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Issue 78
Jan 01 - Jan 31, 2021

Hi there,

First Issue of the year! I know, I know, it's been a while. A LOT has happened since our last issue went out in November - The first COVID-19 vaccines were rolled out. Bitcoin hit $40k. Manchester United topped the league (and dropped). GameStop couldn't stop (but then it also dropped). President Joseph Biden. Former CEO Jeff Bezos. Elon Musk. Clubhouse. Again A LOT.

We also have a lot planned for the Decode Fintech newsletter in 2021, and we really appreciate your continued support and check-ins during our brief hiatus.

My team is also hiring! We're growing the Product Specialists team at Paystack. If you're kind and smart, love helping ambitious African businesses grow, and are excited by the prospect of diving into Paystack's proprietary insights database, please apply to be a Paystack Product Specialist.

As always, stay safe and if you're reading this outside, please keep your mask on. 

Tochukwu Ironsi
Product Specialist, Paystack
đŸ”¥ Decode Fintech Podcast Season 2

We're excited to announce Season 2 of the Decode Fintech Podcast! In the first episode, we speak with operators from GhIPSS and MTN about the origins of mobile money in Ghana. Listen to learn how Ghana became one of the fastest growing mobile money markets in Africa.

NigeriaPOS and NIP transactions in Nigeria hit $428 billion in 2020. According to the Nigeria Interbank Settlement System Plc (NIBSS) statistics for 2020, transfers processed via the NIP (NIBSS Instant Payment) channel amounted to NGN 158 trillion (~$416 billion), a 50.36% increase from NGN 105 trillion (~$276 billion) in 2019. The POS transactions saw a significant 47.5% uptick in value from NGN 3.2 trillion (~$8.4 billion) to NGN 4.7 trillion (~$12.4 billion).  Financial Technology Africa

While the NIP data doesn't include intra-bank transfers and transfers via other switches, it is still the most dominant transfer channel and hence a strong index for digital payments in Nigeria. It's also important to note that the growth rate of NIP transfers accelerated as well from 30.84% YoY growth in 2019 to 50.36% in 2020. Maybe COVID, maybe organic growth. What is clear is that cashless digital payments are only going one way: Up. 
GlobalVisa calls off proposed acquisition of Plaid. The global card payments giant and Plaid mutually agreed to terminate the planned $5.3b USD merger. This comes after significant legal opposition from the United States' Department of Justice (DOJ) over anti-trust concerns. TechCrunch

In January 2020, we first wrote about the planned acquisition in issue 37. Since that time, Plaid, which connects customers' bank accounts directly to fintechs, has grown significantly - according to TechCrunch, the number of Plaid customers grew by about 60% in 2020. There is huge value in granting fintechs direct access to consumer data and African upstarts like Mono and Okra seem to be on a similar path to unlocking that opportunity locally.

Again from Issue 37, we wrote: "Plaid will help Visa to tap into their customers’ growing use of fintech apps and non-card payments". Currently, the bulk of Visa's revenue is from card-related services and while they remain one of the dominant players in that market, they remain vulnerable to new mobile-first, non-card disruptions like Plaid. That said, Visa has shown increased attention in cryptocurrency and sought direct partnerships with fintechs like TransferWise in the past year.

Ultimately, both the card issuing giant and the fast-growing bank connector will be fine (for now).
TwitterMo' money, Mo' revenue for Nigerian online payments. Marcello Schermer (@Marcelloscherme) shares a chart from McKinsey's 2020 global payment report highlighting Nigeria's double-digit growth in both electronic transactions and payments revenue. Twitter

Here's a link to the full McKinsey Global Payments report.
NigeriaCARMA moves headquarters to Nigeria, targets African expansion. CARMA, a P2P credit and consumer data marketplace, has announced the relocation of its headquarters from Nairobi, Kenya to Lagos, Nigeria. The company which is also present in Zambia plans to continue to expand to more African countries. Disrupt Africa

