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Consumer fintech startups are all banks-in waiting

get.Africa
Consumer fintech startups are all banks-in waiting
By get.Africa Weekly • Issue #76 • View online
Ẹ kàárọ̀,
That’s “good morning” in Yoruba
In his memoir “Africa Rise and Shine”, Jim Ovia wrote about the difficulty in getting Zenith Bank off the ground.
Nigeria’s banking sector was privatized in the late 1980s. And, by his own admission, he and his investors barely met the central bank’s steep requirements.
In the last decade or so, Ovia has become an investor himself. His company Quantum Capital Partners led the Series A funding round for TeamApt, a Lagos-based fintech.
TeamApt recently announced a new funding round, alongside a plan to transition from consumer fintech to “digital banking”. 
Quantum Capital didn’t participate in the round. Which, on a personal level, was disappointing. Because if ever Ovia released a second book, I’d have loved to know whether the assumption that a TeamApt Bank is easier to get off the ground than a Zenith Bank is truly the correct one.  
The unbundling and re-bundling of fintech
In the original fintech playbook, a startup identifies a small number of financial services that may or may not already be offered by traditional banks, they then try to use digital technology to optimize them.
But in recent years, we’ve witnessed fintech startups rip up that playbook and increase the number of financial services they provide to the point where they morph into neobanks or challenger banks (What’s the difference?). 
One of the first startups to make this transition in Nigeria was Carbon.
When it was first founded in 2016, the company was called Paylater and, you guessed it, it focused on lending. But in 2019, its parent company, OneFi, acquired Nigerian payment solutions company, Amplify, and Paylater became Carbon. 
Today, in addition to lending and payments, Carbon offers services such as money transfers, savings and investments. It is now, for all intents and purposes, a neobank. 
A few other fintech startups, like FairMoney, Kudi and the aforementioned TeamApt, announced a similar neobank play this past week.
These companies will now compete with traditional banks, as well as neobanks and challenger banks who set out to be neobanks and challenger banks from Day 1. 
Read more
Why is this happening?
There are many reasons why consumer fintechs that reach scale are all likely to make this pivot, here are two:
Growth: Fintech commands the lion’s share of startup investment in Africa, with some estimates from last year putting it at around 50%. With each investment round, the mandate is for the company to grow until it inevitably provides a similar breadth of financial services to a bank. FairMoney, for instance, raised $42 million in a Series B round led by Tiger Global, an investment that has been described as the VC’s “African comeback”. With this, FairMoney is set to launch services such as P2P transfers, lending, debit cards and current accounts. This should allow them to access new revenue streams and keep investors happy. 
Regulatory advantage: In many ways, fintech regulation lags fintech innovation. As part of the announcement, FairMoney also disclosed that it had acquired a microfinance banking license, which has significantly lower requirements than the commercial banking license that Ovia got in the 90s and the license that a traditional bank will need to get off the ground today. 

get.Africa is a weekly roundup of the most important stories in African tech. To support, follow us on Twitter, subscribe to our YouTube channel, share this issue or send us an email. You can also check our archives.
Credit: Josue Isai Ramos Figueroa
Credit: Josue Isai Ramos Figueroa
What's the Big Deal?
African startup, Payhippo, has raised $1 million in a pre-seed round led by Ventures Platform. Payhippo is a lending startup focused on providing loans to underserved businesses in Africa. 
Diagnostic healthtech startup, MDaaS, has secured a $2.3 million seed extension funding. Early-stage VC firm, Newton Partners, led the round.
Jiji has acquired Cars45 for an undisclosed amount. This acquisition sees the classifieds company make a foray into transactional marketplaces.
+ $ Drone delivery startup Zipline, a company that got its start delivering medical supplies across Africa, has raised $250 million in new funding. This latest round will fuel further expansion of its logistics networks in Africa and the United States.
+ GH₵ Ghana’s Jetstream lands $3 million to build the digital infrastructure for Africa’s trade corridors.
Reads
Inside Branch’s 20% interest investment push to beat Nigerian bank offerings
Fighting monetary colonialism with open source code
How much bigger Netflix is than Showmax in South Africa
What is the business case for food delivery apps in Nigeria?
Moving bitcoin overseas from your wallet in South Africa is a crime
Watch + Listen
Digital Transformation's Role in the Global Chip Shortage
Digital Transformation's Role in the Global Chip Shortage
How consumer loan platforms are providing credit across Africa
+ Reads
+ Postponed: Nigeria’s government extends NIN-SIM linkage deadline to July 26. And in South Africa, the authorisation commencement date for POPIA is now set for 2022.
+ Internet shutdowns: The Twitter shutdown in Nigeria has entered its fifth week, while in Eswatini, amidst pro-democracy protests, MTN goes offline.
+ Other forms of control: To control speech, Uganda is taxing internet usage by 30%. And next door in Kenya, the cost of internet and calls could go up if a proposed amendment to the law goes through.
+ Another one: Following Chaka, Nigerian investment platform Cowrywise has secured a licence from SEC. SEC is proving to be a relatively progressive regulator and is helping to answer this question (Paywall) about the kind of regulator Nigeria’s tech ecosystem needs.
+ Skill deficit: Nigeria is becoming a fintech powerhouse, but a lack of employees is holding startups back. Here’s one proposal on how to solve it.
Overheard on Twitter
Tidjane DEME
Online betting = 1/2 of online transactions in Africa. It also the first use of micro-loans from mobile lenders.
Is betting just going digital faster than anything else ?
Or are we getting dangerously addicted to betting ?
Classifieds
I'm writing a book on remote work for African businesses
I'm writing a book on remote work for African businesses
+ To make whiteboard animation videos like this for educational or marketing purposes, please send us an email.
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