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Issue 179
Aug 28 - Sep 10, 2023

Hi there,

I’ve been out of office for health reasons 🥴 and I’m so glad to be back with a supersized edition of the newsletter 💪🏾

My heartfelt condolences go to the people of Morocco and Libya. It’s truly heartbreaking to see the devastation and suffering caused by the recent natural disasters. Our thoughts and prayers go out to all those who have lost their loved ones, homes, and livelihoods.

This newsletter was written to Laufey’s soulful sophomore album, Bewitched.

Tochukwu Ironsi
Market Intelligence Specialist
Introducing Paystack-Titan Virtual Accounts!


GlobalFlutterwave expands cross-border operations into India. Flutterwave, a Nigerian payments company, has expanded its remittance operations to India. The expansion was done in partnership with India's IndusInd Bank and will enable the bank’s customers to remit funds to African countries using Flutterwave’s rails.  Bloomberg

There are about 2.4 million Indians estimated to be living in Africa, with Indian communities and businesses running decades deep on the continent. Also, bilateral trade between India and Africa reached $89.5 billion in 2021-2022. Therefore building payment rails that enable a portion of these trade and remittance transactions has some economic potential.

There are also reports that India is in talks with certain African countries to integrate Unified Payments Interface (UPI), India’s real-time payment network, with regional payment networks. For players like Flutterwave, this will either mean cooperation, competition, or both at some point in the future.

Zooming out, remittances might be just the first step of a multi-product expansion that includes consumer wallets and cross-border merchant ecommerce. This is apparent for Flutterwave, which already offers a breadth of consumer and merchant products but can apply to other consumer remittance fintechs in the future.
NigeriaSquad reports $1.7 million net profit in H1 2023. According to H1 2023 reports, Squad, Guaranty Trust HoldCo's merchant payments subsidiary, which launched in June 2022, earned ₦2.2 billion in gross revenue (~$2.9 million) in the first half of 2023. This was a 44% increase from the second half of 2022. The company also earned ₦1.3 billion (~ $1.7 million) in profit after tax during this period. TechCabal

The full investor presentation offers more information about Squad and GTB’s overall payment business. The ₦2.2 billion in gross revenue reported by Squad was earned from processing ₦3.6 trillion in local gateway & switching payments and $1 million in international payments. Squad is now on track to cross ₦1 trillion in monthly local payment volumes.

Looking away from Squad, the trends for individual GTB payment channels show a very interesting shift. The value of payments via mobile banking in the first half of 2023 was ₦17.4 trillion, a 14% year-on-year increase. In contrast, payments via USSD and internet banking were ₦1.4 trillion each and declined by 15% and 3%, respectively, from the previous year.

The decline in GTB’s USSD activity could mostly be attributed to the introduction of a ₦6.98 fee by telcos. Despite this, the data offers another interesting insight: cashless payments in Nigeria are growing, and most of this is happening through mobile applications and wallets. We can see similar trends from UBA’s 2022 investor presentation. Also, according to data from Nigeria Inter-Bank Settlement System (NIBSS), the value and volume of mobile inter-scheme transfers have surpassed point-of-sale transactions and are now growing faster than bank transfers as a whole.

This shift to not just digital but mobile native payments should inform every facet of a fintech’s go-to-market strategy. We might begin to see big shifts in customer payment experiences as financial institutions begin to design for a more mobile-first experience.

Another key channel for GTB is cards, which are issued to customers and interfaced through ATMs, POS devices, and web portals. Four hundred million POS/web transactions worth ₦3.9 trillion were processed through GTB-issued Naira cards in H1 2023, a 70% increase in volume and a 63% increase in value from the same period last year. ATM activity from Naira debit cards, however, decreased significantly by more than 50% from H1 2022.

This goes against popularly repeated narratives about the “death of cards”. The decline in ATM use, though, is interesting. One might be quick to interpret this as a signal of decreased cash usage, but it’s very likely that customers have just moved to withdrawing cash from human agents via POS devices over ATMs.

A final point on card payments from the earnings report is the impact of FX restrictions on customer behavior. International payments from Naira cards declined to zero in H1 2023. Not surprisingly, there was a sharp jump in POS/WEB transactions from international cards (cards tied to domiciliary accounts) for both local and international payments in that period. This suggests that GTB customers have taken on the burden of sourcing their own foreign currency for card transactions.

