Frontier Fintech GPS #10 November 6th 2024
Paystack launches funds transfer service in Kenya, Nigerian Challengers ramp up compliance, Geidea partners with Tpay and other news that matters
Illustration by Mary Mogoi - Website
Hi All, Welcome to the 10th edition of Frontier Fintech GPS where I provide key insights on the top global Fintech news items that matter to you. This newsletter will be arriving in your inboxes every Wednesday morning. The idea behind Frontier Fintech GPS is to help you navigate the endless stream of Fintech news and get smart about global Fintech as it applies to Africa. To those who are yet to subscribe, hit the subscribe button below and share with your colleagues and friends. 🚀
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🇰🇪 Paystack Launches Instant Transfer services in Kenya
Paystack has introduced a Transfers feature in Kenya, enabling businesses to send funds to any Kenyan bank account, M-PESA wallet, Paybill, or Till account directly from the Paystack Dashboard. This integration simplifies financial operations by allowing tasks such as supplier payments, customer reimbursements, and payroll processing to be managed within a single platform. The feature supports both single and bulk transfers, offers API integration for customized experiences, and operates 24/7 with real-time fund delivery. To utilize this service, businesses must be registered with Paystack and have sufficient funds in their Paystack Balance, which can be topped up via M-PESA or bank transfer.
The SME payments space will be one to keep an eye on. Recently I wrote about CBK’s efforts towards Faster Payments and last week Moniepoint raised a US$ 110m Series C with the aim of expanding into the continent. I see a lot of value being created by the likes of Paystack, Pesapal, Cellulant and Flutterwave for SMEs when it comes to payment orchestration and enablement. It’s an area where low levels of lending by banks due to Basel 3 restrictions coupled with world class service provision by payment enablers could lead to a situation where banks start losing market share. It’s a step towards the further disintermediation of banks from a customer experience perspective leaving banks to be ledger and infrastructure providers. I’ve always said, a forward thinking Tier 3 bank that is ideally focused on Corporates should build enabling BaaS infrastructure as an SME and consumer play;
🇳🇬 Nigerian fintechs ramp up compliance hiring months after customer onboarding ban
In response to an April 2024 ban by the Central Bank of Nigeria (CBN) on new customer onboarding, fintech companies like Kuda Bank, Moniepoint, OPay, and Palmpay have significantly expanded their compliance and fraud monitoring teams. This strategic move aims to meet regulatory requirements and address concerns over lax Know Your Customer (KYC) measures. The CBN's directive, which included mandates to restrict peer-to-peer crypto transactions and enforce stricter KYC protocols, has prompted these fintechs to hire experienced compliance professionals, often from traditional banks, to enhance transaction monitoring and customer management systems. This shift reflects a broader industry trend towards prioritizing regulatory compliance to mitigate fraud and align with investor expectations.
The need to be more compliant is a global imperative and not one restricted to Nigeria. The cynic in me would detect foul play in the April Ban given the specificity of it with regards to new customer onboarding. Nonetheless, that’s not the point I’m trying to make. The key point to make is that I think that Challenger Banks have a unique opportunity to build out compliance from first principles. The idea is to distill compliance into its core principles and build out workflows with this in mind. One could argue that compliance is ever changing but things like KYC and Sanctions Screening have core principles. The ultimate goal would be to build world class visibility for your key regulatory stakeholders including real time visibility and reports that would drive further trust between Challenger Banks and regulators. The aim is to do things way better across the stack than the incumbents that have too much legacy debt. Falling back into traditional compliance execution will eventually covert these challengers into staid banks.
🇪🇬 Geidea And tpay Partner to Transform Digital Payments And Drive Financial Inclusion Across KSA, Egypt, & UAE
Geidea, a leading financial technology firm, has partnered with tpay, a prominent payment connector, to enhance digital payment services across Saudi Arabia, Egypt, and the UAE. This collaboration aims to provide merchants and consumers with an integrated platform offering various payment options, including Direct Carrier Billing (DCB), card payments, and e-wallets. By combining Geidea's extensive network with tpay's innovative solutions, the partnership seeks to simplify digital transactions and promote financial inclusion throughout the Middle East, Turkey, and Africa.
