provider, for an undisclosed sum. The newly acquired company will be integrated as Fin Home Loans and will form part of Fin's holistic finance offerings. Disrupt Africa |
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| Africa | MetaMask integrates with MoonPay to facilitate payments in Nigeria. MetaMask, a crypto wallet, has integrated MoonPay, a fiat payment onramp service, to enable Nigerian customers to purchase cryptocurrencies directly through bank transfers. MoonPay |
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| Africa | Payday raises $3m in seed funding. Payday, a cross-border payments startup, has completed its $3 million seed funding round. The funding round, led by Moniepoint, a leading fintech specializing in agency and business banking, will drive talent acquisition, product development, and the acquisition of new licenses. TechCrunch |
| | EDITOR'S NOTE | Payday’s products, which include dollar virtual cards and accounts for cross-border payments, have gained traction in Nigeria where dollar shortages and challenges with traditional cross-border payment methods are prevalent.
What is particularly interesting is Moniepoint, a fintech with mostly offline operations, leading the seed round. Though given the recent changes in the Nigerian payment landscape, this development isn’t entirely surprising.
Moniepoint broke into the agency banking market with a network of POS agents providing cash withdrawals (via debit cards) and cash deposits into customers’ bank accounts. Over time, they expanded into business banking to serve their SME agent segment with business accounts, credit, and financial operations tools. At the time, we explained why doubling down on the merchant side of their business was a good strategy, as it allowed Moniepoint to deepen their relationship with agents, earn added revenue, and differentiate themselves from the competition.
While their business banking unit has found traction, with $1.4 billion worth of loans issued in 2022, Moniepoint’s agency banking still likely contributed a significant portion of transaction activity. A fintech in the business of providing easier access to cash might seem at odds with the country’s cashless vision, but Moniepoint’s success highlights the payment realities of the average Nigerian consumer. As we’ve written before, it’s fair to expect payments to transition from cash to mostly digital in the future. In fact, this transition has begun, but we’re far from digital ubiquity, with most retail payments still made with cash.
The Central Bank of Nigeria (CBN) recently attempted to accelerate this transition.
Nigeria’s financial regulator announced a Naira redesign program with deadlines for phasing out the use of old notes. The CBN also introduced cash withdrawal limits for consumers and businesses. These limits were relaxed and the note swap deadline was pushed till the end of 2023 after much outcry, but not before sparking an acute shortage of cash in the Nigerian economy. These policies and the subsequent scarcity affected multiple actors in the payments system. Customers who were strapped for cash resorted to electronic channels like P2P money transfers and POS terminals to pay for goods and services. With the traditional banks struggling to handle this sudden traffic, mobile wallets and digital neobanks emerged as reliable alternatives.
The agency banking industry was negatively impacted by these policies. POS agents and partner financial institutions make money by charging fees on cash withdrawals. The scarcity of cash sparked an increase in the per-transaction fees charged by the agents. It however also meant there was less cash to dispense to customers and resulted in an aggregate reduction in transaction activity and revenue.
It’s no surprise that the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) protested the new policies in a letter to the CBN. This scarcity of cash constituted an existential risk to the business of about 1.4 million agents.
For a fintech like Moniepoint, the impact was a bit more nuanced. The merchant banking and payments acceptance side of the business likely saw increased activity as customers shifted to paying merchants via electronic methods. But the cash withdrawal business likely also saw a decline as the cash scarcity worsened.
Additionally, unlike its biggest agency banking competitors - First Bank’s FirstMonie, OPay, PalmPay, Paga, and Interswitch’s PayPoint - Moniepoint doesn’t own a consumer product. In December 2022, the volume of monthly POS transactions in Nigeria dipped year-on-year by 14%, the first decline on record. Mobile transfers and NIP transactions however reached YoY increases of 122% and 413% in February 2023.
This suggests that competitors who had a direct relationship with consumers were able to soften the blow to their agency banking cash withdrawal business with increased digital payments on their consumer interfaces. Also, because Moniepoint (unlike these consumer apps) only operates on the acquirer side of a merchant payment, they don’t have much control over issuer-side reliability which was a big reason for dips in service quality for merchant POS payments.
The CBN has committed to increasing the cash in circulation which should be good news for consumers and agents alike, but the period of cash scarcity offered a glimpse into a future of digital ubiquity and the vulnerable position that players like Moniepoint will face if volumes move from cash to consumer wallet ecosystems.
Finally, the CBN’s new agency banking regulations require agents to have exclusive relationships with financial institutions. Also, POS devices can only be used for agency banking OR commerce purposes, not both. As we explained in Issue 164, this will lead to increased competition in an already very competitive industry.
Our earlier analysis of Moniepoint’s pivot to business banking over-indexed the importance of focusing on just the merchants. In a world where these fintechs aggressively compete on product, payment experience, and pricing, differentiation might come from owning a wide base of consumers.
Beyond funding and regulatory cover for Payday, there are other product synergies that Moniepoint could explore with Payday even if the cash scarcity didn’t happen. A deeper integration between both companies could allow Payday to leverage Moniepoint’s wide surface area of agents and businesses for last-mile remittances and faster and cheaper merchant payments.
Ultimately, this investment into Payday is both a hedge and a complement to the future of Moniepoint’s merchant and agency banking businesses. It’ll be interesting to observe how this changes the trajectory of both companies in the future. |
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| East Africa | Credable raises $2.5 million in new funding. The Dubai-based provider of banking infrastructure for businesses has secured a new funding round led by Ventures Platform. The funding will enable the company to deepen its market penetration in Kenya, Uganda, and Tanzania. TechCabal |
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| Morocco | Konta raises $1.15 million in funding. Led by the Azur Innovation Fund, this investment in the Moroccan spend management startup will be used to accelerate product development. WeeTracker |
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