Frontier Fintech GPS #13 November 27th 2024
Take-outs from Revolut's journey, Yellowcard secures CASP license in South Africa, Riksbank pushes for more payments modernisation and other stories that matter
Illustration by Mary Mogoi - Website
Hi All, Welcome to the 13th 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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🌐 Nik Storonsky Talks Building Revolut, First Principles and His Goals for Revolut
I liked this discussion with Nik Storonsky of Revolut. It’s definitely worth a watch. Some key points that stood out;
Revolut is an extremely ambitious business, their goal is to have over 100m customers with revenues of over US$ 100 billion and be truly global. The closest in breadth of their market is Citi Bank and their global corporate business. It will be interesting watching this play out;
First Principles thinking in compliance. Revolut has built an AI tool that can ingest thousands of pages of compliance documentation and produce risk indicators. I’ve always argued that digital banks have the chance to do compliance from the ground up and build a way better risk approach than incumbents and it’s great to see Revolut doing this;
Nik’s learnings on compliance and regulation, Nik mentions how he wishes he would have taken compliance more seriously from the beginning. This shouldn’t be a stain on ‘Fintechs’ but rather a reflection of his libertarian leanings. In the Sons of Witchita a book about the Koch Brothers, the book journals how Charles Koch had a come to Jesus moment about compliance in the mid-90s and drove a complete rethink about how the Koch empire deals with regulations with a focus on being compliant at all costs. It’s reflective of a founders journey and not a stain on “Fintech Bros”;
The idea to build everything in-house, like Rockefeller and Standard Oil in the 19th century, Nik’s decision to build in-house does not completely rely on commercial and technical considerations but more of a deep seated need to be fully self reliant. Nonetheless, the commercial benefits are that Revolut can have world class product velocity which is useful in a hair on fire market like Neobanking;
🇿🇦 Yellow Card Secures Crypto Asset Service Provider Licence in South Africa
Yellow Card has obtained a Crypto Asset Service Provider (CASP) license from South Africa's FSCA, underscoring its commitment to regulatory compliance in Africa. Since launching in 2020, Yellow Card has processed over $3 billion in transactions across 20 African countries. It recently raised $33 million in Series C funding led by Blockchain Capital, with notable investors like Coinbase Ventures and Block, Inc. With sub-Saharan Africa leading stablecoin adoption at 9.2%, Yellow Card aims to expand its B2B services, stablecoin infrastructure, and APIs to lead the digital assets market.
Last week, we discussed how companies like Accrue, Bamboo, and Risevest are driving stablecoin adoption as a store of value. Yellow Card is supporting this by building the infrastructure layer. In South Africa, stablecoin usage now surpasses Bitcoin in number of users, potentially influenced by exchange regulations that make stablecoins more convenient for cross-border money movement.
🇸🇪 Sweden's Riksbank presents case for modernisation of retail payments infrastructure
Sweden's central bank, the Riksbank, has highlighted the need to modernize the country’s retail payment infrastructure to meet evolving European standards. The current systems lag behind technological and regulatory advancements, prompting the Riksbank to advocate for an infrastructure that supports both instant and scheduled payments, ensuring stability through settlements in central bank money. The bank also stresses the importance of safeguarding against money laundering and cyber threats. It warns that if market participants don't modernize accordingly, government intervention may be required.
We've previously covered Brazil's Pix and the Central Bank of Kenya's Faster Payments initiative. Despite Swish's success, Sweden still sees a need for further modernization, emphasizing payments settled in central bank money—which, unlike commercial bank money, is legal tender. Central banks globally are pushing for payment innovations, and in the next decade, we can expect more bold moves in digital payments. PayShap in South Africa could take note of Riksbank’s push for e-money institutions and PSPs to have an active role in settlements, which is crucial for an effective retail payment system.