What I find interesting is the integration of Direct Carrier Billing into Geidea, Geidea is simply the Paystack of Saudi Arabia for easy reference. Direct Carrier Billing on the other hand is a payment method that allows users to buy digital goods or services and charge the cost directly to their mobile phone bill instead of using a credit card or bank account. This is an interesting approach to payments orchestration and very useful for financial inclusion.
🇳🇬 Bamboo Expands to Canada, Launches Fee-Free Remittance Service
Bamboo, an investment platform enabling Africans to access global markets, has launched "Coins by Bamboo," a remittance app designed for Nigerians in the diaspora. Backed by a Canadian Money Service Business license, the app offers faster, more secure, and cost-effective money transfers to Nigeria. Available on Google Play and Apple stores, it allows users to send funds conveniently from their mobile devices. Initially targeting the Nigeria-Canada corridor, Bamboo plans to expand the service to the United Kingdom. The app also features partnerships with charitable organizations, enabling users to donate directly to causes they care about.
It will be keen to watch how this plays out not so much for Bamboo, but to see how the Remittance market evolves. Will remittances belong to apps that specialise in remittance like Wise or will players that have ongoing relationships like Bamboo grow their market share? The idea here is that Bamboo is building a deeper relationship with its clients in Canada based on ideas such as financial stability, savings and long term investment. This therefore enables it to expand wallet share more naturally due to the relationship.
🇿🇲 ChitChat expands beyond Africa
ChitChat, a social commerce platform, has expanded its services beyond Africa to countries including China, the U.S., the U.K., Japan, India, Canada, and Malaysia. The app now offers multi-currency exchanges, a ChitChat wallet, and a USD virtual debit card, enabling users to send money to bank accounts, mobile wallets, and cash agents in local currencies within these countries. This expansion aims to provide Africans, both domestically and abroad, with a seamless and secure platform for cross-border transactions. Launched in March 2024 in Zambia, ChitChat has grown to serve six African countries and, in September 2024, partnered with Mastercard to introduce virtual cards for cross-border payments.
ChitChat is executing a very complex strategy, building social and payments all at the same time. Previous efforts at Social Payments have struggled to take off, symbolized by Safaricom sunsetting Bonga. Part of the challenge is the technical aspect of actually building the product and the second is the commercialisation particularly customer onboarding. What specific wedge would you be offering clients given that in most instances, the social aspect is already taken care of by WhatsApp? It will be interesting to see if they will actually pull it off in their core markets besides expanding globally.
🌏 Wise granted direct access to the Philippines’ real-time payment system
Wise has secured direct access to the Philippines' real-time payment system, InstaPay, and can now settle transactions directly with the Bangko Sentral ng Pilipinas' real-time gross payment system, PhilPaSS Plus. This integration enables Wise customers worldwide to send up to 50,000 (US$ 850) Philippine pesos instantly from 28 currencies, with 94% of all transactions arriving within 24 hours. Additionally, Filipino users can now fund their Wise accounts and cards quickly via bank transfers or e-wallets, enhancing the convenience of sending and spending globally. This development follows Wise's previous direct integrations into payment systems in the UK, EU, Singapore, Australia, Japan, and Brazil.
I recently wrote about Faster Payments here and some time back I wrote that global wallets will be interconnected by Faster Payment Systems. This thesis is proving to be true. The key take-outs are that;
The Central Bank of Kenya should fast track their efforts towards building Faster Payments and moreover like the Philippines, it should enable PSPs to have settlement accounts for direct settlements. This should have a material impact on remittances;
Banks should follow these trends carefully, juicy FX revenues could be on the line and the way to mitigate this is to be a reliable remittance partner particularly around transaction success rates and therefore obviate the need for PSPs to seek out direct connections;
Nubank, a leading digital banking platform, has introduced NuCel, a mobile phone service in Brazil, aiming to enhance customer experience and diversify its offerings beyond financial services. NuCel provides flexible, no-commitment plans with options of 15GB for R$45/month, 20GB for R$55/month, and 35 GB for R$75/month, all payable via the Nu credit card. The service includes unlimited local and long-distance calls, unlimited WhatsApp usage, and access to an exclusive savings feature yielding 120% of the CDI on deposits up to R$10,000 for at least one year. Initially available for eSIM-compatible devices, NuCel will gradually roll out over the coming months, covering 93% of Brazil with high-performance 5G connectivity.
