Africa’s new fintech unicorns are gaining ground

Africa’s technological environment has just gained attention, and that of South Africa TymeBank and Nigeria Moniepoint both are raising funds in recent weeks to the tune of more than $1 billion and joining the coveted unicorn ranks.

But that valuation doesn’t just reflect investor confidence. He points to the success he’s had in adopting disruptive fintech solutions designed to help mature people, and improving them by equipping them to work in an environment where nearly half of the population remains unbanked.

The main goal of both companies was to make banking easier for people and businesses in two of Africa’s wealthiest countries.

TymeBank began by offering retail customers low-cost bank accounts and savings products before expanding into a commercial bank, providing working capital to small businesses in South Africa.

Meanwhile, Moniepoint started in Nigeria helping small businesses with accounts, payments, loans, and spending tools and has recently expanded into retail banking.

Most importantly, all fintechs are taking a hybrid approach to banking, combining the convenience of digital banking with the real, physical experience.

“In Africa, it’s a catch-22: you can’t have one thing without the other,” said Lexi Novitske, senior partner at Norrsken22, an investor at TymeBank, to TechCrunch. “Many tech companies have to create customer acquisition and engagement through analog or dynamic efforts.”

Most informal markets require a mixed strategy

Their strategies distinguish challenger banks in the US from other developed markets. Revolut, Monzo, and Chime work as their names suggest: digital. Even some platforms in emerging markets, such as Nubank and JPMorgan C6 in Brazil or small businesses like Open it in India, they have focused on digital strategies only to create regional leaders.

But the digital trend is not good for Africa. There are exceptions—such as Valar-backed fintech Kuda—but there is a cap on the number of customers such a platform can reach. Therefore, as Stephen Deng, co-founder of DFS Lab, an African-based entrepreneur, says, they will enter the home (household).

On top of this, it’s an area where money is king, internet connections can be unreliable, and trust in internet systems remains low. Cash is still the largest form of payment in all of Africa, accounting for over 90% of all transactions, according to McKinsey report. Meanwhile, GSMA it is estimated that 43% of Sub-Saharan Africa has internet access.

Tymebank and Moniepoint have created a centralized solution that thrives on meeting retail and business customers wherever they are. TymeBank currently claims 15 million people in South Africa and the Philippines, while Moniepoint claims more than 10 million people and businesses use its services. (Black, a total of $500 millionit’s not far off, though, with about 7 million users.)

“When the business income is high you can pay people to take your digital products only, but there is not enough revenue per user (ARPU) to justify the cost in the long term,” said Deng. “Moniepoint, Tyme, and others have seen that you need to create touchpoints that connect with the mass market while being able to push your technology through those channels. We call this ‘cybernetic‘ approach because it supports informal processes – often in person – and technology but without falling into the costly trap of trying to properly code those channels.”

Examples related to the maturity of banking markets

One of TymeBank’s biggest achievements is partnering with supermarkets such as Pick n Pay and Boxer to expand their reach in South Africa. These stores act as virtual branches: TymeBank uses kiosks and ambassadors in these stores to help new customers open accounts and make deposits, adding a personal element to its experience for those who prefer face-to-face interaction.

It is a model that works because it recognizes and changes the way most African consumers interact with financial services. Walking into a grocery store and leaving with a new bank account feels natural to most people.

TymeBank has over 1,000 kiosks and 15,000 points of sale across South Africa. Meanwhile, its sister company, GoTyme – a joint venture between Tyme Group’s parent company and Gokongwei Group, which was launched in 2022 – will adopt the same strategy and has about 500 kiosks and 1,500 bank ambassadors in the Philippines.

In Nigeria, QED-backed Moniepoint has taken a slightly different approach, building a large global network of agents. About 200,000 of these agents are small business owners who have point-of-sale (POS) devices and act as public ATMs, enabling deposits, withdrawals, and bill payments. The system represents a model that has successfully driven mobile money in Africa, pioneered by Safaricom M-Pesa in Kenya.

Distributing its services through agents bridges the gap between rural and urban communities by providing financial services in areas where traditional banks, banks or ATMs, do not exist or are trusted (The World Bank estimates only 16.15 ATMs per 100,000 adults in Nigeria as of 2022.)

Likewise, countries like Nigeria are thriving on what is called ‘luckily‘ trade – beyond taxes and other authorities – which creates approx 60% of its GDP. In addition to the increasing number of unbanked consumers and businesses, a model that has physical properties is more important than innovation.

Both companies now offer retail and business banking and have used the hybrid model as a foundation to add other services, such as loans, working loans, business management tools, accounting and bookkeeping, and insurance.

Following their recent unicorn tours, they are both looking to take their designs beyond their home markets, where they claim to be profitable. For Tyme Group, which recently announced a $250 million Series D led by Nubank at a cost of $1.5 billionexpansion work in Vietnam and Indonesia is already underway. Like Africa, developing countries in Asia show a mixture of digital adoption and internet dependence. If so, GoTyme’s growth strategy makes the move worthwhile.

After earned $110 millionMoniepoint will seek to expand its operations in Nigeria and expand into other African markets, such as Kenya. It can also target these markets through acquisitions, which can lead to regional integration strategies.

Appearance outside of fintech

In all of this, perhaps the most important part of the hybrid model is the one that strengthens African fintech, as TymeBank and Moniepoint are not the first fintechs to put the brand on the path to unicorn.

And this is going on their level. Africa’s first multi-billion-dollar fintech group, including Interswitch and Flutterwave, provided cash flow and payment solutions to local and international merchants across the region. The next fintech unicorns, including Softbank-backed OPayMade up of lines WaveChimera Investments-backed MNT-Halanboth provide financial services to millions of customers across Africa using a combination of digital and real-time solutions.

Fintech is the most successful startup group at the moment, accounting for eight out of nine startups worth more than $1 billion in the region. As it continues to attract the attention of businesses in this country and around the world, this type of model can serve as a blueprint and the best bet to get some kind of profit and, at the same time, drive revenue.

However, at the same time, there is great potential to use the hybrid model in the fintech industry, especially in non-African markets. For example, telemedicine – an industry that relies heavily on mutual trust – can improve the environment for people in the airport while managing operations using digital platforms, according to Novitske. E-commerce is group insurance and other industries that he mentions.

“We think the best startups in Africa will use a hybrid approach,” Deng said. “The interface between digital and physical is often where new things happen because integrating informal markets requires a physical touch. In B2B markets, purchases are often informal. In border payments, including stablecoins, domestic payments are often informal. In ‘local stores, payment and delivery are often irregular.’