Africa's tech ecosystem has received a recent surge of attention, with South Africa's TymeBank and Nigeria's Moniepoint both securing funding in recent weeks at valuations exceeding $1 billion, joining the coveted unicorn club. These valuations signify more than just investor confidence; they represent the success these companies have achieved in adapting disruptive fintech models originally designed for developed economies and scaling them to thrive in a region where nearly half the population remains unbanked.
Tailored Solutions for a Unique Market
The primary focus of both TymeBank and Moniepoint has been simplifying banking for individuals and businesses in two of Africa's largest economies. TymeBank began by offering retail customers affordable bank accounts and savings products before expanding into business banking, providing much-needed working capital to small and medium-sized enterprises (SMEs) in South Africa. Moniepoint, on the other hand, started its journey in Nigeria by supporting small businesses with accounts, payments, loans, and expense management tools. The company has recently expanded its offerings to include retail banking services.
The Power of Phygital Banking
A crucial element that sets these fintech companies apart is their commitment to a hybrid approach to banking, seamlessly blending the convenience of digital banking with real-world, physical touchpoints.
"In Africa, it's a catch-22 situation: you can't have one without the other," said Lexi Novitske, a general partner at Norrsken22, an investor in TymeBank, in a recent interview with TechCrunch. "Many tech companies must establish customer acquisition and engagement through highly analog or physical efforts."
Why Traditional Digital-Only Models Fall Short in Africa
The strategy adopted by TymeBank and Moniepoint stands in stark contrast to the challenger banks typically seen in the United States and other developed markets. Revolut, Monzo, and Chime, for instance, operate solely in the digital realm, as their names suggest. Even some emerging market platforms, like Nubank and JPMorgan's C6 in Brazil or small business-focused platforms like Open in India, have prioritized digital-only channels to establish themselves as regional leaders.
However, a purely digital approach isn't ideal for Africa, with a few exceptions like Valar-backed fintech Kuda. The reach of such platforms is inherently limited due to factors like:
Limited internet connectivity
Low trust in entirely online systems
Cash remaining the dominant payment method, accounting for over 90% of all transactions according to a McKinsey report
TymeBank and Moniepoint: A Winning Hybrid Approach
TymeBank and Moniepoint have carved a successful niche by meeting both retail and business customers where they are. TymeBank boasts over 15 million users across South Africa and the Philippines, while Moniepoint claims to serve more than 10 million people and businesses. It's worth noting that Kuda, valued at $500 million, isn't far behind with roughly 7 million users.
"When venture capital was plentiful, you could incentivize people to adopt your digital-only product, but there just isn't enough average revenue per user (ARPU) out there to justify the long-term costs," explained Stephen Deng, co-founder at DFS Lab, an Africa-focused early-stage investor. "Moniepoint, Tyme, and others have recognized the need to establish physical touchpoints that connect with the mass market while simultaneously maintaining the ability to deliver their technology through those interfaces. We refer to this as a 'cybernetic' approach because it strengthens informal, often in-person, channels with technology without falling into the expensive trap of attempting to fully digitize those channels."
Models Tailored to Market Maturity
One of TymeBank's key strategies for scaling its operations has been forging strategic partnerships with major supermarket chains like Pick n Pay and Boxer to expand its reach within South Africa. These retail touchpoints act as quasi-branches: TymeBank utilizes kiosks and deploys ambassadors at these stores to assist new customers with opening accounts and depositing funds, adding a human element to its services for those who prefer face-to-face interactions.
This model flourishes because it acknowledges and adapts to how the average African consumer interacts with financial services. The ability to walk into a supermarket to buy groceries and walk out with a new bank account feels natural for many people. TymeBank has established a network of over 1,000 kiosks and 15,000 retail points across South Africa. Its sister company,GoTyme, a joint venture between parent company Tyme Group and the local conglomerate Gokongwei Group, launched in 2022 and has adopted the same strategy, boasting nearly 500 kiosks and 1,500 bank ambassadors in the Philippines.
