They did not need banking licences. Instead, they built on top of banks, quietly plugging into the system while presenting a very different face to customers. But now that model is changing.

After years of back-and-forth with regulators, Revolut finally getting its UK banking licence feels like more than just a company milestone. It’s a sign of where the industry is heading. Fintechs are no longer happy sitting in the middle. They want to run the whole show, as banks themselves.

But this is not a simple story of disruption. Nor is it a clean, linear shift. It is, as some experts suggest, something more uneven, more conditional and, perhaps, more fragile than it first appears.

Inside the numbers

To really get a sense of how big this shift is, you just have to look at what companies like Revolut are doing today.

It is no longer just a payments app. Over time, it has quietly expanded into savings, currency exchange, stock and crypto trading, and now even lending. It operates across Europe, the UK, the US, and parts of Asia-Pacific, less like a regional player and more like a global financial platform in the making.

The scale is hard to ignore. Revolut says it has around 70 million customers worldwide, with about 13 million in the UK alone. That’s massive for a company that, not too long ago, wasn’t even a bank.

Traditional banks have noticed. Over the years, many have either partnered with fintechs or invested in them, not just to compete, but to stay relevant as the industry evolves.

At the same time, more fintechs are going all in. Players like Monzo and Starling Bank in the UK, N26 in Europe, SoFi in the US, and Nubank in Latin America have already secured banking licences. This isn’t happening in one market; it is happening everywhere.

Even traditional banks are not just sitting back. Big names like JPMorgan Chase and DBS Bank are putting serious effort into digital and AI. They are starting to feel a lot more like fintechs than old-school banks.

When you step back and look at it, the gap really isn’t what it used to be. Fintechs and banks are slowly meeting somewhere in the middle.

Not a shift, but a wave

For Ron Shevlin, Chief Research Officer at Cornerstone Advisors, one of the United States’ leading independent investment consulting firms, the narrative of a sweeping transformation may be overstated.

“It’s more a wave than a shift,” he told International Finance, pointing to the influence of regulatory cycles. In his view, the current momentum is tied in part to a more accommodating political and regulatory environment, one that could easily change.

“The ‘wave’ will subside with the next change in the White House,” he said.

This framing matters. It suggests that the move toward banking licences is not inevitable, but contingent, shaped by external conditions as much as by internal strategy. Still, even a wave has direction. The direction, at least for now, is clear.

Limits of the partner-bank model

In order to understand why fintechs are moving toward licences, it helps to look at how they started.

In the early days, most fintechs did not bother becoming banks. They simply teamed up with licenced institutions, more or less ‘borrowing’ their infrastructure to get going. It helped them move fast, skip the heavy regulatory burden, and focus on building a smooth user experience.

“The partner bank model was always a workaround. A way to access banking infrastructure without the regulatory overhead. It was fine for early-stage fintechs that needed to move fast,” Shevlin explains.

But as these companies scaled, the limitations became harder to ignore.

Relying on sponsor banks, often smaller institutions, introduced friction. Product development could be constrained. Strategic flexibility could be limited. Most importantly, control was never fully in the fintech’s hands.

“If a sponsor bank changes its risk appetite, or gets acquired, or gets regulatory heat, the fintech suffers,” Shevlin notes.

In other words, the very structure that enabled rapid growth can become a bottleneck at scale.

The economics of becoming a bank

Beyond control, there is a more fundamental driver, which is ‘money’.

“Why now?” Shevlin explains: “Two reasons: the regulatory environment and profitability.”

At the heart of this is lending.

“The profits in banking come from lending. Without a licence, you cannot lend,” Shevlin noted.

This is a critical point. Many fintechs built their businesses around payments, earning revenue from interchange fees or subscriptions. But these revenue streams have limits. Margins are thin. Competition is intense.

A banking licence changes the equation. It basically changes the game for fintechs.

They can raise cheaper funds by holding deposits, move into lending products like loans and credit cards, keep more of the revenue instead of sharing it, and plug directly into payment systems. This isn’t a small upgrade; it fundamentally reshapes how their business works.

From fintech to bank

If the economics explain the ‘why’, the evolution of the industry explains the ‘how’.

