Frontier Fintech GPS #11 November 13th 2024
Safaricom releases its HY 2025 results, Moniepoint expands it's c-suite, Visa backs 4 African tech companies and more stories including global fintech results analysis
Illustration by Mary Mogoi - Website
Hi All, Welcome to the 11th 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. 🚀
Sponsored by Skaleet
Global Platform, Local Solutions: Pioneering Simplicity in Complex Banking Tech
First implemented in 2014, Skaleet’s core banking technology was built on the idea that digital financial services were necessary for the growing African market. Geographic dispersion and a youth driven demography showed the founders that digital propositions based on Mobile and Agent networks were going to be the primary mode of delivering financial services in Africa. They built for this reality with the aim of helping banks quickly launch digital propositions. They have the chops to show for it with Trust Merchant Bank (TMB), BMCI and Interbank Burundi all launching quick digital propositions in their respective markets (Masvri digital bank launched in 4 months during the pandemic !). TMB and BMCI both have over 800,000 customers transacting on the Skaleet platform and grew exponentially over the past years.
These learnings were then exported to Europe whilst the continent was witnessing its own Neobank boom in the middle of the last decade. Skaleet is therefore a Global Next Gen Core Banking platform built on the back of hard won insights from launching in the continent. They know how the continent works and have built for it. With a single code base and one platform, Skaleet’s extreme level of configurability combined with an in-market solutioning approach drives predictable localized success. Since December 2020, Skaleet has raised nearly $ 50 million from Long Arc Capital, a NY-based growth equity fund and has grown to a team of over 130 people, giving them the scale and chops to successfully manage both large and small digital propositions. Contact Brice for Partnerships and Beatrice for Sales;
🇰🇪 Safaricom announces HY 2025 results with slowing growth in their M-Pesa Business
Safaricom recently announced their FY 2025 results, the overall picture was one of growth being weighed down by continued investments in their new Ethiopia business. My analysis will only focus on their M-Pesa business.
M-Pesa revenues grew to be 43.5% of total revenues, growing by 16.6% y/y to KES 77.2b;
Overall, M-Pesa accounted for 7% of total revenue growth within Safaricom. It’s now their core business and will drive all future growth and this is how investors now view the business;
Nonetheless, there are some signs that don’t make for easy reading;
M-Pesa is arguably witnessing slower growth, total 1-month active users only grew by 4.1%. Slower growth is probably being driven by both a maturity of the business as well as a poor economy;
In terms of overall business, the consumer business continues to grow but the contribution of consumer payments revenue to total revenue declined by 200bp from 64.9% to 62.9%;
Business payments revenue continued to grow and now account for almost 30% of total M-Pesa revenue up from 26.6% in the same period last year;
Revenues from financial services are flat and so are revenues from global payments at KES 4b and KES 1.9b respectively. In fact, financial services revenues have declined for two straight years probably due to the tariff changes implemented at the beginning of the new administration’s term;
The highest growth witnessed in the M-Pesa ecosystem came from Merchant Overdraft revenues which grew by 62% to KES 234m and Virtual Card revenues which grew by 148% to KES 156.6 million. Nonetheless, the value transacted declined in FY 2025 for virtual cards;
The challenge is simple - Traditional revenues from their consumer business are beginning to flat-line. In the absence of this growth, M-Pesa has to rely more and more on the business segment which is based on recruiting merchants and facilitating their payments. However, this is the area where in my view a Faster Payments System has a deeper value proposition due to interoperability, lower costs and richer payments information which is critical for reconciling commercial payments.
The extra arrow in the quiver could be the long-term Ethiopia business where M-Pesa recorded incredible growth at over 600%. Nonetheless, the economics of being the sole MoMo player are vastly different to being a MoMo in a competitive market;
🇳🇬 Moniepoint taps Stanbic IBTC CFO as MFB leader
Moniepoint, a rapidly growing African fintech company, has appointed former Stanbic IBTC Chief Financial Officer, Bayo Olujobi, as the CFO of its microfinance bank. This strategic hire suggests Moniepoint's potential ambitions to transition into Nigeria's commercial banking sector. Following its rebranding from TeamApt in 2023, Moniepoint achieved unicorn status with a valuation exceeding $1 billion after a $110 million Series C funding round led by Development Partners International. The company serves over ten million businesses and individuals, processing more than five billion transactions in 2023 alone. Olujobi's extensive experience in traditional banking is expected to enhance Moniepoint's financial oversight and facilitate its expansion plans, including potential moves into the commercial banking landscape and broader African markets.
