Apparently, becoming a billion-dollar tech startup built in Africa by Africans is a milestone of mammoth proportions, but not the destination. If anything, such a huge achievement is more like the starting point for the next billion dollars, and the next one after that. At least, this is true for Africa’s newest unicorn, Flutterwave.
Barring the deserved fanfare that followed the announcement of the deal on March 10, it appears work has been cranked up at Flutterwave since that USD 170 Mn Series C valued the startup at around USD 1 Bn.
And what’s Flutterwave’s latest endeavour? It appears to be something that’s flown under the radar for so long, even before that much-talked-about recent tie-in with PayPal.
Just days after the startup reached that unicorn landmark, Flutterwave revealed a partnership with PayPal which many are calling a gamechanger.
It’s a new feature on Flutterwave that finally allows PayPal customers all over the world to make direct payments to people in many African countries; including those that live in countries that have historically been blocked from receiving funds via PayPal.
And barely three days after that equally momentous announcement, Flutterwave’s Co-founder/CEO, Olugbenga “GB” Agboola appeared in Nairobi, Kenya. There, he met with Sitoyo Lopokoiyit, who is Interim CEO at M-Pesa Africa, which oversees one of the world’s most successful mobile money/fintech platforms, M-Pesa.
“At Flutterwave, we always say payments is partnerships,” GB tweeted around lunchtime on March 19.
@theflutterwave we always say payments is partnerships! Glad to have had a chat with @sitoyo, CEO of mPESA Africa.
Excited to see the continued growth of mPESA, and their plans to scale, and deepen our relationship across Africa. pic.twitter.com/0FnVSnj4cB— GB ? (@TechProd_Arch) March 19, 2021
On his part, Sitoyo shared on LinkedIn that he had a “fantastic meeting with GB discussing areas of mutual interest as well as how can[sic] we support African fintech companies.”
So now, here’s one of the continent’s most prominent fintech startups seemingly hitting it off with a mobile money platform run by the large corporate, Safaricom; which quite a number of Kenyan fintechs seem to have a love-hate relationship with.
How it started
In line with its overarching vision of creating one big, interconnected payments ecosystem that covers every part of Africa, Flutterwave first extended its services to Kenya in 2016, processing cards denominated in Kenyan Shillings and US Dollars, with support for M-Pesa payments.
Thus, Flutterwave clients are able to send and receive money into any bank account (in Kenya) using Visa, Mastercard, and M-Pesa.
Since then, the feature has expanded to include other East African countries, such that customers and clients in Kenya, Uganda, Rwanda, and Tanzania – as well as those in countries in other regions such as Zambia and Ghana – can make or collect payments by means of mobile money services, such as M-Pesa, integrated on the Flutterwave platform.
After Flutterwave announced a similar integration with PayPal recently, the CEO of the Nigeria- and US-based fintech startup showed up in Kenya to meet with the M-Pesa Africa Chief, and there’s a bit of curiosity around what Flutterwave may be planning next with M-Pesa.
“M-Pesa is an important part of our plans to simplify payments for endless possibilities in East Africa and indeed, Africa,” GB tells WeeTracker.
“It is already very popular in the region and we’re glad to have the solution available on Flutterwave. We’ve found that it truly makes online payment easier for customers. Presently, businesses and individuals use M-Pesa on Flutterwave for collections and payouts in Kenya.”
How it’s going
Since Vodafone sold its stake in the business in April 2020, M-Pesa is now co-owned by Kenya’s largest telco, Safaricom, and South Africa’s leading telco by subscriber base, Vodacom.
Launched in 2007, M-Pesa is Africa’s largest mobile money platform with more than 40 million users in several African countries including Kenya, Rwanda, Uganda, and Tanzania. The service has also reached Ghana, Egypt, Democratic Republic of Congo, Mozambique, and Lesotho, at various points.
Although GB remains coy on the subject, there’s reason to believe Flutterwave is looking to integrate and rollout the M-Pesa-type payment feature across all the markets where M-Pesa or its sister mobile money platforms are a dominant payment channel.