According to Chris Skinner, CEO of The Finanser, the shift toward licences is particularly evident among neobanks.

“You cannot put all fintechs in the same bracket. But those who are neobanks, light banking services, have all started moving into getting banking licences in the past few years,” he told International Finance.

This distinction is important. Not all fintechs want to be banks. Payment specialists, infrastructure providers, and enterprise platforms may continue to operate through partnerships.

But for neobanks, companies that already resemble banks in everything but regulation, the move toward licences feels like a natural progression. As they make that transition, the line between fintech and traditional banking begins to blur.

“Totally,” Skinner says when asked whether the distinction is disappearing.

“There are many fintechs that are no longer fintechs. They are banks,” he added.

He cites Monzo and Starling Bank.

A changing competitive landscape

This blurring of boundaries has significant implications for competition. For years, traditional banks dismissed fintechs as niche players, useful for innovation, perhaps, but not a serious threat to core business lines. That view is becoming harder to sustain.

“It has been a slow burn,” Skinner observes, citing data suggesting that a growing share of traditional banking services is shifting toward fintech providers.

The trend is expected to accelerate in the coming years. The scale is already substantial.

For example, Revolut has millions of customers in the UK alone, and tens of millions globally. If even a fraction of those users transition to full banking relationships, the impact could be significant.

For traditional institutions like HSBC or Barclays, this is not just a competitive challenge; it is a structural one.

Technology as a differentiator

One reason fintech banks may be well-positioned to compete is technology. Traditional banks, in many cases, still operate on legacy systems built decades ago, long before the internet, let alone mobile or cloud computing. Fintechs, by contrast, started from scratch.

“The critical thing about neobanks is that they began with no legacy infrastructure. The new banks built theirs specifically to leverage today’s technologies,” Skinner explains.

This gives them an edge in areas such as user experience, product development speed, data analytics, and integration with emerging technologies like AI.
As the industry enters what Skinner describes as ‘another big change with AI’, this technological foundation could become even more important.

“The new banks have far more ability to use intelligence,” he said.

Regulation: Supportive or cautious?

If tech and money are pushing fintechs toward licences, regulation is the one thing that can still slow things down, or change the direction.

On one hand, there are signs of support. Regulators in markets like the UK have actively encouraged innovation, creating frameworks that allow fintechs to experiment and grow.

“Regulators are now pretty comfortable with fintechs. In fact, they want to encourage more innovation in finance,” Skinner said.

On the other hand, the relationship is not without tension. Things like KYC checks have actually become a sticking point, especially for fintechs trying to move from simple payments or prepaid models into full-fledged banking. Customers who signed up with minimal documentation may suddenly be required to provide detailed identification, leading, in some cases, to account closures and dissatisfaction.

At a broader level, regulatory attitudes can shift with political cycles.

“It’s a back-and-forth thing,” Shevlin notes, particularly in the US context. This creates uncertainty. What looks like a supportive environment today may not remain so tomorrow.

Do Customers Even Care?

Amid all this discussion of licences, regulation, and strategy, there is a simpler question: does it matter to customers?

Shevlin offers a blunt perspective: “Americans do not really care if a fintech has a charter or not, until that fintech fails.”

It is a reminder that, for most users, the appeal of fintech lies in experience, ease of use, transparency, and convenience. Regulatory status is largely invisible, at least until something goes wrong.

This creates an interesting dynamic. Fintechs may pursue licences for economic and strategic reasons, but the customer-facing narrative may not change much. At least, not immediately.

Not all fintechs will follow

Despite the momentum, not every fintech will or should become a bank.

“There are different paths,” Skinner says.

For example, companies like Stripe, Adyen, and Airwallex focus on payments and financial infrastructure, often in partnership with banks. For these firms, a banking licence may offer limited additional value relative to the complexity it introduces.

Even among neobanks, timing matters.

“Fintechs need to scale to a certain point before the economics make sense,” Shevlin argues, suggesting that pursuing a licence too early can be risky.

Historically, obtaining a licence has been a lengthy and expensive process, one that requires significant resources and regulatory engagement. The current environment, with faster approval cycles, may not last.

Toward a new banking landscape

Both Shevlin and Skinner see a landscape in flux, but not necessarily one that follows a single trajectory. For Skinner, the long-term vision is expansive.