Whereas it’s natural to want to read a lot into this, including the idea of the hire being a step towards commercial banking, I think it’s always useful to be aware of the narrative fallacy. Companies typically tend to make senior recruits especially after raising a round and this is on brand. Similar moves have been done by Flutterwave, Nala, Paystack and many others in the past. Nonetheless, I’ve written before that the decision to be a commercial bank is very logical and I expect Moniepoint to become one eventually. The challenge in the market like I’ve argued is that whereas the opportunity exists for new challengers due to declining customer service levels and the general complacency that comes with large banks, capital rules across the continent make it exceedingly difficult to get into the banking space.
🌍 Visa backs four new African fintech start-ups as part of $1bn continental commitment
Visa has invested in four African fintech start-ups—OkHi (Nigeria), Workpay (Kenya), Oze (Ghana), and Orda.Africa (Nigeria and Kenya)—as part of its Africa Fintech Accelerator programme. This initiative aligns with Visa's pledge to invest $1 billion in Africa by 2027, aiming to foster digital innovation and enhance financial inclusion across the continent.
Visa and Mastercard have both over time built platform businesses where they can now be thought of as Fintech enablers given their multi-product capabilities. Growth within the continent will need to come from their non-card business that is generally done through banks and this is where such initiatives come in. Visa needs to continue supporting Fintechs either through direct investments or grants as a way to promote their platform businesses. Some of their capabilities include Crypto, Cross-Border payments, Visa Direct and their Security and Tokenisation capabilities.
🌍 EIB launches Finance in Africa Report
The European Investment Bank's "Finance in Africa 2024" report that was released on November 7th provides a deep dive into Africa’s financial landscape, spotlighting key developments, challenges, and opportunities within the sector. As Africa's financial ecosystem evolves, the report examines the impact of fintech and resilience in the banking sector amid global uncertainties. By offering a mix of data-driven insights and industry trends, the report presents a nuanced view of how technology and economic shifts are reshaping financial access and inclusion across the continent. Some highlights that matter to you;
Fintech Expansion: The number of fintech companies in Africa has nearly tripled since 2020, reaching 1,263 at the start of 2024. This growth has enhanced access to financial services for individuals and businesses across the continent. My view on Fintech expansion is simple, the intersection of technology and finance will only deepen over time. Enabling technologies such as AI will lower the costs of entry into a number of verticals and I expect the number of Fintechs, both new and formed out of incumbents to continue to grow;
Private Sector Credit Decline: Private-sector credit has decreased from 56% of GDP in 2007 to 36% in 2022, hindering economic development and industrialisation efforts. I recently wrote about Private Credit and the stats from EIB further prove that banks are not playing the role that is expected of them. This is largely due to capital constraints and presents an opportunity for Fintechs to build alternative lending models. The challenge here though is to show sophistication from the start and not meander into a lending model. This was the key takeout from my most recent article;
🇳🇬 🤝🏿 🇰🇪 Lendsqr expands operations into Kenya with launch of advanced loan processing platform
Lendsqr, a Nigerian fintech startup specializing in loan management software, has expanded its operations into Kenya by launching an advanced loan processing platform. This platform aims to enhance the efficiency of banks, microfinance institutions, and digital lenders by streamlining loan origination, management, credit decisioning, and data analytics. Notably, it incorporates AI-driven video integration to improve underwriting processes, offering faster and more secure lending solutions. This expansion aligns with Lendsqr's mission to support financial institutions across Africa and follows its recent ₦1 billion on-lending initiative in Nigeria, designed to bolster digital lenders' capacity to extend credit to their customers.
Lendsqr, founded in 2018 by Adedeji Olowe, is a Nigerian fintech company specializing in lending-as-a-service solutions. Lendsqr’s own data shows that they have supported over 4,500 lenders across multiple countries. Some of their clients include Sterling Bank’s SnapCash proposition. It’s true that both banks and non-banks are keen to get into the digital lending space. Banks in Kenya for instance are tripping over each other to launch digital lending propositions and one of the challenges is the sophistication and usefulness of their digital lending platform. From a market perspective, Lendsqr is solving a real problem. Nonetheless, the challenge is the sheer number of competitors in this space. It’s imperative for Lendsqr to not only educate the market but demonstrate that their platform is useful, resilient and secure.
🇳🇬 MTN MoMo PSB applies for Payment Service Solutions Provider (PSSP) and Payment Terminal Service Provider (PTSP).
