African B2C fintechs will (eventually) become counterfeit neobanks

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The year was 2016 and Paylater – which would eventually become Carbon – was just beginning. At the time, Paylater was essentially a digital lender providing small unsecured loans in Nigeria through a mobile app.

Paylater was one of the creations of One Finance and Investments Limited Nigeria (OneFi), a company co-founded by sibling couple Chijioke and Ngozi Dozie in 2012.

And the fast lending service continued in such a way that within 3 years of its launch, the Paylater mobile app had been downloaded by over a million users and disbursed over $ 13 billion in loans. NGN ($ 36 million, at the time). But something changed in March 2019.

It was during this time that OneFi acquired the Nigerian payment solutions company Amplify and Paylater became Carbon. Basically, Carbon arrived as a neobank offering a suite of financial services – encompassing loans, payments, money transfers, savings, investments, debit cards, and even a Buy It Now (BNPL) product. at this point – through a wallet.

This is more or less the first known example of an African fintech startup with a product aimed at consumers transforming into a sort of mobile-only digital bank offering a glut of valuable financial services that rival (or surpass) the offerings of most traditional banks.

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And maybe Carbon was ahead of its time and ahead of its time, because now, around two years later, a number of fintech startups across Africa (and indeed the rest of the world) are accepting the idea that a neo-pivot / evolutionary bank could shape their future.

Take, for example, Chipper Cash, which recently raised $ 100 million from Series C led by Ribbit Capital and Jeff Bezos’ fund, Bezos Expeditions. The startup started in 2018 with a daring game to simplify cross-border money transfers in Africa.

Today, Ugandan start-up Ham Serunjogi and Ghanaian Maijid Moujaled are expanding beyond free cross-border money transfer to include instant peer-to-peer (P2P) local payments, buying time discounted antenna / data, free bill payments, cards, and the new icing on the cake – crypto trading and split stock investing. Do you have an idea of ​​the British neobank Revolut? Exactly!

Additionally, lending startup Branch recently emerged from its “mobile loan shell”. With the acquisition of a troubled microfinance bank (MFB) in Kenya and an MFB license in Nigeria, Branch unveiled Branch 2.0 – it is now essentially a digital bank with footprints in lending, money transfers, payments and, more recently, savings.

What about Paga, Fairmoney and even OPay to some extent? They all seem to be re-coupling various fragmented segments of fintech and morphing into a version of neobank.

Well, that seems like one more thing to fear for people like Kuda, Eversend, TymeBank who actually set out to build digital-only banks from the start and fight with traditional banks. These “original” African neobanks are now discovering that there is suddenly another competitor: potentially all B2C fintech startups on the continent.

A similar deal seems to be playing out in the west with CashApp, Venmo and even Wise – B2C fintech products that increasingly look like a neobank with each new license acquired and each vertical superimposed on the original service.

As it stands, it’s almost as if every business-to-consumer (B2C) fintech will ultimately become a challenger bank seeking to claim and retain customers of original incumbents, or digital banks, while at the same time competing for a new generation of account for the first time. holders.

It’s a bit ironic, a bit poetic even. At one point, it seemed like the whole fintech startup case hinged on unbundling or decoupling the range of financial services that traditional banks have failed to deliver properly. Previously, fintech startups found a value proposition by dividing up individual financial services and working with them. And many still do.

But it looks like the circle has come full circle – the latest copy of the fintech playbook seems to strongly recommend “bundling unbundled products under one digital ecosystem”.

Fintech startups backed by companies that have built for the consumer are increasingly looking for growth to thrive. And that required diversification and expansion. While some of the expansion has been geographic, most of it has been vertical.

Fintech is the crown jewel of Africa’s evolving tech ecosystem, raising record amounts of funding and creating new unicorns every two years. As fintech startups pursue continued growth to keep up with the influx of capital and continue to validate the industry, it has become imperative to achieve a bigger pie, AKA, to become a one-stop-shop for financial services.

The view of Stone Atwine, founder / CEO of Eversend, is that the bundling of multiple products – cards, transfers, savings, trading, crypto and loans – is the natural progression as long as the goal is to increase income. average per user (ARPU). “It makes the customer more valuable to the business and the platform more valuable to the customer,” he notes.

It’s hard to say if this neo-banking maneuver would be the light at the end of the unit economy tunnel for these startups at the present time. Either way, as it stands, it really seems like every fintech startup is a potential competitor to every fintech startup in African fintech.

May the best fintech win!

Featured Image Courtesy: DigiPay



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