Building a Fintech Startup in Africa

Hey Folks,

We are here again with another article. Many founders approach us to understand and navigate the fintech market and how to thrive in this exciting yet complex industry. Due to popular requests, we compiled this article for new entrants and existing players as they embark on their fintech journey.

Over the past few years, the fintech industry has been one of the fastest-growing sectors globally. The sector gained momentum and wider adoption during the pandemic as people realized that individuals and organizations could access financial products and services without requiring physical contact. Furthermore, the pandemic paved the way for innovators across the globe to discover creative solutions for financial inclusion in underserved areas.

Emerging markets like , Africa, LATAM (Latin-America) and Asia-Pacific benefited from the evolution of finance bolstered by technology. The markets experienced financial inclusion gaps due to significant physical and technical infrastructure deficits required to serve the unbanked. According to the World Bank, as of 2021, the banked population was 71% in developing countries. The data shows the resilience and growth of fintech in the global economy. From payment to personal finance, the growth in the sector presented opportunities for firms like Stripe, Square, Klarna, Paystack, Flutterwave, Wave among other fintechs to disrupt financial services.

The fintech industry has long benefited from a funding bias against other industries with huge valuations and increased investments. So far, fintech startups have raised $970.4billion globally since 2010 and $11.5billion in Africa since 2019. The number of fintech startups continues to grow with fears of a possible bubble. Should that be a point of concern? Probably a discussion for another day.

As an entrant in a saturated industry, how should you go about this? We identified five core areas to consider as you embark on your journey into this industry.

1. Identifying your niche:

Fintech is generally broad. As the sector gain traction and momentum, innovators continue to explore untapped niches. To stand out, you first need to identify your niche. For instance, you can choose from payments, remittance, insurance, lending, personal finance, trading, investment, digital banking among others.

Identifying your niche would help you stay focused and build a great product that meets the specific needs of your users. To discover your niche, observe and speak to customers to explore their pain-points and the goals they seek to achieve, what they are willing to pay for and how much they are willing to pay for it. Your niche could be personal finance for the working class, insurance for small businesses etc. This helps you to leverage your limited resources to provide the best product for users.

2. Understanding the regulatory landscape

One mistake founders make is that they go on to build solutions without referencing the regulatory and compliance requirements of their current and the potential markets they intend to explore.

For instance, some regulations guide how financial technology companies operate in Ghana. Companies that fail to meet these initial requirements cease to operate or seek the appropriate licenses. The Central Bank of Ghana under, The Payment Systems and Services Act, 2019 (Act 987), is mandated to regulate fintech activities in Ghana.

To ensure the regulation of the fintech industry, the Central Bank of Ghana established the Fintech and Innovation Office. The regulatory office partnered with notable regtechs like EMTECH to introduce the  Regulatory Sandbox Program for fintech. The Central Bank of Nigeria (CBN) also took similar steps. 

Understanding the regulatory landscape of the industry will help shape your product and give you more credibility to operate, provided you meet all the initial requirements.

3. Know your competition

To stand out in a saturated fintech market, you need to build a strong value proposition and competitive advantage over your competitors. You are entering a space with numerous incumbent financial institutions and fintech in other markets. Understanding your space shapes your product and strategy.

4.Identifying technology stacks to build upon

Understanding what tech stack to adopt and integrations are pre-requisite for building a great fintech product. This is important to ensure that products are more secure, user-friendly, flexible but safe enough to facilitate third-party integrations.

5. Talents

Now that you know what you want to build, it’s time to go out there to source talents. The global talent economy is competitive as big fintech and multi-corps fight for the few available talents. Finding affordable talents can be very difficult especially for well-experienced developers who need to build complex payment systems and gateways for your products.

One might ask, how then do I attract the right talent to my team with minimum or no initial cost? First, treat these guys as investors (they technically are) as they will have to buy into the idea to invest their talents and time into building it. In exchange, you offer an equity stake in your company. How do you source these talents?

●       Reach out to them on LinkedIn

●       Attend tech events

●       Speak to industry professionals for recommendations

●       Also identify young but talented developers with minimum experience to join at the early stages

●       You can scout for talents on platforms like this

6. Bootstrap and Raise

The dynamics of fintech can be interesting. At the very earliest stages, it is advisable for startups to bootstrap their business at least for some time before raising funding. Why? Due to the current global market downturn, VCs are doubling down on valuations and are tightening oversight on the sustainability of fintech models against future market dynamics and a possible bubble. These are investors’ ways of protecting their investments.

After bootstrapping for a while and achieving product-market-fit with sustaining recurring users, you can meet with investors. StartOA partners with fintechs at their very earliest stages to help them navigate their fintech journey and prepare them to become market and investor-ready

To conclude, the fintech industry has the opportunity to provide innovative financial products and services to the unbanked and return on investment for investors. For fintech founders to deliver high-impact driven products, a great understanding of the markets and adequate information coupled with preparation is imperative for their long-term growth and sustainability.

About Start OA

StartOA collaborates with founders across Africa to deliver and deploy high-impact driven solutions for people and businesses on the continent. We achieve this through construct engagements with founders regarding but not limited to, access to capital and strategic partnerships, and market expansion.

The StartOA Accelerator program is a comprehensive launchpad for African founders to scale their businesses through multiple growth pipelines.

We believe that funding is the least of a startup’s problems, when:

●      Customer needs and product market-fit are not taking into consideration

●      The legal and corporate governance structures for growth are unsustainable

●      The sales and distribution strategies for revenue generation are ineffective

●      Founders possess limited knowledge of relevant industry players

We partner with founders who are building unique products and services that solve every day complex problems in very innovative ways. We bring onboard a wide range of expertise and networks to drive founders to become well-structured and investment ready.

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