Frontier Fintech GPS #9 October 30th 2024
Moniepoint raises US$ 110m Series C at a Unicorn valuation, Sawari Ventures launches a US$ 200m fund, CBN intends to get Nigeria out of the FATF Grey list and other key stories
Artwork by Mary Mogoi - Website
Hi All, Welcome to the 9th 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. 🚀
Consider becoming a paid subscriber to support Frontier Fintech’s long-term sustainability.
🇳🇬 Moniepoint gets $1 billion valuation in new funding round led by DPI and Google
Moniepoint, a Nigerian fintech company, has secured $110 million in a Series C funding round led by Development Partners International (DPI), with participation from Google's Africa Investment Fund, Verod Capital, and Lightrock. This investment elevates Moniepoint's valuation to over $1 billion, marking its entry into the "unicorn" category. The capital will be utilized to expand Moniepoint's digital payment and banking solutions across Africa, aiming to build an integrated platform for businesses that encompasses digital payments, banking, foreign exchange, credit, and business management tools. Currently, Moniepoint processes over 800 million transactions monthly, totalling more than $17 billion in value. Other investors in Moniepoint include QED and BII which both led a round two years ago valuing Moniepoint at US$ 800m.
What’s interesting to me is the involvement of DPI which is a more traditional Private Equity type investor as opposed to a pure VC player. DPI has been in the African market for a very long-time and can be considered in the same bracket as Helios i.e. sophisticated investors with a very keen understanding of Africa’s market dynamics. This transaction therefore can be seen as a validation of Moniepoint’s economic fundamentals.
Questions will definitely arise around the valuation and drive some introspection across the ecosystem. US$ 1 billion in valuation would put Moniepoint ahead of rivals such as Access Bank and GTBank who generated roughly 30x the revenue Moniepoint has generated. In fact, Access Bank’s net profits were roughly US$ 1 billion. Moreover, both GT Bank and Access have Pan-African franchises and licenses across the continent.
I recently wrote about how all challenger banks will eventually end up being banks, and this perspective was echoed by Moniepoint’s CEO in a podcast interview with the Flip Africa. If that’s the case, then the investors are pricing in not only significant growth, but significant and sustainable operating leverage that would allow Moniepoint to be valued more as a Fintech and less like a bank. It’s a stretch of the imagination to think that business tooling, agent management, payments and software solutions will justify such a delta between Moniepoint and traditional banks over the long-term. Nonetheless, there’s precedent in the ecosystem. Helios invested in Equity Bank back in 2007 at a valuation of close to US$ 700m and the bank grew to justify it. Moniepoint has been the poster boy of flawless execution in the market and I’d back Tosin and the team to build a world class modern financial institution.
🇪🇬 Sawari Ventures to back more African startups with new $200 million fund
Sawari Ventures, an Egypt-based VC firm, is launching its second fund, Sawari Ventures II, targeting $200 million to invest in African startups. The fund, debuting in early 2025, will focus on Series A and B investments, allocating about 70% to Egyptian ventures and expanding into North, West, and East Africa. Key sectors include fintech, healthtech, agri-tech, and digital education. In partnership with Bpifrance, Sawari aims to foster collaboration between African and French markets.
This is good news for the ecosystem, I’ve become a firm believer that Africa’s start-up ecosystem will require more local capital particularly for earlier rounds. This is largely because the biggest drivers of leverage at this stage is the ability to drive partnerships and manage unique non PMF issues such as navigating local relationships. In so far as local capital comes with local context then the ecosystem is better for it.
🇳🇬 CBN Optimistic About Nigeria’s Removal from FATF Grey List by May 2025
The Central Bank of Nigeria (CBN) is optimistic about Nigeria’s removal from the Financial Action Task Force (FATF) grey list by May 2025. CBN Deputy Governor Aishah Nnaji highlighted that Nigeria has completed the necessary requirements for this removal, which will enhance remittance flows and foreign direct investment (FDI). CBN Governor Yemi Cardoso emphasized efforts to eliminate remittance obstacles and increase inflows to $1 billion through collaborations with International Money Transfer Operators (IMTOs) and Nigerian banks.
