May 16, 2020

Chijioke Dozie of Carbon: Exploring Africa’s fintech success story

Chijioke Dozie
carbon
Africa
Chijioke Dozie
4 min
Chijioke Dozie is theCEO and co-founder, Carbon. Here, Dozie takes a look into the dynamic African fintech landscape, as well as the opportunities and c...

Chijioke Dozie is the CEO and co-founder, Carbon. Here, Dozie takes a look into the dynamic African fintech landscape, as well as the opportunities and challenges that abound. 

Exploring Africa’s fintech success story

For those that are not too familiar with financial systems in Africa, if I told you that one of Africa’s biggest problems is money, you may think I was talking about poverty. Although that would not necessarily be incorrect, I am actually talking about the challenge of effective and efficient access to money and the wide range of issues that beset financial services across the continent.

For starters, it costs money to use money. Across the continent, using an ATM, whether to withdraw cash or check your bank balance, costs money. You are also charged for bank-to-bank transfers and remittances. People are effectively taxed for accessing and using their own money.

There is also the issue of access to credit. For a variety of reasons, many African countries do not have the infrastructure that allows financial systems in develoAped markets to ascertain credit-worthiness. As a result, there is very limited access to loans and those that do get access are charged exorbitant interest rates.

African fintech is booming

It is in the context of these and other challenges that African innovators and entrepreneurs are developing fintech solutions. From payment solutions that don’t charge users for using their money to platforms that facilitate easy-to-access short-term loans, the African fintech scene is booming with a wide range of solutions. All hoping to address at least one of the challenges that face the continent’s financial service sector.

Even established global brands are getting in on the action. Mastercard recently announced that it has teamed up with telecoms provider Vodacom to launch VodaPay Masterpass, a digital payment platform that enables consumers to load any bank card into a secure digital wallet downloaded as an app on their smartphone. This allows them to pay for their needs and wants to match that same “always on” mindset using their smartphones.

Using a combination of technology, an understanding of unique needs and a knowledge of longstanding financial traditions, new platforms that are made by Africans for Africans are springing up all over the continent. For example, there is a Nigeria-based startup using machine learning to calculate the credit-worthiness of consumers who don’t have a credit history, opening the door to marginalised groups in the financial community. In many cases, female entrepreneurs are most affected by lack of access to financial services. Many of these women have been consistently overlooked but now have access to advisory services, loans and other financial services to help them scale their businesses.  

Startups are receiving more funding

If the stats on startup funding in Africa is anything to go by, it looks like the boom is set to continue for a while. Of all the African startups that received funding in 2018, almost a third (32.6 percent) were fintech businesses - a greater percentage than any other sector. In Nigeria, African’s biggest economy, the dominance of fintech funding is even more pronounced. Over 80 percent of total funding raised by startups in Q1 of 2019 was raised by fintech. A financial service provider also got the highest amount of funding.

According to the Finnovating for Africa 2019: Reimagining the African financial services landscape report, Africa’s fintech companies have grown from 301 in 2017 to 491 (at the last count). African fintech ecosystem has grown by 60 percent in the last 24 months and fintech companies have raised more than $320 million in funding since 2015. In 2018 alone, $132.8 million was raised, making it the best year the sector has ever had.

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There is growth across the continent

From Nigeria to Kenya and from Morocco to South Africa, fintech solutions are springing up, providing unique solutions to many longstanding issues as well as introducing new and innovative ways to address previously unidentified challenges. The rapid adoption of mobile phones has also created a golden opportunity to deliver a range of tailored solutions that will connect the hitherto unbanked with the benefits of the mainstream financial system. 

When you consider that these solutions are being built and honed in some of the most hostile business markets in the world, and seeing incredible traction, you have to ask how soon we should expect to see these solutions in markets outside Africa. 

The African fintech story is indeed one of the biggest success stories coming out of the continent. As the story develops, it will be very interesting to see what other successes lie ahead of this vibrant and innovative scene that some of us have the huge pleasure of being a part of.

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Jul 23, 2021

Robinhood faces $35mn fine from New York DFS

Robinhood
IPO
Nasdaq
gamestop
2 min
Robinhood faces $35mn fine from New York DFS
Robinhood announced it had reached a ‘settlement’ with regulators and is on target for a $35bn valuation for its initial public offering

The renegade trading platform, Robinhood, which was central to the GameStop shares frenzy earlier this year, faces a US$35mn fine from New York financial regulators.

The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.

Robinhood valuation

The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.

Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."

Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”

However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.

Robinhood floats imminent

Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.

Reports suggest that 55 million shares will be offered. Robinhood founders, Baiju Bhatt and Vlad Tenev are also set to sell 2.63 million shares.

Robinhood democratising investment

Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.

The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.

Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.

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