“The landscape of 2035 is one where many fintechs have worked together to build a new world of global banking. It’s a brave new world,” he said.

In this vision, the dominance of traditional banks could give way to a more diverse ecosystem, one that includes global digital banks, regional challengers, and specialised fintech platforms.

For Shevlin, it is a bit more measured. This wave of fintechs chasing licences may continue for now, but it won’t be steady or last forever.

What really comes through is that this isn’t a simple disruption story. Fintechs aren’t just trying to replace banks anymore. In many cases, they are becoming them. But it is not a straight path. It is shaped by regulation, economics, timing, and all of it. Getting a licence opens doors, but it also brings new pressures.

More than anything, it shows a mindset shift. Fintechs are no longer operating outside the system; they are stepping right into it. Whether that truly reshapes banking is still an open question.

For now, what is clear is that the boundaries are changing. And in finance, as in many industries, when boundaries shift, everything else tends to follow.

The post When fintechs stop playing nice, and start becoming banks appeared first on International Finance.

A strategic thinker with a track record of driving growth across global companies, including leadership roles at Oracle and Flytxt BV, Hetarth now spearheads WebEngage’s mission to cement its position as a customer retention pioneer across MEA, the Americas, and APAC.

In this exclusive conversation with International Finance, Hetarth shares deep insights on how fintechs in Saudi Arabia and the UAE are navigating data regulations, accelerating retention-led engagement, and preparing for an AI-powered future.

How do fintechs in Saudi Arabia and the UAE balance hyper-personalisation with strict data regulations like SAMA and PDPL?

Fintechs in Saudi Arabia and the UAE have realised that personalisation and regulation don’t conflict; they require better architecture. The smart ones begin with privacy-by-design: clear consent, strict access control, and strong separation between PII and behavioural signals. Once that foundation is in place, hyper-personalisation becomes a matter of using patterns, not identities.

In Saudi Arabia, especially, SAMA and PDPL push companies to keep data within the Kingdom, so the intelligence layer has to operate locally. When you treat governance as part of the system, you can deliver real-time experiences without crossing any regulatory lines.

How is WebEngage’s regional data centre helping BFSI clients in Saudi Arabia and the UAE offer personalised experiences while staying compliant?

Our Saudi deployment was built specifically to give banks and insurers the confidence to scale personalisation without worrying about residency.

Everything from raw events to backups stays in-country, which aligns with how SAMA and PDPL expect sensitive data to be handled.

We also separate identity data from behavioural streams and let teams control exactly which fields can be used for segmentation, modelling, and journey orchestration. UAE institutions, especially those operating across borders, benefit from a similar setup because they can build seamless journeys while honouring local rules. Things move seamlessly on customer engagement because the compliance guardrails are already baked into the architecture.

With WebEngage’s ZeroPII architecture, all personally identifiable data stays entirely within the customer’s own environment, never touching the WebEngage Cloud. Our platform only processes behavioural and non-PII attributes, while personalisation happens securely on the customer’s premises via the WebEngage Agent.

With the focus shifting from customer acquisition to retention, what strategies are fintechs in this region adopting to stay competitive?

We are seeing more and more MENA fintech companies move from campaigns to journeys. Instead of running bursts of acquisition, they’re wiring always-on flows around onboarding, activation, credit usage, savings habits, and renewals. That shift alone has improved their unit economics.

We also see more behavioural engagement, such as responding to missed payments, salary credits, failed KYC attempts, or changes in spending patterns. These signals can be far more meaningful than demographics.

In today’s “milli-second economy,” how do WebEngage’s tools enable hyper-personalisation for fintechs and digital banks?

WebEngage ingests live events from banking cores, wallets, and apps, stitches them into real-time profiles, and uses AI to decide the next best action in that exact moment. For a digital bank, that could be recommending a credit top-up, sending a fraud alert, or nudging a savings goal, based on what the customer is doing right now and what their long-term behaviour suggests.

Because our infrastructure is elastic, this intelligence holds during peak load days like salary cycles or mega-sale periods. The customer simply experiences it as a bank that “gets” their context without being intrusive.

