Africa’s technology sector has received a significant boost in recognition, as both South Africa’s and Nigeria’s startups have secured funding in recent weeks, achieving valuations of over $1 billion and joining the elite group of unicorns.
While these valuations may not perfectly reflect investor confidence alone. Companies leverage their achievements in adapting innovative fintech solutions designed for developed markets to meet the distinct needs of regions where nearly half the population remains underserved financially.
Firms have focused on simplifying banking experiences for individuals and businesses in the two largest African economies.
Established initially as a provider of affordable financial services for individual customers, TymeBank subsequently expanded its scope to offer financial solutions to small businesses in South Africa by providing access to working capital.
Meanwhile, Moniepoint commenced operations in Nigeria by providing financial services to small businesses, including account management, funding, loan facilities, and expense tools, before recently expanding its offerings into retail banking.
As fintechs continue to evolve, they’re adopting a hybrid approach to banking, seamlessly blending the convenience of digital services with tangible, in-person interactions.
In Africa, a paradox prevails, where progress often hinges on striking a delicate balance between seemingly opposing forces, observed Lexi Novitske, general partner at Norrsken22, which has invested in TymeBank, speaking with TechCrunch. “Tech companies should invest in building buyer relationships through hands-on, experiential marketing initiatives that blur the lines between digital and physical interactions.”
The super casual nickname for that hybrid approach is ‘Hybrid’ – no surprises there!
The approach of these financial institutions differs significantly from that of traditional American challengers. and different developed markets. These fintechs, Revolut, Monzo, and Chime, operate digitally, reflecting the modern name that signals their commitment to innovation. In several emerging markets, such as those in Brazil and India, smaller platforms and companies are leveraging digital-only channels to become regional market leaders, often by targeting underserved areas.
Although a solely digital approach may have its merits, it is not optimally effective in the African context. While exceptions exist, primarily encompassing Valar-backed fintechs like Kuda, a ceiling is imposed on the number of clients such platforms can serve. As Stephen Deng, co-founder of DFS Lab, a venture capital firm focused on early-stage investments in Africa, notes, entrepreneurs in these ecosystems may hit (home) income limits.
In a region where financial considerations often reign supreme, internet connectivity can be spotty at best, and trust in online programs remains limited. It’s no surprise then that cash remains the most prevalent payment method across Africa, comprising a staggering 90% of all transactions, as statistics indicate. Meanwhile, a staggering 43% of Sub-Saharan Africa has internet access.
TymeBank and Moneypoint have successfully navigated a middle ground by catering to both retail and enterprise clients where they are positioned. TymeBank currently boasts 15 million customers across South Africa and the Philippines, while Moniepoint reports that more than 10 million individuals and businesses rely on its services. While Kuda, with approximately 7 million customers, isn’t far off.
“When venture capital is abundant, it’s possible to hire people to develop your digital-only product, but without sufficient average revenue per user (ARPU), the costs become unsustainable in the long term,” Deng said. Companies like Moniepoint, Tyme, and others recognize the importance of creating tangible connections with a broad audience while maintaining the agility to innovate through these touchpoints. This hybrid approach is dubbed a ‘strategy because it leverages technology to amplify existing, informal networks while avoiding the costly mistake of trying to fully digitalize them.
Financial services tailored to the sophistication of market ecosystems.
TymeBank has successfully scaled one of its primary challenges by forging robust retail partnerships with prominent supermarket chains such as Checkers and Boxer, thereby significantly increasing its footprint in South Africa. Through innovative retail touchpoints, TymeBank leverages kiosks and trained ambassadors at these storefronts to facilitate seamless account openings and deposits, ensuring that customers have the option of personalized support from knowledgeable representatives.
It’s a highly advanced mannequin that thrives due to its unique ability to understand and adapt to the diverse ways in which everyday African clients engage with financial services. For some, strolling into a grocery store to buy essentials and departing with a newly opened bank account can be a liberating experience.