Mercury some time early this year shut-down accounts for businesses from Nigeria, Ukraine and other high risk nations. A country’s macroeconomic management has a direct impact on the entire ecosystem. If Nigeria is removed from the Grey List, this should make it easier for Nigerian companies to participate in the global economy particularly from a money movement perspective and hopefully have those Mercury accounts reopened. As a user of Mercury, I can empathise with the disruption that such a robust closure could cause.
🇳🇬 NIBSS to Launch Non-Resident BVN Platform in December 2024
The Nigerian Inter-Bank Settlement System (NIBSS) will launch a non-resident Bank Verification Number (BVN) platform in December 2024, allowing Nigerians abroad to manage bank accounts and complete Know Your Customer (KYC) requirements without in-person verification. This move aims to streamline processes, reduce costs, and improve financial inclusion for the diaspora, supporting the Central Bank of Nigeria's broader strategy to enhance international remittance channels.
Typically, getting a Bank Verification Number in Nigeria requires a physical KYC check by a bank. This has made it difficult for Nigerians in the diaspora to get a BVN and thus transact freely whilst abroad. This should make it easier and should drive more remittances and FDI into the market. As Kenya nears Faster Payments, this should also be studied from an operational perspective on how to onboard from day one to avoid such hiccups.
🇳🇬 Sterling Bank selling Core Banking to MoMos
Sterling Bank has developed SEABaaS, a custom core banking platform aimed at providing a cost-effective alternative to popular foreign banking software. Targeting MTN’s MoMo and various fintechs, Sterling hopes to leverage SEABaaS’s flexibility and local pricing to attract smaller banks and businesses seeking agile banking solutions. While tier-1 banks might hold off until SEABaaS proves itself during critical year-end operations, the platform could gain traction among tier-2 banks focused on cost savings particularly given the Naira’s depreciation.
The idea of building custom in-house capabilities as a financial service provider and then leveraging these capabilities to smaller businesses is not new. SoFi sells Galileo to other Fintechs and Ant Group has a separate business where it sells its wallet capabilities as a stand-alone product. Sterling’s move is therefore not new. It nonetheless brings new challenges in terms of managerial focus as well as the fact that Core Banking is already a relatively crowded space. One way they can add value is by selling an end to end BaaS product that includes both licensing and tech rather than selling tech as a standalone product.
🌍 Network International & Ant Have Forged MEA Payments Partnership
Network International has partnered with Ant International to introduce Alipay+ Wallet Tech in the Middle East and Africa. This solution aims to provide banks, fintechs, and telecom operators with digital wallet capabilities, allowing them to serve millions of customers with seamless and secure mobile wallet services. The partnership is part of a broader strategy to enhance digital financial services in emerging markets across the region.
Alipay+ Wallet Tech enables a bank or Fintech to launch its own robust, world class wallet capabilities. This is a comprehensive product that includes;
The customer interface and app capabilities in a box;
Platform capabilities including a scalable cloud deployment that has all the capabilities of Alipay particularly reliability and availability;
Certification programs similar to what Oracle offer for Database Engineers;
Network International is bringing its experience and relationships in the region to act as distribution and implementation partners for Alipay’s service. As wallets grow in attractiveness driven by tailwinds such as Central Banks launching faster payments systems, this becomes an attractive proposition for both banks and Network as it diversifies away from its dominant card business.
🏴Bank of England presses on with retail CBDC to plug bank innovation gap
The Bank of England (BoE) is advancing plans for a retail central bank digital currency (CBDC) to address innovation gaps in the banking sector. BoE Governor Andrew Bailey highlighted that commercial banks have been slow to innovate in payment systems and that a retail CBDC could ensure modernization in both domestic and cross-border payments. Although he prefers banks to lead these innovations, the BoE is preparing to step in if needed.
