African Fintech Taking Of With $400 Million Invested In Nigerian Fintechs Over One Week

African Fintech Taking Of With $400 Million Invested In Nigerian Fintechs Over One Week

For a continent long held back by a lack of physical infrastructure there is great hope for the impact the modern digital economy may have on Africa’s development. Another of the most significant bottlenecks to economic growth across much of Africa has been a lack of access to basic financial services for significant swathes of population. Within that context, fintech solutions designed specifically for local African markets have for some time now been considered to hold a great deal of promise in both regards.

Fintech payments solutions that allow users to hold, receive and send cash digitally could make a significant positive impact in Africa. They both neutralise the need for a physical bank to be within convenient walking distance as well as overcoming many of the problems around the fact that traditional banks often require the kind of personal identity documents that many Africans simply don’t possess.

In a clear sign that investors have recognised the potential of fintech payments solutions specifically designed for the African context, almost $400 million of venture capital has flowed into 3 Nigeria-based payments companies over the past week alone. OPay, a Chinese capital-backed payments company founded by Opera, the company behind the internet browser of the same name, announced on Monday the successful raise of $120 million. The round was led by SoftBank Ventures Asia and Sequoia Capital China and follows on from a previous investment round that raised $50 million in June.

A few days earlier Visa invested $200 million in Interswitch, another Lagos-based payments fintech and Palmpay, also a payments solution also announced a successful $40 million raise led by Chinese VC Transsion.

Segun Agbaje, chief executive of Guaranty Trust Bank, Nigeria’s biggest lender by number of loans and digital payments pioneer in the country commented on recent investor interest:

“The growth in the payments space is probably like no other on the continent at the moment. There is so much untapped potential . . . this is a space where people are growing 20-30 per cent, month on month — that tells you why the money is pouring in.”

Data from investment platform Partech Ventures shows that over the past year a total of $1.2 billion in venture capital has been invested in African tech start-ups. The $400 million raised by the three payments companies over the past week represents a third of that 12-month total. All three also said that much of the money raised would be invested in expansion across sub-Saharan Africa. Across the region, as many as two thirds of adults still do not have a bank account.

They all also have the ambition to become truly pan-African payments companies. That ambition is complicated by the patchwork of complex foreign currency controls, regulatory regimes and trade agreements between the numerous countries that make up the sprawling continent. But as the continent’s most populous country and biggest economy, Nigeria is the perfect launchpad for fintechs with pan-African ambitions. The country’s central bank recently updated regulations to allow for ‘e-money’ and the local market is big enough in itself to sustain most businesses.

As well as being crucial to Africa’s wider economic development, fintech solutions in the region have also shown that they can be potentially profitable. Interswitch reported a $15m profit after tax in 2016, $19.2m in 2017 and $23.3m in 2018. The company said Visa’s $200m investment valued it at more than $1bn, making it Africa’s first true homegrown ‘unicorn’. An IPO is planned for London early next year.

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