How can fintechs in Saudi Arabia and the UAE personalise their services to cater to both underbanked populations and affluent digital natives?

Both groups can sit on the same platform. The difference lies in the playbooks you build on top of it. For underbanked segments, personalisation is about trust. That could look like vernacular messaging, education-led nudges, lighter onboarding, and alternative data signals to reduce friction.

Affluent digital natives expect the opposite. They want proactive insights, lifestyle-aligned offers, real-time rewards, and a level of convenience that feels almost concierge-like. When fintechs unify their data and design separate journeys for each cohort, they can support inclusion and deliver premium experiences without duplicating infrastructure.

What are the key challenges fintechs face in the MEA region when it comes to customer engagement, particularly in terms of compliance with data regulations?

The biggest challenge is still data fragmentation. Many fintechs have core banking, CRM, wallet systems, and contact centres that don’t talk to each other. Without a unified, compliant customer profile, personalisation becomes difficult and risky. The second challenge is regulatory diversity. UAE, Saudi Arabia, Bahrain, and Egypt all have different expectations around data flows, residency, and consent. Fintechs operating region-wide need stacks that can adapt country by country without rewriting everything. And finally, skills. Teams are still learning how to blend legal, security, and marketing perspectives into one workflow.

How are fintechs aligning their customer engagement strategies with the goals of Saudi Arabia’s Vision 2030?

They are shaping their engagement strategies around the same pillars Vision 2030 focuses on, namely digital excellence, financial inclusion, and ecosystem growth. We see institutions using data-driven education journeys for first-time borrowers, SMEs, women-led businesses, and young professionals.

They’re also broadening their product ecosystems, using engagement tools to surface insurance, investments, and bill payments inside unified apps. That aligns with Saudi Arabia’s push to build multi-service digital platforms. Most importantly, fintechs are investing in Arabic-first, culturally aware experiences, which strengthen trust.

How does WebEngage help BFSI firms in the region build compliant, scalable customer retention strategies?

We usually start with the foundation: what should a unified, compliant customer profile look like, and where should it live? Once that’s agreed, everything else, from journeys to AI models, sits on that blueprint.

Our CDP architecture is modular and designed for regulated industries. That takes away a huge amount of operational strain from banks. From there, teams can scale from a handful of journeys to hundreds, without revisiting governance every time. Retention becomes a repeatable system.

How do you see the martech landscape in the Middle East evolving over the next 3–5 years, particularly for fintechs and banks?

We’re heading into a composable era. Banks don’t want all-in-one suites anymore; they want flexible CDPs and engagement layers that slot into their existing cores. AI will also become industry-native. Models trained specifically on BFSI behaviour, such as credit cycles, risk, and regulatory constraints, will outperform generic engines. We’re already seeing evidence of this across our deployments.

And finally, agentic AI will become the quiet game changer. Instead of manual segmentation and journey creation, teams will supervise AI agents that propose cohorts, write message variants, and run controlled experiments.

How critical is it for fintechs in the Middle East to have compliant customer engagement and data analytics platforms, and how are they ensuring this?

It’s the foundation of trust. One mistake in data handling can take years to repair, especially in markets where regulators move quickly. We’re seeing teams involve compliance and security from day one when evaluating platforms. They want clarity on how data flows, where it sits, and how consent is honoured and audited. A platform like ours helps because the compliance controls are built into the engagement layer. When the technology itself enforces good data hygiene, teams can innovate with freedom.

With the UAE’s push for open banking, how are fintechs adapting their customer engagement strategies to align with new regulatory frameworks?

Open banking is giving fintechs access to richer, consented transaction data, and that’s changing the nature of engagement. Instead of pushing generic offers, many are moving towards advice-led experiences like spending insights, savings nudges, and product recommendations based on a person’s full financial footprint.

At the same time, it raises the bar on data stewardship. Customers must know what they’re sharing, with whom, and for what purpose. So fintechs are tightening consent flows and increasingly moving towards frameworks with revocable permissions.

What does the future hold for customer engagement in the fintech sector in Saudi Arabia and the UAE? What trends should we expect in the coming years?

First, AI-driven decisioning will become the norm, and every customer interaction will be context-aware and outcome-focused.

