Africa’s newest fintech startups are winning by keeping their feet on the ground
Africa’s tech ecosystem has gotten a boost of attention, especially in South Africa TymeBank And Nigeria Moneypoint Both have raised money in recent weeks at valuations in excess of $1 billion and joining the coveted unicorn group.
But these valuations don’t just reflect investor confidence. It points to its success in taking revolutionary fintech models originally developed for mature economies, and scaling them up by designing them to work in a region where nearly half the population remains unbanked.
The primary goal of both companies was to simplify banking services for individuals and businesses in two of Africa’s largest economies.
TymeBank began by offering low-cost bank accounts and savings products to retail customers before expanding into commercial banking, providing working capital to small businesses in South Africa.
Meanwhile, Moniepoint began its operation in Nigeria by supporting small businesses with accounts, payments, loans and expense tools, and has recently expanded into retail banking.
Importantly, both fintech companies take a hybrid approach to banking, blending the convenience of digital banking with real-world physical touchpoints.
“In Africa, it’s a dilemma: you can’t have one thing without the other,” Lexi Nowitzki, general partner at Norrsken22, an investor in TymeBank, told TechCrunch. “Many technology companies must build customer acquisition and engagement through very analog or physical efforts.”
Informal markets largely require a mixed approach
Their strategy contrasts with rival banks in the United States and other developed markets. Revolut, Monzo, and Chime work as their names indicate: digitally. Even some platforms in emerging markets, e.g Nubank and JPMorgan C6 In Brazil or small companies such as Opens In India, we focused on digital-only channels to build regional category leaders.
But a purely digital approach is not ideal in 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. Hence, says Stephen Deng, co-founder of DFS Lab, an early-stage investor focused on Africa, you will face (domestic) revenue caps.
Furthermore, it is an area where cash is king, internet connectivity can be unreliable, and trust in purely online systems remains low. Cash remains the most popular means of payment across Africa, accounting for more than 90% of all transactions, according to a McKinsey report. Meanwhile, GSMA He says 43% of people in sub-Saharan Africa have access to the Internet.
Tymebank and Moneypoint have forged a middle path that thrives by meeting retail and corporate customers where they are. TymeBank currently claims to have 15 million users across South Africa and the Philippines, while Moniepoint says more than 10 million people and businesses use its services. (coda, Worth 500 million dollars(Not far behind, with about 7 million users.)
“When venture capital was plentiful, you could pay people to just adopt your digital product, but there wasn’t enough average revenue per user (ARPU) to justify the costs in the long term,” Ding said. “Moniepoint, Tyme and others have discovered that you need to create physical touchpoints that interact with the mass market while maintaining the ability to push your technology through those interfaces. We call this”com. cybernetic“Because it leverages informal – often personal – channels using technology while not falling into the costly trap of trying to fully digitize those channels.”
Models tailored to the maturity of banking markets
One of the key things TymeBank has done to expand is establishing retail partnerships with supermarkets such as Pick n Pay and Boxer to expand its reach in South Africa. These retail touchpoints act as quasi-branches: TymeBank uses kiosks and ambassadors in these stores to help new customers open accounts and deposit money, adding a human element to its operations for those who prefer face-to-face interactions.
It is a successful model because it recognizes and adapts to how the average African consumer interacts with financial services. Walking into the supermarket to buy groceries and walking out with a new bank account is normal for many people.
TymeBank has over 1,000 kiosks and 15,000 retail points of sale across South Africa. Meanwhile, its sister company, GoTyme — a joint venture between parent Tyme Group and local conglomerate Gokongwei Group, launched in 2022 — is adopting the same strategy and has nearly 500 kiosks and 1,500 bank ambassadors in the Philippines.
In Nigeria, QED-backed Moniepoint has taken a slightly different approach, building an extensive network of agents nationwide. About 200,000 of these agents are small business owners equipped with point-of-sale (POS) devices and acting as human ATMs, enabling cash deposits, withdrawals and bill payments. The system mirrors the model that has driven the success of mobile money in Africa, and which Safaricom’s M-Pesa pioneered in Kenya.
Decentralizing its operations through agents, it bridges the gap between urban and rural populations by providing financial services in areas where traditional banking infrastructure, bank or ATM, is non-existent or unreliable (the World Bank estimates that there are 16.15 ATMs Only one machine per 100,000 adults in Nigeria as of 2022.)
Likewise, countries like Nigeria thrive on what is called “informalTrade – outside the scope of tax collection and other authorities – which constitutes approx 60% of GDP. Combine this with the large number of unbanked consumers and businesses, a model with physical elements is more of a necessity than an innovation.
Both companies now offer consumer and business banking services, and have used the hybrid model as a basis for adding other services, such as credit, working capital loans, business management tools, accounting, bookkeeping and insurance.
After their recent forays into the unicorn space, both will look to replicate their designs outside their home markets, where they claim to have reached profitability. For Tyme Group, which recently It announced a $250 million Series D led by Nubank at a $1.5 billion valuationExpansion into Vietnam and Indonesia is already underway. As in Africa, emerging economies in Asia offer a mix of digital and internet adoption. If anything, GoTyme’s current growth trajectory makes this a logical next step.
after Raised $110 millionMoniepoint will seek to deepen its operations in Nigeria and expand into other African markets, such as Kenya. It may also explore these markets through acquisitions, which would pave the way for further regional consolidation.
Outlook beyond fintech
In all of this, perhaps the most compelling part of the hybrid model is what it leverages for African fintechs, as TymeBank and Moneypoint are not the first fintechs to deploy the model on their way to unicorn status.
This is happening on their scale. The first group of billion-dollar African fintech companies, including Interswitch and Flutterwave, have provided infrastructure and payment solutions to local and global merchants across the continent. Subsequent fintech companies, including those backed by SoftBank Opaisupported by tape wavebacked by Chimera Investments MNT-two casesall providing financial services to tens of millions of customers across Africa using a combination of digital applications and brick-and-mortar touchpoints.
Fintech is arguably the most successful category of startups at the moment, accounting for eight out of nine startups valued at more than $1 billion in the region. As it continues to attract more investor interest locally and globally, such a model could serve as a blueprint and the best bet for achieving project returns and, at the same time, promoting financial inclusion.
However, at the same time, there is great potential for the hybrid model to be applied in industries beyond fintech, especially in informal markets in Africa. For example, telemedicine — an industry that relies heavily on trust — can leverage local and personal touchpoints to receive patients while streamlining processes through digital platforms, according to Novitzk. E-commerce models and group insurance are other industries she cites.
“We believe that most successful startups in Africa will master the hybrid approach,” Deng commented. “The interface between digital and physical is often where innovation happens because the aggregation of informal markets requires physical touchpoints. In B2B markets, purchasing is often informal. In cross-border payments, including stablecoins, Local payments are informal and in local retail, payment and delivery are often informal.