In Nigeria, QED-backed Moniepoint has taken a slightly different approach, establishing an extensive network of agents nationwide. Approximately 200,000 of these agents are small business owners equipped with point-of-sale (POS) devices, effectively acting as human ATMs, facilitating cash deposits, withdrawals, and bill payments. This system mirrors the successful model of mobile money 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, such as banks or ATMs, is either non-existent or unreliable. The World Bank estimates that as of 2022, there are only 16.15 ATMs per 100,000 adults in Nigeria.
Similarly, countries like Nigeria thrive on what is often referred to as "informal" commerce, which operates outside the purview of tax collections and other regulatory authorities. This sector constitutes nearly 60% of Nigeria's GDP. When combined with the high number of unbanked consumers and businesses, a model that incorporates physical elements becomes more of a necessity than an innovation.
Expanding Services Beyond Basic Banking
Both companies now offer comprehensive retail and business banking services. They have utilized their hybrid model as a foundation for expanding their service offerings to include credit, working capital loans, business management tools, accounting and bookkeeping, and even insurance.
Following their recent unicorn funding rounds, both TymeBank and Moniepoint are poised to expand their operations beyond their respective home markets, where they claim to have achieved profitability. Tyme Group, which recently secured a $250 million Series D funding round led by Nubank at a $1.5 billion valuation, is already expanding its operations into Vietnam and Indonesia. Given the similarities between these emerging Asian economies and Africa, with a combination of digital adoption and offline dependence, GoTyme's current growth trajectory makes this expansion a logical next step.
Moniepoint, after raising $110 million, intends to deepen its presence in Nigeria and explore other African markets, such as Kenya. The company may also pursue expansion through acquisitions, paving the way for further regional consolidation.
A Blueprint for Success Beyond Fintech
Perhaps the most compelling aspect of the hybrid model is its potential to serve as a blueprint for success in African startups beyond the fintech sector. TymeBank and Moniepoint are not the first fintechs to leverage this model on their path to unicorn status.
This success is evident in their scale. The first wave of billion-dollar African fintechs, including Interswitch and Flutterwave, provided essential infrastructure and payment solutions for both local and global merchants across the continent. Subsequent fintech unicorns, such as Softbank-backed OPay, Stripe-backed Wave, and Chimera Investments-backed MNT-Halan, all deliver financial services to tens of millions of customers across Africa by effectively combining digital apps with real-world touchpoints.
Fintech currently stands as the most successful startup category in Africa, accounting for eight out of the nine startups valued at over $1 billion in the region. As investor interest in the African market continues to grow both locally and globally, this hybrid model could serve as a valuable blueprint for achieving venture-scale returns while simultaneously driving financial inclusion.
The Potential for Broader Application
Furthermore, there's significant potential to apply the hybrid model to industries beyond fintech, particularly within Africa's informal markets. For instance, telemedicine, an industry heavily reliant on trust, could leverage local, in-person touchpoints to onboard patients while streamlining operations through digital platforms, according to Novitske. E-commerce and group insurance models represent other industries where this approach could prove highly effective.
"We believe that most successful startups in Africa will master a hybrid approach," commented Deng. "The interface between the digital and physical realms often serves as the breeding ground for innovation, as aggregating informal markets necessitates physical touchpoints. In B2B marketplaces, procurement often remains informal. In cross-border payments, including those involving stablecoins, domestic payouts frequently operate informally. And within local retail, payment and delivery systems often lack formal structures."
Conclusion
In conclusion, the success of African fintech unicorns like TymeBank and Moniepoint demonstrates the power of a hybrid approach that combines the convenience of digital technologies with the importance of physical touchpoints in addressing the unique needs of the African market. This model has the potential to not only drive financial inclusion but also serve as a blueprint for success in other sectors across the continent, contributing to the continued growth and development of the African tech ecosystem.
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