Frontier Fintech GPS #8 October 23rd 2024
CBK moves closer towards Faster Payments, Yellow Card raises a US$ 33m round moving stablecoins deeper into prominence, Omnibiz acquires Traction Apps and other Fintech news items.
Artwork by Mary Mogoi - Website
Hi All, Welcome to the 8th 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. 🚀
🇰🇪 The Central Bank of Kenya makes progress towards a Faster Payment System
The Central Bank of Kenya (CBK) has announced progress toward creating a financial sector-wide interoperable solution, known as a Fast-Payment System (FPS). This system will allow instant money transfers across the entire financial industry, regardless of the financial institution a customer uses. The development of FPS is part of the National Payments Strategy 2022-2025 and aims to enhance Kenya’s payment infrastructure. A Technical Working Group (TWG) involving the CBK, Kenya Bankers Association, Payment Service Providers, and banks has been formed to design and implement the system.
FPS addresses challenges in existing payment interoperability, such as the lack of a centralized switching mechanism and costly bilateral arrangements. It seeks to create an open, fully integrated system that reduces costs and improves convenience for customers. Kenya's FPS will align with global best practices and is expected to elevate Kenya’s standing in payment innovation and financial inclusion. Further updates on the project’s timeline will be provided by the CBK.
I wrote about the NPS and the idea of Faster Payments in Kenya back in 2021 here. The Central Bank of Kenya has been moving in silence, in the same week as they announced that the Kenya Electronic Payments and Settlements System is now on ISO 20022, they announced an impending Faster Payments System. Their language is spot on, Kenya has become a Fintech laggard due to an over-reliance on M-Pesa. There’s an up-coming article specifically dedicated to this so be on the look-out. Nonetheless, the devil will be in the details. The few things that this Faster Payments System has to get right are;
Embed identity - Like Pix, the system needs to have an identity function that will allow banks and Fintechs to onboard people onto the system. Embedded identity is key for virality in just the same way knowing someone’s number makes it easier for you to send money to them;
Settlements Mechanism - It’s important that the Central Bank opens up access to the settlement system to every participant be it a bank or Fintech. Pix has over 800 participants;
Governance - CBK has to be fully in control and dictate pricing and rules around compliance and security. Regulator run payments systems have better outcomes than bank led ones. CBK should know all about this.
A well executed FPS could make Kenya a leading player in the African Fintech ecosystem just like how FPS’ have helped India, Brazil, Nigeria and the UK become Fintech heavyweights.
🌍 African crypto startup Yellow Card raises $33 million in new funding
Yellow Card, an African fintech startup, raised $33 million in a new funding round led by Blockchain Capital, bringing its total funding to $85 million. The company operates in 20 African countries, using stablecoins like USDT and USDC to facilitate low-fee cross-border transactions. Yellow Card plans to expand into Ethiopia, Egypt, and Morocco, where cryptocurrency regulations are evolving. The startup aims to address the inefficiencies of traditional banking systems in Africa and provide smoother financial transactions.
I wrote before in my article on stablecoins that this is an area that should be taken seriously by incumbents and Fintechs. Yellowcard expanding into North Africa and Ethiopia is a natural consequence of growth and the demographics of both regions bode well for crypto adoption. This is particularly the case in Ethiopia where they have relaxed capital controls. The company will also do well to become a trusted on/off ramp to stablecoins for incumbent banks. This will require the continued build out of enterprise grade systems that include; compliance, data protection and cyber-security. This will also require enterprise sales capabilities. Yellowcard is definitely one to watch in the stablecoin space.
🇳🇬 Nigerian B2B eCommerce startup, OmniRetail acquires Traction Apps
Nigerian B2B eCommerce startup OmniRetail has acquired Traction Apps, a fintech company providing payment tools for small businesses, for an undisclosed sum. Traction, which supports over 100,000 merchants, will have its PoS solution integrated into OmniRetail's OmniPay platform by Q1 2025. The acquisition aims to simplify payments, credit access, and loyalty solutions for SMEs. Traction's founders will join OmniRetail's leadership team to help grow OmniPay, and the new entity is expected to process over ₦1.8 trillion in transactions annually.