🇳🇱 Amsterdam’s Qash exits stealth mode to democratise access to the US banking system in volatile economies
Qash, founded by Boris Spiwak and Gerson Lynch in Amsterdam, aims to improve financial inclusion in unstable economies by providing offshore savings and investment products. Drawing from their experiences with economic instability in Venezuela and Suriname, Qash bridges the gap between volatile local currencies and the stability of the U.S. dollar. Their first product, launching in Colombia, includes a blockchain-based digital-dollar account and a Qash-branded Visa card that allows users to save, spend, and invest in digital dollars using stablecoins. Supported by Antler, Qash initially struggled to secure a U.S. banking partner, leading them to pivot to blockchain technology for faster deployment. They plan to introduce FDIC-insured U.S. dollar accounts by Q3 2025, partnering with brands like Visa and Rain to support their offerings and meet regulatory requirements. Their business model includes FX fees on transactions and premium features for investing in tokenized assets.
Qash’s approach, using stablecoins to facilitate easier payments, addresses a problem well known in Africa. Fintech should empower people in emerging markets to access the global economy, but as these apps gain traction, regulatory pushback could intensify due to concerns around dollarization.
🇧🇷 🤝🏿 🇬🇧 Brazilian Fintech Nubank Considers Domicile Move to UK
Nu Holdings Ltd., the parent company of Brazilian fintech giant Nubank, is considering moving its legal base to the UK, a decision that would align with efforts by the UK government to attract more tech firms. Discussions took place during the Group of 20 summit in Rio de Janeiro, but the move is still awaiting approval from the UK's HM Revenue & Customs. Currently based in the Cayman Islands, Nubank remains listed on the New York Stock Exchange, with corporate headquarters in Sao Paulo, Brazil. Founded in 2013, Nubank has grown rapidly, now serving around 60% of Brazil's adult population through its app and also operating in Mexico and Colombia.
Post-Brexit UK has been keen on building its reputation as a Fintech hub given its geographic advantages, tax benefits, access to human capital and proximity to London as a financial hub. Nubank will join the likes of Wise, Revolut and Paysafe which are all domiciled in the UK. Paysafe is listed via SPAC in the US and most people would bet that Revolut will eventually get a US listing. It’s a testament to London’s staying power in global finance.
🇳🇬 Payaza secures investment-grade rating setting a new standard for African fintechs
Payaza, Africa’s leading payment gateway, has secured an investment-grade rating from the Global Credit Rating (GCR) agency, receiving a BBB long-term rating and an A3- short-term rating. This recognition underscores Payaza's financial strength and creditworthiness, placing it among a select group of stable financial institutions. The investment-grade rating not only validates Payaza’s risk management and operational framework but also enhances its ability to secure strategic partnerships and attract investments.
Getting a credit rating has numerous benefits chiefly access to funding opportunities and strategic partnerships. It’s a signal not only of financial stability but commercial maturity. This is another step in an ongoing story in which African Fintechs are “growing up”. One must understand that a number of founders are also undergoing significant personal growth and learning to be better businessmen and all this is better for the ecosystem. Just like the earlier video of Nik Storonsky of Revolut talking about how he wished he took compliance seriously in the earlier days.
🇿🇦 Mama Money Revolutionizes Banking with WhatsApp-Powered Bank Card
Mama Money has launched the Mama Money Card, a bank card managed via WhatsApp, developed with Access Bank and Pick n Pay. This card aims to serve those with limited access to traditional banking by allowing users to manage their accounts entirely through WhatsApp, including services like airtime purchases, balance checks, and international money transfers. The card supports online shopping, ATM withdrawals, and registration requires only proof of identity. Co-founder Mathieu Coquillon emphasizes its role in simplifying financial services for underserved communities, while Deven Moodley highlights its potential to enhance financial inclusion in South Africa by leveraging widespread cellphone and WhatsApp usage.