Currently, making payments with M-Pesa or some other mobile money service on Flutterwave is only available to customers in Kenya, Uganda, Rwanda, Tanzania, Ghana, and Zambia, per a post on the company’s website.
Specifically, at the moment, M-Pesa as a payment method is only available when the currency of the merchant (recipient of the funds) is set as the Kenyan Shilling (KES). And the words of the Flutterwave CEO hint at a possible expansion of the service to include some other countries where mobile money is thriving.
“The nature of our integration makes payments easier for our merchants and their customers, by simplifying details required to make or receive payments. We are always working to improve our products and the payment experience, so we’re excited to make it available in other countries where it’s available gradually,” GB reveals.
Why it matters
By holding pole position as the dominant mobile network operator in Kenya, Safaricom is the most valuable company in East Africa. But that may be exactly why it often goes unnoticed that Safaricom may be just as big a telco as it is a fintech.
Safaricom is the home of M-Pesa, which is essentially a fintech organisation run by the telco. In Kenya, M-Pesa is especially dominant – not only does it control up to 98 percent of the country’s mobile money market share, but it also has interests in virtually every fintech segment in the country. M-Pesa rakes in millions of dollars for the telco annually.
Whether it’s micro-lending, savings, overdraft facilities, insurance, micro-investments, or cross-border remittances, Safaricom is involved in some way with its deeply-entrenched M-Pesa service providing the ultimate rails for financial institutions to build and roll out their offerings.
In fact, there have been repeated calls in the distant and recent past for Kenyan regulators to look into splitting up Safaricom into two separate telco and fintech entities, citing that its near-monopoly on both fronts had given it too much power.
Apart from competing telcos like Airtel Kenya which has time and again complained of being stifled by Safaricom, there are scores of much-smaller, new age fintechs in Kenya who recognise the telco as a boom and bane for their business at the same time.
In fact, a top official at a Kenyan lending startup who didn’t want to be identified mentioned to WeeTracker last year that some “Safaricom products are usually touted as being in direct competition with fintechs.”
Simply put, Safaricom comes off as a collaborator and competitor to fintech startups at the same time.
That’s because many Kenyan fintechs have to rely on Safaricom’s M-Pesa infrastructure to distribute their products and services, and at the same time, those fintechs are threatened by Safaricom which also props up identical products and services for large commercial banks under special revenue share agreements.
Apparently, across the East African region, it’s not an uncommon practice for large corporates to play gatekeeper, to compel a swath of fintechs building on their platforms to directly and exclusively integrate to them – stifling fintech innovation in the process. Flutterwave co-founder, Iyinoluwa Aboyeji, who is currently the CEO of Future Africa, shared his thoughts on this recently.
We need to have a serious conversation about how large private corporations are stifling Fintech innovation in east Africa.
— E (@iaboyeji) March 25, 2021
However, there are signs that large corporations like Safaricom, in particular, which has long been considered the dream and nightmare of Kenyan fintech startups, may finally be coming around. And collaborations like the one between M-Pesa and Flutterwave seem to indicate that.
“When M-Pesa took centre stage in accelerating Kenya’s future in digital payments, Safaricom seems to have shifted from being a cannibal to supporting the ecosystem in order to build other solutions on top of M-Pesa,” Bernard Bernard Momanyi Nyagaka, co-founder/CEO of Onesha Technologies Ltd, had mentioned previously.
Similarly, Ali Hussein Kassim, co-founder/CEO of Kipochi and Kenyan fintech industry expert who also sits on an oversight board said, had told WeeTracker last year that even though Safaricom can “be a bit abrasive sometimes” in how it deals with the [fintech] industry, there has been a significant shift in the company’s strategy that speaks to greater collaboration.
“To be honest, we have seen a marked improvement in their relationship with the fintech ecosystem in the recent past. This can obviously be improved, like any other product and relationship. They are the first mobile money operator to provide an easy-to-use API Platform called Daraja,” Kassim had noted.
What to expect between Safaricom (or other large private corporations) and fintech startups from here on out? Probably somewhere between a little and a lot, or either of those.