MTN Nigeria’s MoMo Payment Service Bank (PSB) is significantly expanding its role in Nigeria’s fintech landscape by applying for Payment Service Solutions Provider (PSSP) and Payment Terminal Service Provider (PTSP) licenses. These new licenses would enable MoMo PSB to handle payment terminals and back-end processing for digital payments, opening up options to offer in-store and online transactions to a broader range of merchants and customers. Traditionally, PSBs were designed to boost financial inclusion with basic banking services, but this dual license marks a shift, allowing MoMo PSB to compete with banks and established fintechs. With millions of active wallets and an extensive agent network, MTN’s move indicates both a strategic expansion and a regulatory shift that could support financial inclusion by offering more telecom-driven banking options to Nigeria's unbanked population.
This move makes sense due to the relatively complex Nigerian fintech licensing landscape. In most other countries, a full PSP license comes with the ability to not only facilitate payments acceptance but also to become an e-money issuer. In Kenya for instance, M-Pesa and Airtel Money are both licensed as PSPs. For MTN MoMo to enable a comprehensive product offering, it will need all three licenses. The three licenses in summary enable the following;
Payment Service Bank (PSB): Enables telecoms to provide basic banking services, such as opening accounts and cashless transactions, aimed at increasing financial inclusion, especially in underserved areas.
Payment Service Solutions Provider (PSSP): Allows companies to process digital payments on behalf of merchants, offering back-end infrastructure for secure transactions.
Payment Terminal Service Provider (PTSP): Permits management and operation of payment terminals (like POS devices), enabling in-store payments and facilitating transactions for merchants.
🇳🇬 AZA Finance Subsidiary, BT Payment Services Granted Payments Service Provider (PSSP) Licence in Nigeria
BT Payment Services Nigeria Limited (BT Payment), a subsidiary of global fintech company AZA Finance, has received a Payment Service Provider (PSSP) license from the Central Bank of Nigeria. This license enables BT Payment to directly facilitate Nigerian naira collections and payments for its customers, including corporates, fintechs, NGOs, and other organizations, enhancing transaction efficiency and affordability. Previously, BT Payment operated through licensed partners in Nigeria, but with its new PSSP license, it can now directly offer faster, cost-effective services to businesses operating within the country. This license is one of several expansions AZA Finance has announced, marking a broader strategy for 2024.
2024 has been a busy year for AZA, some of their key initiatives in 2024 have included;
Acquisition of Exchange4Free: In April 2024, AZA Finance acquired Exchange4Free, a South African cross-border payment firm. This acquisition bolstered AZA Finance's foreign exchange and treasury service offerings, as well as its API and compliance capabilities;
Expansion into New Markets: AZA Finance has extended its operations into Egypt, Cameroon, Zambia, Brazil, and India, adding to its existing presence in countries such as Kenya, South Africa, Ghana, and Morocco. This expansion aligns with the company's strategy to tap into the growing demand for cross-border payments and foreign exchange services in emerging markets.
It’s clear that through expansion, AZA can deepen its value proposition to its clients that include Fintechs, NGOs and commercial clients. Whereas companies like Thunes are more platform-focused, AZA must develop a deeper relationship given that they’re solving unique challenges particularly around FX availability and liquidity. This is the same playbook that Verto is executing across the continent.
🌍 Ecobank Partners with Nium to Unlock Real-Time Cross-Border Payments Across 35 African Markets
Ecobank has partnered with Nium to enhance real-time cross-border payment capabilities across 35 African countries. This collaboration enables Ecobank to leverage Nium's extensive payment network, facilitating instant and cost-effective transactions for businesses and individuals throughout the continent. By integrating Nium's technology, Ecobank aims to improve financial inclusion and streamline international trade within Africa.
Amongst all the global cross-border payment network players such as Thunes and Terrapay, Nium has been more deliberate around building capabilities for banks and other FIs. With this partnership, Ecobank can offer payment capabilities particularly for SME clients that will allow them to pay and receive globally. What’s of particular interest is Nium’s integration into SWIFT that can enable quicker payments with the benefit of a SWIFT message that’s particularly useful for not only communicating with your supplier but maintaining records. The challenges with such initiatives is usually the internal go-to market within Ecobank. Given the size and scope of the bank, such initiatives risk dying a slow death internally due to “Business as Usual”. It will require strong leadership to not only communicate the value to front-line staff but also train them. Nium’s capabilities coupled with Ecobank’s deep relationships with customers should prove useful.