Second, engagement will move beyond the bank’s own app. With embedded finance, fintechs will need to interact with customers inside partner ecosystems like mobility apps, marketplaces, telcos, and even smart devices.

Third, agentic AI will take over much of the operational work, from segmentation to content to journey design, and teams will guide the strategy while machines handle the execution. And finally, regulators will start valuing good engagement as consumer protection. Clear communication and responsible product guidance will become part of what “good finance” means in the region.

The post Fintechs investing in Arabic-first: WebEngage’s Hetarth Patel appeared first on International Finance.

“It is reasonable to expect that absent some big dislocation or economic event we’ll be back in private ownership next year, maybe as early as the first half of the year,” Paul Thwaite said, as reported by the Financial Times (FT).

The Keir Starmer-led United Kingdom government’s ownership of the bank has decreased from 38% a year ago to less than 11%. Since the 46-billion-pound bailout of NatWest during the global financial crisis, when the bank was still known as RBS, the state has owned a portion of the company.

“I think it will be a symbolic moment for the sector. It means we can talk about the future of the bank, the potential of the bank rather than having to talk about its past,” Paul Thwaite said.

Thwaite stated that after NatWest repurchased some of the state’s shares this year, going back to private ownership would also enable the bank to allocate capital more strategically.

According to him, one area of special attention would be expanding the bank’s wealth management division, which includes private bank Coutts, first through organic growth. Future acquisitions were not ruled out.

“The two transactions we’ve done this year have shown that we’re on the front foot and where we see interesting opportunities that deliver good financials, good strategic fit, then we’ll take them,” the NatWest boss added.

Thwaite, who was appointed permanent CEO after serving as interim CEO in July 2023, has seen NatWest acquire the majority of Sainsbury’s Bank and 2.05 billion pound in prime residential mortgages from Metro Bank.

Prior to this, the United Kingdom government had promised to put the bank back into private ownership by 2025 or 2026. Additionally, Labour abandoned the previous government’s plans to sell NatWest shares to the general public, which had already begun when it was elected in July 2024 and had cost the bank 24 million pound.

The October announcement of the Labour government’s budget received widespread support from Thwaite. According to him, British regulators could do more to encourage growth, but the government’s emphasis on science, infrastructure, and planning would help sustain economic expansion in the medium run.

“I think there are levers that regulators can pull which don’t risk the stability of the system, don’t necessarily risk protection of consumers,” he said, in reference to areas such as the ringfencing regime and regulations on fraud and customer complaints.

Who Is Paul Thwaite?

In July 2023, Paul Thwaite became the Chief Executive Officer. Before being hired, he served as the Chief Executive of the Commercial and Institutional (C&I) division, which brought together the teams that assisted NatWest’s business clients, which ranged from start-ups and entrepreneurs to multinational corporations and financial institutions.

Under Paul’s direction, C&I, which was in charge of establishing the strategy, vision, and culture for several companies, brands, and entities, provided long-term sustainable growth and value to its clients as a reliable partner.

In addition to his unwavering focus on the customer experience, Paul brings strong expertise in risk management, balance sheet management, and strategic transformation. His contributions to the Group’s strategy reviews in 2014 and 2019 were crucial, and he has spearheaded the creation and implementation of several initiatives and programmes that are at the forefront of their respective industries.

Most notably, he oversaw the Group’s response to helping companies during the COVID-19 pandemic and was in charge of NatWest’s integrated payments and embedded finance strategy. Paul has actively promoted talent throughout his career, assembling and managing diverse teams from various disciplines and geographical locations to meet the needs of clients and other stakeholders.

NatWest Remains On Track For Privatisation

The British banking group will keep on exploring “strategically congruent” and “financially compelling” M&A (merger and acquisition) opportunities after a flurry of investments in 2024, Paul Thwaite told during the FT Global Banking Summit, as he informed the audience of his having “lots of potential uses” for the bank’s excess capital but would be thoughtful about its deployment, whether supporting growth in existing businesses or pursuing additional “inorganic tuck-ins,” like the deal struck to buy the banking business of retailer Sainsbury’s in June.

