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If you walked up to any African fintech founder and asked them, "What are the things you wish you knew before you started building your product?" you’d hear stories for days. 

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But it all boils down to one truth: building a fintech in Africa is not for the faint of heart. It's like playing whack-a-mole. As you solve one problem, another one pops up. 

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This guide is a quick and dirty guide on how to build and launch a fintech company in Africa.

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It’ll help you answer key questions like: what types of licences do you need?  What should your engineering stack look like? What regulations should you be paying attention to? How do you minimise fraud? How do you acquire your first 100 users? 

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Whether you're a founder or an operator in the fintech industry, this blog post is for you.

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Opportunities in fintech in Africa 

People say the fintech space in Africa is oversaturated. But we don’t think so. 

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350 million people still struggle to access simple financial solutions across Africa. While financial inclusion is somewhat of a buzzword in fintech, it is still a big concern in Africa. As long as the financial inclusion gap exists, there’ll always be an opportunity to build a fintech product.

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Cash is still the preferred payment method for 90% of transactions in Africa. This is a substantial gap that payment companies can fill because cash transactions are inefficient, inconvenient, and generally not secure for businesses.

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Moreso, VCs love investing in fintechs. In 2022, African fintechs raised over $1.4 billion. While that number slightly dipped in 2023, there are indications that more funding will flood the fintech space in 2024. 

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For example, Norrsken22, a pan-African venture capital firm, wants to invest in African growth-stage fintechs in 2024 after closing a $205 million round. Other indicators include Mastercard’s $200 million stake acquisition in MTN’s mobile money product.

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With all these signals, it makes sense that significant growth is expected in the fintech category. Boston Consulting Group projects the African fintech market will reach $65bn in revenue by 2030. This is a tremendous growth opportunity, making now the best time to build a fintech product in Africa. 

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The market is there, and the funding is there.

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Fintech opportunities in Africa

According to our experts, Adetola Onayemi, Bukola Gentry and Oluwasegun Adeleye, these are some of the fintech segments you can build in:

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• B2B Payments: Products that help businesses embed finance into their product and accept payments from other businesses and their customers. To understand how big of a problem payment is, check out this post by Caleb Maru.
• Wealth creation and wealth building: Solutions for savings, investments, financial planning, micro-investing and personalised finance tools for children.
• Infrastructure: These are products other startups and businesses can use to build their own solutions. They could be for security, API integrations, data management, cross-border payments, etc. 
• Escrow services: Solutions that help buyers and sellers reduce the risk of transacting by smooth exchange of goods and services.
• Financial inclusion: Build simple financial solutions to help bank the unbanked population across Africa. 

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Challenges to building a fintech in Africa and how to navigate them

1. Regulatory requirements

Regulatory bodies can impose requirements that are difficult for early-stage startups to meet. Capital requirements and licensing fees are examples of such requirements. 

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For instance, Safaricom paid as much as $150 million to get a mobile money licence in Ethiopia. This can be a huge limitation for players starting with limited resources.

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To get licences very quickly in some countries, regulators sometimes require you to register your fintech in those markets. And sometimes, to satisfy regulatory requirements, there are cases where 50% of your ownership must be residents of the country. -Adetola Onayemi, CEO, Norebase

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Regulations sometimes require major changes to your company’s management structure. 

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For example, foreign founders establishing a digital lending company in Rwanda must appoint a resident director. This director needs to be a Rwandan citizen or a foreigner with a valid resident or work permit. 

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If you plan to build or expand to other African countries, factor in such requirements.

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2. Overlapping regulatory bodies

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So there are times when I've had to deal with some fintechs, and they'll say things like, I don't know who my regulator is. I don't know if it's the Central Bank, the Security Exchange Commission, state authority, or consumer protection; it's just unclear. -Adetola Onayemi, CEO, Norebase 

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In some cases, your fintech solution might not fall under the jurisdiction of a specific regulatory body. This ambiguity makes it difficult to know which regulator to approach.