🌐 Global Fintechs announce their quarterly results
A number of Fintechs have announced their quarterly results. I’ll give a run-down of some names;
Affirm grew its total revenues by 41% to US$ 698 million on the back of GMV of US$ 7.6 billion. Their core metric of Revenue Less Transaction Costs (RLTC) as a Percentage of GMV remained the same at 3.8%. In total, adjusted operating income increased by US$ 70m to US$ 130 million. The adjustment is done given that stock options and warrants expenses were worth roughly US$ 120 million. In my view the key thing to watch out for is the trajectory of interest rates given that this will determine both their funding costs and their revenues;
Paypal - Paypal recorded growth across all core metrics. Total Payments Volume grew by 9% y/y to US$ 422 billion. Revenues increased by 6% y/y to US$ 7.8 billion driven by Braintree and Venmo. Their transaction margin remained healthy at 46% and stood at US$ 3.7 billion. Operating income stood at US$ 1.5 billion representing a margin of 18%. Their key revenue lines by contribution to total revenue are PSP card processing (unbranded) at 36%, branded checkout at 27%, Venmo 18%, Other merchant services at 10%, P2P (ex-venmo) at 8% and e-bay revenue at 2%;
SoFi - SoFi continued to see growth in its core operating metrics. New member additions grew to 9.4 m from 8.7m in the previous quarter. Total products grew 31% y/y and 7% q/q to 13.6k products. Total accounts on Galileo grew by 17% y/y to stand at 160m accounts. Members are simply anyone with a SoFi product and products refer to the aggregate number of lending and financial services products that their members have selected on their platform since inception. Whilst it's an interesting reporting framework, the idea is that it shows the depth of usage that customers have. Overall net revenue grew by 30% y/y to US$ 689m and EBITDA stood at US$ 186m. Overall, SoFi's financial growth and expanded services emphasize its focus on membership expansion and diversified revenue streams, positioning it toward its long-term goal of becoming a leading financial institution.
Marqeta - Marqeta, Inc., a global modern card issuing platform, reported its financial results for the third quarter of 2024, highlighting significant growth and strategic advancements:
Total Processing Volume (TPV): $74 billion, a 30% year-over-year increase.
Net Revenue: $128 million, up 18% from the same period last year.
Gross Profit: $90 million, reflecting a 24% year-over-year growth.
Net Loss: $29 million, an improvement from the previous year's loss of $55 million.
Adjusted EBITDA: $9 million, compared to a loss of $2 million in the third quarter of 2023.
CEO Simon Khalaf attributed the positive results to the company's operational discipline and new product developments. Notably, Marqeta introduced a Portfolio Migration service, successfully migrating millions of Klarna cards in Europe onto its platform. Additionally, the company launched Marqeta Flex, a solution aimed at enhancing Buy Now, Pay Later (BNPL) offerings within payment apps, with Affirm and Klarna as initial partners. Marqeta also unveiled the UX Toolkit to help customers create customized payment experiences with reduced development resources
Block released their Q3 2024 Financials. They highlight the company’s growth across key areas, particularly in lending and financial services:
Expansion in Lending: Block's Cash App and Afterpay BNPL (Buy Now, Pay Later) offerings have driven strong consumer engagement, with Cash App Borrow helping users manage daily expenses and Afterpay facilitating over $72 billion in spending since acquisition.
Cash App Growth: Cash App gross profit rose 21% year-over-year, with active users transacting more frequently. The introduction of Afterpay on Cash App Cards aims to offer an alternative to traditional credit cards.
Square Ecosystem: Square Loans have totaled $22 billion in global lending, supporting small businesses with technology-driven underwriting, transparent terms, and simplicity, which has enhanced seller retention and cross-selling of other products.
Financial Performance: Block reported a 19% increase in gross profit to $2.25 billion and a significant improvement in operating income, achieving $323 million.
Outlook: Block raised its profitability guidance for 2024, aiming for improved margins and continued growth in 2025 with initiatives to boost financial access and enhance customer retention.
Block continues to play a key role in underserved markets through both Cash App for individuals and Square for businesses. The ecosystem is working and their appeal amongst Gen-Zs and Millenials is growing as they account for 72% of self-reported customers.
🇸🇬 Boxo and Nium launch white-label remittance platform for apps
Boxo and Nium have collaborated to introduce a white-label remittance platform tailored for mobile applications. This platform enables app developers to seamlessly incorporate international money transfer services into their existing offerings through Boxo's software development kit (SDK). Key features include customizable front-end options, access to transfers in over 60 countries, and flexible pricing structures. Additionally, developers are provided with an administrative dashboard to monitor performance and revenue metrics. This initiative aims to enhance user engagement by allowing mobile apps to offer fast and secure cross-border money transfer services.
Last week we talked about Alipay+ and their wallet solution and this adds to that trend. Boxo enables companies to build super-app capabilities through their SDK and Nium is a global cross-border payments provider. Through this partnership, they will enable companies to launch remittance solutions right out of the box relying on Boxo’s tech capabilities and Nium’s global rails. This would be useful for Tier 1 banks in the continent keen on building SME or Affluent banking propositions centred on global payments.