The Africa SMME Tech Report

Issue No. 2. AME small business tech news for 18 April 2021. This edition features Stripe, Paystack, Appzone, Huawei, MTN, Airtel, MondiaPay, Zapper, and more...

Stripe’s UAE Entry Begs the Question ‘Where Next?’

Stripe enters UAE with its eyes on the rest of MENA

The privately held American digital payments company Stripe, which entered the African market last October through its estimated $200 million acquisition of Nigeria’s Paystack (after being an investor in the company), is now heading to the UAE. 

Stripe recently announced it will establish a presence in Dubai as the first step in expansion to the Middle East and North Africa. 

From Stripe’s EMEA Business Lead Matt Henderson.

“The UAE is a thriving hub for technology, supported by strong investor appetite, internet-savvy consumers, and an open, innovative ecosystem of business leaders and entrepreneurs. Similarly, the pool of tech talent in the Middle East is growing very rapidly.”

Yet, there are problems left to solve, Henderson said. 

“Companies still face challenges when trying to accept payments, make payouts, and manage the financial side of internet businesses. Stripe removes these complexities so businesses can focus on what makes them special. Our launch today also means we can now connect our global user base to the Gulf, enabling them to seamlessly expand their operations in the region.”

Stripe is well-resourced for expansion. In March the company announced a fresh $600 million funding round on a gaudy $95 billion valuation. 

But considering its acquisition of Paystack, we wonder what geographic boundaries will Stripe impose between itself and its acquisition? When Stripe made the acquisition last year it pledged to allow Paystack to continue operating as an independent business. And it seems unlikely that Stripe would directly compete with a company it owns.

Paystack -- once referred to as the “Stripe of Africa” -- currently serves more than 60,000 customers in Africa, ranging from SMMEs to enterprises. MTN is one of its better-known partners. 

Stripe conquering the Middle East and North Africa while Paystack attacks Subsaharan Africa would seem to make sense.

The aspirations of rivals 

Stripe’s move into the UAE also begs a quick recap of what some of its leading global rivals are up to in the region. 

Adyen. Before Stripe planted its feet in Dubai, its Netherlands-based rival Adyen was already buying furniture for its planned presence in the UAE. Adyen, a global player processing POS and online transactions, plans to use Dubai as a launchpad for operations throughout the Gulf.

PayPal. Until recently, PayPal was difficult to use in Africa. In many cases, it was possible to send money via PayPal, but difficult to impossible to receive money from the platform. Now, thanks to an integration with Flutterwave, Africans can both send and receive payments in Africa via PayPal. This has opened up PayPal’s 377 million global merchant network to African merchants, freelancers, SMMEs, and solopreneurs.

In 2019, PayPal did establish a presence on the continent via its money transfer subsidiary Xoom, which it acquired in 2015. Xoom, via partnerships with Ria Money Transfer and African banks, allows people to send money online to 150,000 withdrawal points in Africa or to transfer funds directly to bank accounts.

Square. This company founded by Twitter CEO Jack Dorsey pioneered the democratization of the physical with its device that allowed farmers’ market stands and food trucks to accept credit card payments. Its influence on Africa is clear. It’s hard to see a Yoco or iKhohka existing without Square. 

So far, Square has stayed clear of Africa. Yet Dorsey is famously interested in the continent. Jack’s other company Twitter, just planted its feet in Ghana as the first step in a planned Africa rollout. This doesn’t necessarily signal Square will follow. These are after all two different companies that just happened to share a CEO.

Square’s most recent international foray was to open an office in Ireland.

We suspect if Square does land in Africa it will be with a duffel bag full of cash to acquire an existing fintech, a la its rival Stripe. 


MTN Puts $5 Billion Valuation on Mobile Money Unit

African mobile money operators have made moves recently that shed much-needed light on just how much these operations are worth. This has been a challenge in part because many of the biggest mobile money operations are nested within larger organizations.

A case in point is South African mobile carrier MTN plans to value its mobile money unit at $5 billion. The valuation comes as part of a plan to either sell or list a portion of the mobile money unit, according to PYMNTS.com. The idea is to capitalize on foreign investors’ hunger for fintech assets.

MTN’s company’s mobile money operation has more than 46 million users.

This move follows rival Airtel Africa’s $200 million investments in its momo arm Airtel Money from TPG’s Rise Find and subsequent $100 million investment from Mastercard. These investments were at a reported $2.65 billion valuation.

The GSMA’s Max Cuvellier posted the above graphic on LinkedIn. It makes the case that Africa’s mobile money players, now that their valuations are made public, are the true African fintech “unicorns.”

“Too often, #mobilemoney players only get mentioned in passing, usually to recognise the transformative impact of the industry, focusing on M-PESA in Kenya in particular,” Max wrote on LinkedIn.

”It probably is linked to the fact that until very recently, it was quite hard to get a valuation of these businesses. But things are changing, and fast.”


Nigeria’s Appzone Raises $10 Million

Nigeria-based fintech software startup Appzone has raised $10 million in Series A funding. The company provides software that allows proprietary solutions for banks, payment systems, and other finance-based companies.