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Adetola articulates this so powerfully, so we’ll allow him to pick up the explanation of this idea. 

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“Most fintechs are pushing the boundaries of what's possible. Several times, those things you're trying to do are sometimes not already captured within established regulated bodies. So, it becomes a question of who I have to report to.

It is crucial to invest in understanding the regulation, which means investing in understanding the layout on the ground, the regulatory frameworks, what works, what does not work, what has failed, what others have tried to do, and why it didn’t work.”

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But regulations are not trying to stifle innovation. 

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While the easy thing to do might be to avoid regulatory oversight, it’s best to engage regulators proactively.

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This was the strategy OKHi used very early on. 

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Bukola Gentry, Senior Business Development Lead  (OKHi) explains;

“Sometimes, startups have it at the back of their mind that regulators are trying to stifle them.

But most of the time, it's not like that. So, the situation with us at OKHi was that we engaged the Central Bank of Nigeria and let them understand what we wanted to do. And funny enough, it was super exciting. When we arrived, they called all the top people to come and listen to our presentation. They were wowed, and they told us that our solution could be big and that all we needed to do was engage this set of regulators. This was very important for us because the blockers for us before engaging the regulator were all the businesses we were pitching to. They needed us to get the regulator's backing before they could subscribe to our service.”

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By engaging regulators early, you can get them to recognise your product category and clarify which regulatory body you need to work with.

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3. Monopolies and dominant players 

Monopolies can be a big problem for new players, especially if you’re competing in specific segments. To compete, you must understand how the pre-existing players established their dominance.

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Companies gain monopolies in different ways—some by first-mover advantage and others by heavy backing from governments and regulators. 

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One big challenge is existing monopolies. There have been cases where only one company has the license to do something in a particular country and refuses to innovate. Collaboration with such companies can be difficult. -Adetola Onayemi, CEO, Norebase 

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Understanding how existing players established dominance will help you decide whether to pivot to another product or map out a strategy for operating and competing with the dominant players. Also, in some cases, collaboration with established players might be an option. Payment is partnerships, after all. 

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4. Infrastructure and lack of technical knowledge

Fintech companies are sensitive because they deal with your customer’s funds and data. So, it’s important to have a stable infrastructure that minimises fraud. 

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You need people with years of technical knowledge to build an excellent infrastructure. This can be expensive if you’re just starting. 

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We have a tonne of highly skilled talent in Nigeria. The only issue right now is that people have increased their expectations of their paychecks. If you find the right talent and you’re willing to pay for it, that's great. But quite a number of people promise they can deliver on the job but ultimately don't. So try to have a mix of different talents in your organisation. Most startups want to start lean. Starting lean helps you manage your expenses, but you should always have a backup plan in case you lose the good talents you have.

By having that backup at every point in time, you ensure your business remains a going concern, and nothing will significantly stifle your operation. -Bukola Gentry, Senior Business Development Lead  (OKHi)

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5. Getting your base right

Technology is the foundation of any successful fintech company. 

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It’s a crucial element that determines functionality and user experience. But it’s always best to think about technology as a means to an end, not the end itself. 

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“I think the most important thing that every founder needs to understand is that you’re in this to solve problems. So, don't be too attached to your technology that it becomes your primary focus. Instead, focus on solving problems and not building a set of features. For us at Kora, that's our philosophy. Doing the same will help you put things in context and understand how best to deliver your solution to your users. ‍- Oluwasegun Adeleye, CTO, Kora. 

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Conclusion

This blogpost is an excerpt of our ebook on how to build and launch a fintech in Africa. Download the ebook to get the full insights here. 

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At Kora, our goal is to connect Africa to the world and connect the world to Africa via payments. For startups and businesses working in Africa, we provide All The Support You Need ™️ to start, scale and thrive on the continent. Sign up to see all the ways you can thrive with Kora.