The HQ relocation strongly suggests a recognition of the potential opportunity in the Nigerian market for their services. And they won't be wrong. Consumer digital lending in Nigeria has soared in 2020 - Last year, digital lending merchants disbursed NGN 88 billion (~$230m) in loans via Paystack, an almost 75% increase from 2019. Given that most of these loans are unsecured, determining creditworthiness and reducing default rates typically depend on how much borrower information that the lending companies can collect. This extant demand from high-value customer data is CARMA's opportunity. 
AfricaAfrican Tech Funding 2020: Fintech is still where the money resides According to the report by Briter Bridges, about USD 2.4 billion in capital was deployed to African tech startups in 2020, representing about a 4% decrease from what was reported in 2019. The bulk of this investment value was in Mergers and Acquisitions (M&A) led by Sendwave's $500m acquisition by WorldRemit and Stripe's acquisition of Paystack. Fintech accounted for 31% of total funding and 90% of all M&A activity. Briter Bridges

The slight decline was mostly attributed to an expected slowdown in investment activity during the COVID-led lockdown. Yet, there is still significant evidence of sustained investment interest in African startups (the entire startup investment in 2016 was valued at just$331m!). And after watershed mega deals and acquisitions, we should expect not just increased funding in the coming years but larger rounds, quicker deals, and hopefully more mergers and exits.  
SomalilandInnovate Ventures opens applications for its Women in Business Accelerator Somaliland accelerator and investor, Innovate Ventures, has thrown open its doors for female-led startups to apply for its Women in Business Accelerator. This will be a 4-week program and will focus on intensive training, funding, and access to network. At the end of the program, 4 startups will each be granted USD $20k in funding Disrupt Africa

According to the Briter Bridges report above, only 15% of all investment activity was into female-led tech ventures. Women-focused accelerators and VCs like FirstCheck Africa and Future Africa are taking necessary steps to close the gap. If you are a female-founder, please apply through any of the above links.
NigeriaCBN finalises framework for QR code payments Nigeria's apex financial regulator has approved the final framework for operating QR code payments in Nigeria. The framework, which was initially drafted in June 2020, is set to drive adoption of QR codes as a means of payment and set standardised processes across the relevant players (banks, issuers, card processors, mobile money operators etc) Business Day

After multiple false starts, it will be interesting to see if this framework can actually drive a strong adoption for QR payments. From discussions with industry operators, lack of interoperable and reliable solutions from current service providers have been huge challenges. So it makes sense that the CBN would want to enforce safe and interoperable standard of operation across the participants in the system. This is very similar to standardisation efforts by the CBN on ATMS and POS terminals which has seen explosive growth in recent years.
GlobalOCC permits US Banks to participate in crypto transactions. The Office of the Comptroller of the Currency (OCC) has directed that banks and savings associates in the United States can now participate in crypto transactions by acting as processing node for blockchain and stablecoins payments. This comes after an announcement by the OCC in July 2020 clearing US banks to act as custodians for digital assets Banking Exchange

This is yet another significant step by the OCC in driving crypto-friendly regulation and adoption of digital currencies into the mainstream. Also given the US' strong influence on global finance, we should expect a ripple effect across other economies. Taking a step back, it seems different regions around the world have approached crypto-regulation quite differently: India has proposed laws to ban private cryptocurrencies. China's Central Bank is currently piloting a CBDC. The EU has shut down CBDC experiments from some member countries and recently proposed regulation for digital assets

In many African countries though, crypto regulation is still very nascent if not non-existent. Notedly, regulation significantly lags adoption as cryptocurrency usage, application, and prices have since soared in the past year. According to P2P crypto trading giant, Paxful, Nigeria is now the second-largest bitcoin market in the world. Most of this crypto activity is led by private African tech startups offering platforms for trading and remittance: BuyCoins, another major crypto trading platform reported trading volumes of $140m in 2020, a 500% increase from the previous year.

Eventually, the laws and the central bank memos will come and it will be interesting to see if regulatory bodies will approach the industry with competition or co-operation. We do hope for the sake of our digital future, that it is the latter. 
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