Central Banks have a key role to play in retail payments particularly to ensure that there’s universal access to payment systems. In the past they have done this through ensuring availability of cash and ensuring that cash is legal tender. As payments digitise, they have a role to ensure that everyone can participate. This is the energy that’s driving Central Banks to launch Faster Payment systems like Pix and CBDCs. The industry needs to get used to the idea of CBDCs as they are the primary way that Central Banks can continue playing their role in lower value payments as money goes fully digital. I’ve written about CBDCs here before.
🇺🇸 The US moves closer towards Open Banking
Section 1033 of the Dodd-Frank Act, implemented through the CFPB’s new rule, grants consumers rights to access their financial data and share it with third-party providers. The rule mandates financial institutions, including digital wallet providers, to make data available in standardized formats, enabling consumers to switch services easily. Compliance requires secure data handling, limited data use, and annual reauthorization. The rule, designed to foster competition, faces industry concerns over privacy risks and liability, with some financial groups filing lawsuits.
Alex Johnson of Fintech Takes does a good job at breaking down what these new regulations mean for the broader Fintech ecosystem. At least for the African market, what this shows is that the world is converging towards a regulator led implementation of Open Banking. I wrote about Open Banking some time back and made the distinction between regulator led ecosystems like Europe and Australia and market-led ecosystems such as the US. Nonetheless, despite whether an Open Banking implementation is led by the regulator or the market, the big question is whether the intended outcomes match with actual realities. The answer is actually no. For now, it seems that Open Banking doesn’t drive additional choice because primary accounts are stickier than most people thought. Nonetheless, I’ve argued before that stickiness is a function of the inertia that comes with having to manually sign forms and do the schlep involved in changing accounts. This could alter dramatically in a world of AI where your agent would do the heavy lifting. To this end, it’s useful to see Open Banking from the perspective of AI agents and whether this will be the final ingredient that drives the intended outcomes.
🇨🇳 Ant CEO Eric Jing touts tokenisation benefits for cross-border transactions at FinTech Week
At Hong Kong FinTech Week, Ant Group CEO Eric Jing highlighted the benefits of tokenization for cross-border payments, noting its potential to streamline real-time, cross-currency transactions. By enabling programmable, 24/7 operations, tokenized deposits can reduce reliance on intermediaries and simplify global settlement. Ant Group has expanded Alipay's reach in Hong Kong, now covering 90% of merchants with 4.2 million users. Jing sees tokenization as essential for creating seamless cross-border financial experiences.
Tokenized deposits represent digital versions of traditional bank deposits, leveraging blockchain technology to enhance transaction efficiency and security. In a tokenized system, each deposit is transformed into a digital token, which can move instantly across blockchain networks, enabling real-time settlements and cross-border transfers without relying on multiple intermediaries. These programmable tokens operate continuously, allowing more flexible and efficient financial transactions, especially for global settlements, compared to the standard banking processes that typically run on limited business hours and involve higher intermediary costs.
Banks like DBS and BBVA have already experimented on tokenized assets and I expect this to gain pace. Ultimately the industry is coming to align with the idea of a financial system that’s built on the principles of the internet i.e. always available and ubiquitous. The energy behind tokenisation is the same energy behind stablecoins.
🇳🇴 Norway's cashless economy drive halted by new cash payment rules
Norway's push toward a cashless society has been paused with new regulations requiring retailers to accept cash payments. The Central Bank Act amendment mandates that businesses must offer a cash option for transactions up to 20,000 kroner, with fines for non-compliance. This rule, endorsed by Norway’s central bank and government, underscores cash as essential for non-digital users and societal emergency preparedness.
Sweden and Norway are showing the trade-offs societies are having to face as they move towards becoming cashless societies. Ultimately at the edges, there are groups that still need to use cash and Central Banks need to step in to ensure that they are taken care of. Remember, it’s in the govts interest that everyone in the economy can transact because that maximizes GDP.