It’s necessary to note here that while we’ve been able to corroborate our analysis with supporting data where available, these figures are for GTCO alone, so there are likely some signals that are particular to GTCO/GTB’s business. However, they remain one of the biggest financial institutions in Nigeria, with enough customers to act as a strong index for the broader digital consumer behavior in the country. 
GlobalThe evolution of global payments. Ben Thompson, writer at Stratechery, and Lisa Ellis, a Senior Analyst at MoffettNathanson, have an interesting discussion about global payments, the blurring lines between offline and online payments, and how players manage and extract value from both sides. Stratechery

This interview has a very western lens, but there are parallels and precedents present in African markets.

For example, Lisa mentions how PayPal now offers white-labelled payment solutions to merchants through Braintree, a subsidiary, at low to negative margins. The strategy for PayPal here is to layer their Braintree offering with other higher-margin, value-added services like Pay with PayPal/Venmo, BNPL, and credit.

This is similar to an offline pricing strategy for large commercial banks in Nigeria where POS hardware and associated transaction fees are offered to large businesses at low to no costs in exchange for deposits that can earn interest. Banks can afford to stomach these costs because they can earn significantly more from lending to these businesses or investing deposits into interest-earning securities.

These traditional banks have now set their sights on online payments as well so we expect to see some downward pressure on pricing and a shift in market share. With interest income reaching record levels, these banks now have more agency to acquire business customers with lower pricing on the payments side and better terms on the banking side.

For fintechs and processors where payments are the core part of their business, this level of leverage is very small, if not non-existent. We should expect these players to start building out their banking business to, at first, protect against churn from big banks and eventually acquire new customers with needs other than payments.

That said, pricing is not the only lever in payments. Reliability and success rates will always matter, especially in online payments with multiple channels, partners, and players. It’s much easier to maintain product quality if that product is the primary source of revenue than just a cost center for leverage elsewhere.

Also, in a push to maximize their online payments business, banks might help convince existing customers with traditional processes and dated payment operations to upgrade their systems. These large, legacy businesses which were previously hard or expensive to acquire, suddenly become immediate payment clients for banks and potential leads for payment competitors in the future.

Ultimately, as payment-focused fintechs and traditional banks in Nigeria begin to converge and compete, the entire payment market is the real winner. From the businesses and customers who get to enjoy cheaper and more reliable transactions, to the processors who get access to previously inaccessible market segments.
NigeriaThe Moniepoint story. Emeka Ajene from Afridigest interviewed Tosin Eniolorunda, the CEO of Moniepoint, about the company’s journey from building software for banks to offering payment solutions directly to consumers and businesses. Afridigest
KenyaThe Blockchain Association of Kenya (BAK) opposes proposed taxes on digital assets. The BAK, an association of operators in Kenya’s blockchain industry, has taken to court to oppose the Kenyan government’s proposed Digital Asset Tax. A key argument from the BAK is that the intended tax is presented as an income tax but actually taxes the gross transaction values. The case will be presented in court on September 28. CryptoTvplus
GlobalVisa expands USDC settlement solution to merchants. Global payments processor, Visa, has expanded its USDC settlement solution to merchants. To achieve this, Visa has partnered with blockchain infrastructure provider Solana and merchant acquirers WorldPay and Nuvei. Merchants acquired by WorldPay and Nuvei will have the option to receive settlements for customer payments in USDC.  Business Wire
South AfricaPick n Pay stores to allow crypto payments from VALR and Luno customers. In partnership with CryptoConvert, a blockchain payments processor, customers can now pay with cryptocurrency using their VALR and Luno wallets.  Moneyweb
NigeriaAnchor raises a $2.4 million seed round. Anchor, a provider of digital banking tools, has completed a $2.4 million seed funding round. The round was led by Goat Capital and will be used to double down on growing the product. TechCrunch
KenyaKotani Pay raises $2 million in pre-seed funding. Kotani Pay, a crypto payments startup, has raised $2 million in pre-seed funding. The round was led by P1 Ventures, with participation from DCG and Flori Ventures. WeeTracker

Kotani also acquired Fuhlstack, a blockchain API provider, for an undisclosed sum. 
NigeriaNestcoin raises $1.9 million round. Nestcoin, a blockchain startup, has raised $1.9 million in funding from Hashed Emergent and a host of new and existing investors. The round will be used to scale Onboard, Nestcoin’s crypto wallets for consumers. TechCrunch
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