Omnibiz, Africa’s fastest growing company in 2024 according to the Financial Times has made a very strategic acquisition in my view that could be a very well executed embedded finance play. OmniBiz is a B2B eCommerce platform that simplifies the supply chain for small retailers by connecting them with manufacturers and distributors. The platform allows retailers to order inventory directly from suppliers and offers additional services like delivery, credit, and data insights, helping businesses operate more efficiently. Whereas other players in the market have approached the B2B e-commerce industry looking to disrupt, Omnibiz has taken the sober approach of respecting the current industry framework including distributors and transporters and building a tech layer to connect all the players. This has enabled it to grow significantly and efficiently. With the volume of data that they generate and the increasing loyalty of their clients given their 70% retailer retention, they’re well positioned for an embedded finance play. The data and retention provides a strong base for a strong SME credit play that can scale. I’ve written about embedded finance for B2B e-commerce here and Omnibiz seems to have all the pieces in place.
Read more about Omnibiz here h/t The Flip and here h/t Timon Capital
🇿🇦 🤝🏿 🇰🇪 South African Fintech, Peach Payments, to Integrate Whatsapp-Based Sales in Partnership with Kenyan CRM, Sukhiba
Peach Payments, a South African fintech, has partnered with Sukhiba, a Kenyan CRM platform, to enable WhatsApp-based sales for South African merchants. This integration allows merchants to manage sales, payments, and deliveries directly via WhatsApp, which is highly popular in both countries. Peach Payments will provide various payment options like card payments, EFT, and Buy-Now-Pay-Later, while Sukhiba will offer an all-in-one platform for customer interactions. The partnership is expected to enhance chat-based commerce across six African countries.
This move corresponds with one of our internal themes of increased social commerce across a number of verticals such as retail and service trade. Urbanisation and digitisation are creating a generation of entrepreneurs and these entrepreneurs will require tooling. We’ve covered Chpter before and their AI for social commerce and this transaction adds to that trend.
🇺🇸 Stripe Aims for Largest Acquisition Yet with $1 Billion Deal for Bridge
Stripe has acquired crypto startup Bridge for $1 billion, marking its largest acquisition yet. Bridge provides infrastructure for crypto stablecoins and supports cross-border payments for clients like SpaceX and Coinbase. This deal would enhance Stripe's growing involvement in the stablecoin space, following its introduction of a “Pay with Crypto” feature. If successful, the acquisition will strengthen Stripe's crypto payments offerings, allowing it to deepen its presence in the stablecoin market.
The two tweets capture the significance of the transaction. This is further proof that Stablecoins are going global. It’s unfortunate that we in Africa don’t get the credit we deserve, we basically invented the idea with mobile money. Nonetheless, I always argue that if you understand mobile money, you should understand stablecoins. Stripe’s world class infrastructure and compliance capabilities will enable stablecoins to become a core plank of global cross-border payments. It’s another significant step towards truly internet enabled money.
🇯🇵 Wise gains direct access to Japan's payment clearing network
Wise has gained direct access to Japan's bank payment clearing network, allowing it to bypass intermediary banks and reduce both fees and processing times for cross-border payments. This move is expected to increase competition with major Japanese banks like Mitsubishi UFJ and SBI Shinsei. Wise’s access to the Zengin system will enhance its payment services, especially in a market where cross-border transfer fees remain high, helping it meet the needs of its growing customer base in Japan.
African remittance companies like Nala, Lemfi and Zepz need to see this move in the context of increasing faster payment adoption by African Central Banks. If these Central Banks adopt global best practice and enable participants to have direct settlement with the Central Bank, they will no longer require intermediary banks. This would then lead to a situation where they can lower their fees but importantly improve the reliability of their services. This trend towards interconnectedness will only gather pace and fintechs will access better settlement capabilities. The message to banks is to get their reliability issues sorted.
🇵🇭 Ayala sells half its stake in Mynt to Mitsubishi
Ayala, a Philippines-based conglomerate, has announced the sale of 50% of its stake in Mynt, the parent company of the GCash e-wallet, to Mitsubishi for $318.89 million. Mynt, a joint venture involving Ayala, Alibaba’s Ant Group, and Globe Telecom, focuses on fintech services through its GCash and Fuse Lending platforms. The sale aims to bolster Mynt’s capabilities and support its continued growth in digital financial services in the Philippines, where mobile usage is high and the digital finance space is rapidly expanding.