The Lagos-based company was founded in 2008 by Obi Emetarom, Emeka Emetarom, and Wale Onawunmi.

“We’re excited not only to be securing a significant capital raise, but also welcoming on board some strategic investors whose support will be key to our growth journey. Today’s news allows us to scale Appzone’s products and services rapidly,” said Co-Founder and CEO Obi Emetarom. “For the last 12 years, we’ve worked in stealth mode, building the really complex infrastructure to power the continent’s growing digital financial services space and forging partnerships with the continent’s biggest financial institutions.”

Emetarom said one priority for using the new capital is hiring the elite talent he says is required to scale the business. Fintech problems are hard problems to solve, and they require “1%” elite talent to do so, he says.

“We are not just trying to bring African fintech on-par with the rest of the world – we exist to make our financial sector the most innovative and technologically advanced on the globe through solutions built for Africa by Africans.”

Appzone currently operates in Nigeria, Ghana, Gambia, DRC (Democratic Republic of Congo), Tanzania, Senegal, and Guinea.

CardinalStone Capital Advisers led the latest round. Also participating were V8 Capital, Lateral Investment Partners, Constant Capital, and Itanna Capital Ventures. This latest round brings Appzone’s total equity capital raised to $15 million.

CardinalStone Capital Advisers co-founder, Yomi Jemibewon, said this about its investment. “Appzone is building a disruptive fintech ecosystem that will be the backbone of Africa’s finance industry with products across payments, infrastructure, and software as a service. The impact of Appzone’s work is multifold — the company’s products deepen financial inclusion across the continent whilst providing best-fit and low-cost solutions to financial institutions. Its emphasis on premium talent also helps stem brain drain, rewarding Africa’s best brains with best in class employment opportunities.”

Appzone says it obtained official approval from the Central Bank of Nigeria in 2018, to operate as a Payment Solution Service Provider (PSSP).

So what, exactly, does Appzone do? From our review of the website, it touts a range of solutions designed to help financial institutions deliver financially inclusive products to African consumers and merchants. And it emphasizes the use of advanced technology to overcome the current physical limitations to delivering these solutions.

One example is Appzone Switch, which it describes as follows.

“AppZone Switch operates a decentralised interbank payment network powered by blockchain and designed to become the payment infrastructure for Africa’s cashless future.”

Another example is its Appzone Lend solution, which the company says is a fully automated process, from loan origination to collecting repayments.

“By removing human effort from the lending process, we are reducing the cost of lending operations hence making loans cheaper and more accessible while improving bank NPL ratios and overall profitability.”

Appzone’s product pages offer fairly high-level descriptions. And each has a line a the bottom of the page that says, “Full page coming soon”. So it seems we still much more to learn about Appzone and its plans for transforming the African financial system.


Huawei, MondiaPay Partner to Expand Contactless Payments

The Chinese mobile technology company, Huawei, has partnered with Mondia Pay, an online payment company to help expand the use of contactless, online payments across Africa.

The partnership, which focuses on Direct Carrier Billing Services, was first announced in September of 2020 and will go live in the current quarter.

When discussing the partnership, Mondia Pay CEO, Simon Rahmann, said this about the partnership.

“We are extremely proud of our continued partnership with Huawei, and the efforts to enable customers across the continent to benefit from Mondia Pay’s fully integrated digital payment technology to make frictionless payments in a fast, safe, and secure manner. We also support the continuous efforts taken towards the transition to cashless societies, which has gained significant traction in the past 12 months.”


The BIG5D Podcast

Episode 14: Brett White, CEO, Zapper

The latest episode of the BIG5D Podcast features an interview with Zapper CEO Brett White, originally recorded at the BigFive Small Business Fintech Summit.

White joined Zapper originally in 2015 as a developer and worked his way up the ranks, becoming CEO in 2019.

Zapper is an innovator in QR-based payments. And much of the discussion centered around recent product innovations from Zapper. We also discuss Africa’s fintech future. Will banks and fintechs co-exist? And what technologies will drive product planning in the near and mid-term.

On banks v fintechs

“There are regulations and there are limitation in terms of what the systems allow for. And the fintechs are always going to push those limits to do exactly those things that are limited…And the reality is a lot of the bigger entities move slower. So they're going to struggle in that space.”

“And I think that they will be a lot of opportunity for fintechs to supplement and work with those bigger entities to provide the capability that they so desire. So I think there will always be a symbiotic sort of relationship there.”

On emerging technologies

“I think long term biometric technologies are going to take over in terms of how people transact and purchase things. In the interim, however, I mean for the next five years, we're in a space where mobile payments are predominant. There's gonna be a lot of innovation around payments instruments themselves in terms of the rails over which people make payments. Things like blockchain, open banking, instant EFT, all those types of solutions are being introduced.”

On cryptocurrency

“What we've seen over the last few months are some schemes starting to produce the ability to at least flirt with the idea of supporting crypto. And some of the banks are talking about it as well. And I think a couple of months ago, that would have been very frowned upon. I don't think that would have been well supported. I think what Elon Musk has done recently with buying a lot of Bitcoin has certainly lit a fire under that.”