With a vast network of more than 1,000 kiosks and 15,000 retail partners across South Africa, TymeBank has established a significant presence. Meanwhile, its sister company GoTyme, a three-way partnership between parent firm Tyme Group and local conglomerate Gokongwei Group, which launched in 2022, is also employing this strategy, having established nearly 500 kiosks and 1,500 bank ambassadors across the Philippines.
Nigeria’s Moniepoint, backed by QED, has pursued a distinctive approach, building a robust network of brokers across the country. Approximately 200,000 of these brokers operate small enterprises equipped with point-of-sale (POS) systems, serving as virtual cash machines that facilitate transactions such as deposits, withdrawals, and bill payments. The system mirrors the innovative approach of M-Pesa, a pioneering mobile payment solution in Africa, particularly in Kenya where Safaricom’s initiative has achieved remarkable success.
Decentralizing operations through brokers enables seamless connections between urban and rural populations by providing monetary services in areas where conventional banking infrastructure – such as financial institutions or reliable ATMs – is scarce (as of 2022, the World Bank estimates only 16.15 ATMs per 100,000 adults in Nigeria).
In reality, many countries, such as Nigeria, rely heavily on unofficial economic activities that operate largely outside the scope of taxation and government oversight, accounting for a significant portion of their overall economy. In light of the vast array of unbanked customers and businesses, a humanoid model with physical components is more a necessary response to market needs than a revolutionary concept.
Firms now offer a comprehensive suite of financial services, combining retail and corporate banking offerings under a hybrid model that has informed the addition of other solutions, such as credit facilities, working capital lending, business management tools, accounting and bookkeeping services, and insurance products.
After securing recent unicorn funding, these companies are likely to aim for global expansion beyond their home markets, where they claim to have achieved profitability. For Tyme Group, which has recently expanded its reach by initiating a foray into Vietnam and Indonesia, the growth trajectory continues to gain momentum with ongoing expansion efforts in both countries. In many Asian economies, a striking blend of digital innovation and traditional reliance is emerging, mirroring the complexities found on the African continent. Given its current momentum, GoTyme’s next move would naturally follow as the natural progression of their efforts.
After expanding its presence in Nigeria, Moniepoint plans to further solidify its operations and diversify into various African markets, mirroring its successful foray into Kenya. The company’s strategic growth plan may also involve acquiring new markets, potentially leading to further regional consolidation opportunities.
Outlook exterior of fintech
What’s truly fascinating about this hybrid model is its validation of the African fintech landscape, as TymeBank and Moniepoint are not the only fintechs to leverage this approach en route to achieving unicorn status.
This is exceeding expectations on a grand scale? The premier cohort of African fintech companies, including Interswitch and Flutterwave, provided foundational infrastructure and payment solutions to both domestic and international merchants across the continent. Subsequently, fintech companies backed by prominent investors such as SoftBank, Stripe, and Chimera Investments have collectively provided financial services to hundreds of millions of consumers across Africa through a blend of digital applications and physical touchpoints.
Fintech has emerged as a remarkably lucrative space, boasting an impressive eight out of nine unicorns – startups valued at over $1 billion – within its ranks. As a model that consistently captures additional domestic and international investor interest, this framework could serve as a benchmark for achieving venture-like returns while simultaneously driving financial inclusion.
However, there is also significant potential for the hybrid model to be applied in industries beyond fintech, particularly in Africa’s informal markets. Telemedicine, a business heavily influenced by perception, can utilize native, in-person interactions to onboard patients while streamlining operations through digital platforms, as suggested by Novitske. The e-commerce industry and group insurance coverage options differ significantly.
As African entrepreneurs eye success, a strategic pivot is likely essential: embracing a hybrid approach to maximize profits and growth. “Innovation often arises from the intersection of digital and physical realms, necessitating tangible touchpoints to aggregate casual markets effectively.” In business-to-business (B2B) marketplaces, procurement processes typically unfold in a relatively informal manner. In cross-border funds, alongside stablecoins, home payouts can occasionally be informal. Supply is often casual in native retail.