This is a great transaction for the Philippines Fintech ecosystem. G-Cash is one of the leading Fintechs in the market offering services for both individuals and small businesses. The Ayala group has stakes in both Mynt and Globe Telecom meaning that they will still indirectly have a stake in Mynt. The key lesson for the African Fintech ecosystem is that there’s a role for large family businesses to catalyse Fintech outcomes. This is due to their capital, knowledge of local markets and political connections which are all critical in incubating Fintechs. This has proven useful in South Africa in the case of Tyme Bank and their association with Africa Rainbow Capital.
🇧🇷 Nubank expands working capital offerings for SMEs, sees 150% growth in loan volume
Nubank has expanded its working capital offerings for small and medium-sized enterprises (SMEs), resulting in a 150% increase in loan volume in the third quarter of 2024. The company's loans primarily support cash flow needs, stock purchases, equipment, and maintenance. An internal survey revealed that 65% of SME customers received their first loan through Nubank, with many lacking access to other credit lines. Nubank's business customers also benefit from services like business credit cards, payment links, and additional financial management tools.
I recently wrote about how challenger banks will have to diversify their business lines to build a truly resilient financial institution. Nubank’s expansion into SME business is a logical next move for a Challenger Bank and their execution is not surprising given the adjacency between SME banking and Retail Banking. There’s plenty of white space ahead of them given that Brazilian Banks have traditionally focused on Corporate Banking. I won’t be surprised by a move towards Corporate Banking in 2027 or 28. How this will work is that their SME clients will grow and Nubank will be forced to grow with them by providing services such as Trade Finance, Cash Management and other services. It won’t make sense for Nubank to be a breeding ground for other banks.
🇹🇭 Siam Commercial Bank launches stablecoin-based cross-border payments
Lightnet, a Thai fintech firm, has partnered with Siam Commercial Bank to launch Thailand's first stablecoin, aimed at making cross-border payments and remittances more efficient. Stablecoins, pegged to assets like gold or the US dollar, offer lower transaction costs compared to traditional bank methods, promoting financial inclusion. This collaboration leverages blockchain technology to improve the remittance experience and positions Thailand as a financial hub in Southeast Asia.
South East Asia is becoming a major hub for cross-border payments innovation. Recently, Cambodia and Ant Group collaborated on a QR code based cross-border payments system. The recent news by Siam Commercial Bank adds to this trend and highlights two other issues;
Stablecoins becoming more mainstream in cross-border payments. I’m sure people are tired of reading this from me, but it’s a core trend;
Banks are being forced to modernise in cross-border payments. Jamie Dimon has stated in the past how Fintechs are a big threat to their payments business. In Africa, the double whammy could be losing the liquidity in payments as well as losing FX revenue. This would be the case whether stablecoins are adopted or National Faster Payments systems enable non-banks to have settlement accounts like with Pix in Brazil;
🇸🇬 DBS’ Piyush Gupta: Only half of banks making enough AI, tech progress
DBS CEO Piyush Gupta stated that only about half of banks have made significant progress in adopting AI and digital technologies. He emphasized that many banks focus on digitization without addressing underlying operational changes, leading to inefficiencies. Under Gupta’s leadership, DBS has seen substantial benefits from AI, adding S$800 million in value this year, with expectations to surpass S$1 billion by 2025. Gupta highlighted DBS's transformation into one of the world’s most profitable banks, though it has faced challenges such as technical glitches and regulatory penalties.
DBS has been a model for digital transformation since Piyush Gupta became CEO in 2009. I’ve written about DBS Bank and the specific efforts they took in digital transformation here. The key take-out is that DBS became a banking platform over 15 years ago and has focused on technology enablement as being a core part of its DNA. With this, DBS is able to quickly iterate and launch new products and have recently been at the core of initiatives such as tokenisation and adoption of blockchain for their corporate bank. Now with AI, they have already generated over US$ 800 million in value this year. Simply, doing digital transformation and becoming a bank platform is a matter of long-term survival. Technology is here to stay.