Nubank is already a very successful Fintech company and now they’re expanding into mobile telephony services. It’s a service that is adjacent given that they’re serving the same demographic and Nubank’s app requires mobile networks to work, particularly internet plans. The key thing here is the opportunities that accrue to a digital bank that has built not only a brand but a powerful platform. It could be one of the reasons that Moniepoint was able to raise at a US$ 1 billion valuation, it’s a nod to their platform play that could yield multiple adjacencies within the continent. Simply, you have the muscles to execute complex projects and think from first principles and therefore its more natural for you to execute things that are outside your traditional area but similar in some respects.
🇳🇬 Nigeria’s CBN Steps Up New Directive, Mandates Regulatory Approval For Core Banking System Changes
The Central Bank of Nigeria (CBN) has mandated that commercial banks obtain regulatory approval before implementing changes to their core banking systems. This directive aims to minimise service disruptions experienced by customers during recent system upgrades by several major banks. The CBN's intervention seeks to ensure that future technological transitions prioritise service reliability and customer access, aligning with its consumer protection mandate.
To a man with a hammer, everything looks like a nail. I don’t understand this edict. From a practical perspective, if I were a bank and I shared my intent to upgrade my Core Banking System, what exactly would the Central Bank do? Most banks have well detailed plans when it comes to core migrations and upgrades but still mess them up. The bungled upgrades are not due to a lack of planning. At core, the issue is the complexity of these systems and their inherent unreliability. It’s a technical rather than regulatory problem. Getting approval will not reduce the probability of having a botched upgrade.
🇧🇷 Open Finance will have integration with Drex, reveals Central Bank director
The Central Bank of Brazil plans to integrate Drex, its digital currency, with Open Finance and Pix to further digitalize the economy. Otávio Damaso, a director at the Central Bank, emphasised that these initiatives will work together, complementing each other. This integration will enable data sharing and the use of smart contracts, fostering greater efficiency and innovation in financial services.
The Central Bank of Brazil has been a real innovator over the last decade, launching arguably the world's most successful Instant Payment System in Pix and recently piloting Drex. The philosophical underpinnings of this innovative spirit can be gleaned in an article written by the current Central Bank governor. I expect Central Banks to be more assertive when it comes to digitisation and shaping financial systems for the future. Most Central Banks share learnings centrally through the Bank of International Settlements and bi-laterally. Soon some of these initiatives will find their way to the continent.
🇿🇦 Standard Bank Partners with Volante to Revolutionize Payment Systems Across Africa
Standard Bank has partnered with Volante Technologies to modernise its payment infrastructure across Africa. This collaboration utilises Volante's Payments as a Service (PaaS) and Embedded Preprocessing solutions to streamline domestic and cross-border transactions, enhancing efficiency and customer experience. The initiative, already operational in South Africa, is set to expand to 18 additional African countries, integrating with over 50 clearing and settlement systems. This move aligns with Standard Bank's broader transformation strategy and addresses key challenges in payment processing, such as speed, cost, and liquidity management.
Banks are being forced to upgrade their payment capabilities particularly in light of ISO 20022, Volante offers Standard Bank not only this compliance angle but increased capabilities around Payment as a Service enabling Standard Bank to focus on building out useful propositions for their clients. Volante is a multi-functional provider that encompasses PaaS, ISO 20022 compliance, Cloud Native payment capabilities and real-time cross border payment capabilities. Many banks in the region will be forced to review their payment strategies given the need for ISO 20022 and this will require a more holistic approach like Standard Bank.