NatWest in November 2024, bought back 1 billion pounds (USD 1.29 billion) worth of its shares from the Keir Starmer government, in another move towards privatisation. UKGI, which manages the government’s stake in the bank, said as a result of the transaction the government’s ownership would fall from around 14% of the company to around 11%.

“This transaction represents another important milestone on the path to full privatisation. We believe it is a positive use of capital for the bank and for our shareholders,” Paul Thwaite said during the occasion.

The transaction was the second such directed buyback in the last 12 months, and brought the total of its shares NatWest bought from the British government in 2024 to 2.2 billion, representing nearly 8% of its capital.

NatWest is also gearing up for its post-privatised future, as it has launched the “FinTech Growth Programme,” which will give the newly-formed fintech companies the resources, networks and expertise of a large bank, with the hope that participants will help bolster NatWest’s innovation efforts.

“This programme lays a pathway to create better outcomes for our customers. Working this closely with fintechs and UK entrepreneurs strengthens our ability to be future focused, while supporting the growth of the innovation economy,” said David Grunwald, director of NatWest Innovation.

NatWest plans to pick five fintechs that offer solutions for specific problems in the digital payment sector. Participating start-ups should be based in the United Kingdom and pre-Series A stage.

During 10 weeks of workshops, mentoring and coaching, NatWest will work with these fintechs to co-create solutions to lead the future of banking, whereas the participating fintechs will earn the opportunities to connect, learn and build networks with other fellow fintechs, coaches and NatWest’s dedication Innovation function.

The post Business Leader of the Week: Under CEO Paul Thwaite, NatWest eyes full privatisation by 2025 appeared first on International Finance.

An international study on senior professionals from banks, lenders, retailers and personal finance management tools found that open banking technology might be important to their businesses in the post-pandemic recovery. The study was published by a leading open banking provider Yolt Technology Services. 

Leon Muis, Chief Business Officer at Yolt Technology Services, said in a report, “Many businesses already understand the potential of open banking and use it to great effect, yet a significant portion still hold misconceptions about the technology, with many unclear on the requirement for customer consent. It is this knowledge gap that is the biggest barrier to truly widespread adoption. Advocates of open technology must highlight that regulation aims to provide consumers and businesses with more control over their financial information, not less, while demonstrating the value it can bring to everyone involved in the transaction process.”

The research showed that 48 percent of respondents believe Covid-19 has not disrupted their open banking adoption plans while 12 percent of them are inclined to adopt the technology due to the pandemic.

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While most of them are worried about their next round of funding, a few are considering to diversify their revenue and one-tenth plan to wind up their business.

Charlotte Crosswell, CEO of Innovate Finance, told the media, “It’s evident that the fintech sector faces a significant funding gap as a direct result of Covid-19. We need to act fast before it’s too late. If we fail to address this, we risk losing many companies in the fastest-growing sector in the UK economy. We cannot turn our backs on the start-ups now or we will pay the price later down the line.”

Although fintech is emerging in the UK, crisis such as the coronavirus pandemic and Brexit is affecting the industry’s growth rate. Previously, the startup economy in the country was flourishing with investors seeking to invest their money in new projects. In fact, investors in the industry last year was almost doubling on top of levels recorded in the second half of 2018, media reports said.

The post Three quarter of smaller UK fintechs face cash crunch appeared first on International Finance.

Franc was established in 2018 by Sebastian Patel and Thomas Brennan. The startup is a robot-advisor largely focused on helping people who are new to equity funds in the market.

The startup is currently operating in South Africa. It is reported that another South African fintech startup AuthGate is seeking to raise capital. It is a self-funded startup and is preparing to raise its first capital, media reports said.

Fintech is rapidly evolving in the country and more international investors are considering to put their money into new startups. It appears that Kenya, Nigeria and South Africa have attracted $3.9 billion venture capital deals during the period between 2012 and 2019, media reports said.

In fact, a report titled Venture Capital in Africa: Mapping Africa’s start-up investment landscape noted that 2019 was the best year for venture capital investments in Africa since 2014. In this context, AVCA’s board Chair, ‘Tokunboh Ishmael, told the media, “Africa’s VC industry continues to grow from strength to strength and we expect 2020 to be another strong year despite global macroeconomic headwinds. The continent’s VC ecosystem showcases the best of African innovation and entrepreneurship, which has the potential to be a key source of solutions to Africa’s intractable problems and a gamechanger for the continent’s development trajectory. AVCA remains committed to supporting the VC industry by charting its growth and providing authoritative research on the asset’s fundraising, deal, and exit activities.”