This development is notable on multiple levels. Access Bank in South Africa is very active with Fintechs as I know a number of other Fintechs working closely with them. Access and specifically the late Herbert Wigwe played an active role in getting Flutterwave off the ground. There’s something to be said about banks having a front row seat at Fintech innovation and how that knowledge compounds into other opportunities. Using WhatsApp as the distribution channel makes sense given its ubiquity, with over 95% of African internet users using the app. Unlike simple chatbots, Mama Money is embedding real financial workflows into WhatsApp—a significant advancement in integrating fintech with common communication tools. It will be interesting to see how this evolves, especially as central banks enhance instant payment systems, following the successful use of WhatsApp payments in countries like India and Singapore.
🇹🇿 Tausi Africa seeks to improve access to credit in Tanzania using AI
Tausi Africa, a leading fintech firm, is set to modernise Tanzania's financial landscape with its AI-powered credit scoring platform, Manka. By analyzing user-consented data from banks, mobile money services, and utility bills, Manka assesses creditworthiness, enabling lenders to make informed decisions for individuals lacking traditional credit histories. Dr. Said Baadel, Director of Research and Development at Tausi Africa, emphasized the company's commitment to leveraging advanced technology to bridge the financial gap in Tanzania and beyond. The firm has partnered with Credit Info, a global credit information provider, to empower microfinance institutions and lenders with data-driven credit decisions and enhance operational efficiency. Looking ahead, Tausi Africa plans to launch a "Credit SIM Card" within the next five years, aiming to expand credit access to millions of underserved individuals across Sub-Saharan Africa.
We recently discussed how Kamal of Craft Silicon improved credit scoring outcomes by shifting from machine learning to deep learning. AI, particularly deep learning, has enhanced the ability to build better credit models. Tausi, like Pezesha, uses alternative data for credit scoring and partners to create embedded finance solutions. The real challenge in credit globally is not assessing risk but recovering from defaults. In Africa, the key is to embed credit scoring widely, making it meaningful, such as using it for rental and insurance access.
🇺🇸 CFPB finalises rule to supervise big tech firms offering digital payment apps
The U.S. Consumer Financial Protection Bureau (CFPB) has finalized a rule to supervise major tech firms offering digital payment services, such as Apple Pay, Google Wallet, PayPal, and Cash App. This regulation applies to companies processing over 50 million transactions annually, bringing them under the same oversight as large banks and credit unions. The CFPB aims to ensure these firms adhere to federal laws concerning consumer data privacy, fraud prevention, and account management. CFPB Director Rohit Chopra emphasized the necessity of this oversight due to the significant role digital payments play in the economy. The rule will take effect 30 days after its publication in the Federal Register.
With regulation I’ve come to realise that how regulators in the long-term see things is that “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” To this end the way to predict how companies will be regulated is to understand the underlying service they provide and whether those services are provided by traditional players, if so, then the regulations that apply will extend to the new players. This is why there’s a growing consensus to regulate Stablecoin issuers like e-money issuers.
🌍 Africa Nenda release the 2024 State of Inclusive Instant Payments Systems Report
The SIIPS 2024 report provides an overview of the state of inclusive instant payment systems (IPS) in Africa. It highlights progress made in the adoption and expansion of IPS across the continent, with a total of 31 live IPS in 26 countries, which includes domestic and regional systems. Notable developments include increased volumes and values of transactions, with $1 trillion processed in 2023, and the rise of cross-domain systems, which enable all-to-all interoperability across banks and mobile money operators. Key markets that have Cross-Domain systems i.e. systems interoperable with banks, MoMo and PSPs include Egypt, Nigeria, Ethiopia and Morocco.
However, the report identifies that none of the current IPS has reached full inclusivity, meaning they do not comprehensively support a wide range of use cases (such as government-to-person or cross-border payments) or effective recourse options for users. Key recommendations include regulatory reforms, including more accessible electronic KYC processes and improved licensing for payment fintechs, to promote broader financial inclusion. The report emphasizes the potential of IPS to become key digital public infrastructure (DPI) in Africa, advancing financial inclusion and economic development. This is something that Central Banks must simply get right.
As always thanks for reading and drop the comments below and let’s drive this conversation.
If you want a more detailed conversation on the above, kindly get in touch on samora@frontierfintech.io