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Africa’s tech ecosystem has gained increased attention along with South Africa TymeBank and Nigeria Moniepoint has both raised more than $1 billion in valuations in recent weeks and joined the coveted pantheon of unicorns.
However, these assessments do not only reflect the confidence of investors. They show success in taking disruptive fintech models originally designed for mature economies and scaling them to work in a region where nearly half the population remains unbanked.
The main objective of both companies was to simplify banking for individuals and companies in Africa’s two largest economies.
TymeBank started by offering low-cost bank accounts and savings products to retail customers before moving into business banking, providing working capital to small businesses in South Africa.
Meanwhile, Moniepoint started supporting small businesses in Nigeria with accounts, payments, loans and spending tools and recently expanded into retail banking.
Importantly, both fintechs take a hybrid approach to banking, combining the convenience of digital banking with real-world physical touchpoints.
“In Africa, it’s a catch-22: you can’t have one thing without the other,” Lexi Novitske, senior partner at Norrsken22, a TymeBank investor, told TechCrunch. “Many tech companies have to build customer acquisition and engagement through highly analog or physical efforts.”
Highly informal markets require a mixed approach
Their strategy contrasts with rival banks in the US and other developed markets. Revolut, Monzo and Chime work as their names suggest: digitally. Even some platforms in emerging markets, e.g Nubank and JPMorgan’s C6 In Brazil or as a small business Open They focused exclusively on digital channels to create regional category leaders in India.
But a purely digital approach is not ideal in Africa. There are exceptions, such as Valar-backed fintech Kuda, but there is a limit to the number of customers such a platform can reach. So, as Stephen Deng, co-founder of DFS Labs, an Africa-focused early-stage investor, says, they will hit (domestic) revenue ceilings.
Plus, it’s a region where cash is king, internet connectivity can be unreliable, and trust in online-only systems is low. Cash remains the most dominant payment method in Africa, accounting for over 90% of all transactions. McKinsey report. Meanwhile, GSMA 43% of Africa has internet access.
Tymebank and Moniepoint have developed a thriving middle ground to meet retail and business customers where they are. TymeBank currently claims 15 million users in South Africa and the Philippines, while Moniepoint says more than 10 million people and businesses use its services. (God, It is valued at 500 million dollars(It’s not far off with about 7 million users.)
“When there’s plenty of venture capital, you can pay people just to adopt your digital product, but there’s not enough average revenue per user (ARPU) there to justify the long-term costs,” he said. “Moniepoint, Tyme and others have realized that you need to create physical touch points that connect to the mass market while maintaining the ability to push your technology through those interfaces. We do thiscybernetic‘ approach because it enhances informal – often in-person – channels with technology, while not falling into the costly trap of trying to fully digitize those channels.
Models adapted to the maturity of banking markets
One of the key things TymeBank has done to scale is to form retail partnerships with supermarkets such as Pick n Pay and Boxer to expand its reach in South Africa. These retail outlets act as quasi-branches: TymeBank uses in-store kiosks and ambassadors to help new customers open accounts and make deposits, adding a human element to its operations for those who prefer face-to-face interaction.
It’s a model that works because it recognizes and adapts to how the average African consumer interacts with financial services. Going to the supermarket to buy groceries and leaving with a new bank account is natural for many people.
TymeBank has more than 1,000 kiosks and 15,000 retail outlets in South Africa. Meanwhile, its sister company GoTyme – a joint venture between parent company Tyme Group and local conglomerate Gokongwei Group, set to launch 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 took a slightly different approach by establishing a wide network of agents across the country. About 200,000 of these agents are small business owners equipped with point-of-sale (POS) devices that act as human ATMs, enabling cash deposits, withdrawals and payments. The system mirrors the model that led to mobile money success in Africa, pioneered by Safaricom’s M-Pesa in Kenya.
Decentralizing operations through agents bridges the gap between urban and rural populations by providing financial services in areas where traditional banking infrastructure, banks or ATMs do not exist or are unreliable (the World Bank estimates that by 2022 Nigeria will have only 16.15 ATMs per 100,000 adults guesses that.)
Similarly, countries like Nigeria are supposedly developing.informal‘ trade – outside the jurisdiction of tax collectors and other authorities – constitutes approx It is 60% of the GDP. Combine this with the large number of unbanked consumers and businesses, and a model with physical elements is more of a necessity than an innovation.
Both companies now provide retail and business banking and have used the hybrid model as a basis for adding other services such as credit, working capital loans, business management tools, accounting and bookkeeping and insurance.
After their recent unicorn rounds, both will be looking to replicate their designs outside of their home markets, where they claim to have reached profitability. Recently for Tyme Group Announced a $250 million Series D round led by Nubank at $1.5 billionExpansion into Vietnam and Indonesia is already underway. Like Africa, Asia’s emerging economies present a mix of digital adoption and offline dependence. If anything, GoTyme’s current development trajectory makes this move the logical next step.
after attracted 110 million dollarsMoniepoint will look to deepen its operations in Nigeria and expand into other African markets such as Kenya. It could also explore these markets through acquisitions, which would lead to further regional consolidation.
Outlook beyond fintech
In all of this, perhaps the most attractive part of the hybrid model is what it empowers for African fintech, as TymeBank and Moniepoint are not the first fintechs to adopt the unicorn model.
And this is reflected in their scale. The first set of billion-dollar African fintechs, including Interswitch and Flutterwave, have introduced infrastructure and payment solutions for local and global merchants across the continent. The latter is backed by fintech unicorns, including Softbank OpaiStriped backing WaveBacked by Chimera Investments MNT-Halanall providing financial services to tens of millions of customers across Africa using a mix of digital applications and real-world touchpoints.
Fintech is arguably the most successful startup category, currently accounting for eight of the 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 can serve as a blueprint and best bet for achieving venture-style returns while increasing financial inclusion.
However, at the same time, there is significant potential to apply the hybrid model to industries outside of fintech, particularly in Africa’s informal markets. For example, telemedicine—an industry heavily dependent on trust—can use local, personal touchpoints while streamlining transactions through digital platforms, according to Novitske. E-commerce and group insurance models are other industries he cites.
“We think the most successful startups in Africa will adopt a hybrid approach,” Deng said. “The interface between the digital and the physical is often where innovation happens, as connecting informal markets requires physical touchpoints. Procurement in B2B markets is often informal. In cross-border payments, including with stablecoins, domestic payments are often informal. “Payment and delivery are often informal in local retail.”