The post South African fintech Franc raises $300,000 in seed funding appeared first on International Finance.

The IMF pointed out that Africa is a great platform for fintech startups and SMEs to capitalise on the pool of unbanked and underbanked populations. Two years ago, the continent exceeded $1 billion in venture capitals to startups.

It appears that Johannesburg, Nairobi, Lagos, and Capetown are the four emerging fintech hubs in Africa. Of the four African cities, Johannesburg houses major establishments such as Standard Bank Group, FirstRand, Absa Group, Nedbank Group and Investec—enhancing its characteristics to become one of the hotbeds for fintechs in the world.

A report titled Findexable Global Fintech Rankings 2020 noted that “Nairobi is Africa’s second-largest fintech hub, with an estimated 20 percent of African fintechs and an emerging ecosystem of local investors and venture capital firms complemented by a steady rise of international investors and growing interest from global technology firm.”

Kenya is also developing its own charm in fintechs. Last year, the Monetary Authority of Singapore (MAS) and the Central Bank of Kenya (CBK) signed a fintech cooperation agreement to strengthen the country’s fintech infrastructure.

Africa has created a conducive environment to drive fintech innovation by enabling the private and public sectors to collaborate.

The post Africa’s is booming with an increased number of fintechs appeared first on International Finance.

Under the terms of the agreement, Qarar will combine its risk algorithms with Aion’s intelligent banking platform. The integration aims to transform banks’ customer risk assessment. 

Currently, banks in the UAE, Bahrain and Kuwait use Aion’s banking platform to offer digital financing solutions to customers. The platform with AI capabilities will help banks to make better decisions. Also, Qarar’s deep analytics engine will allow banks to make risk-managed business decisions by processing large volumes of data from various sources, media reports said. 

Qarar CEO Zaid Kamhawi, told the media, “Digital platforms are the next natural step in the future of financial institutions and will allow banks to onboard, assess and process lending applications in real-time using state of the art cloud-based technology. Our partnership with Aion comes to support the digital transformation initiatives sweeping the market and to meet customer demand for fast, consistent and accurate digital lending decisions.”

Ashar Nazim, who is the CEO of Aion Digital said that the partnership is a huge opportunity for banks and challenges at this point. In his view, the GCC’s data economy is extensively growing with a value of more than $5billion. With that, Qarar and Aion aim to transform the lending ecosystem for banks to accurately assess credit risk. 

The post Aion Digital and Qarar partner to transform credit markets in ME appeared first on International Finance.

A study published by Disrupt Africa on active fintech startups over the last four and a half years in 28 countries found that African fintechs have incrementally increased in number to 491 in 2019. In November alone, Nigeria’s payments companies received $400 million in investments—pointing to venture capitalists’ and especially China’s deep interest to gain advantage from the continent’s expanding fintech ecosystem.

The recent developments in fintech investment pose the big question—why is Africa slated to outmatch the  top fintech investment destinations of the world?

Sub Saharan Africa is the fastest growing fintech investment zone

A new GSMA research found that Sub-Saharan Africa is one of the fastest-growing investment zones for fintechs. “The region’s fintech landscape has grown at an annual rate of 24 percent over the last 10 years,” Dapo Adewole, who is responsible for leading the Technology and Digital Practice across  Ernst and Young West Africa, tells International Finance.

The region’s fintech segment comprises more than 260 active companies, with 20 percent of them being international players. A leading independent newswire Medici conducted research last year that found that Nigeria and Kenya are the two African countries that boast the highest number of startups working toward financial inclusion.

These fintechs have already made a profound impact on the local people with rational approaches and nimble technologies. That coupled with a unique economic and demographic environment has established the Sub-Saharan Africa as an ambitious rival to evolving markets like Latin America and Asia. The fact is “it is characterised by a less-developed financial infrastructure and an unbanked population of about 66 percent as of December 2018,” Adewole explains, is the prospect for massive new fintech opportunities.

“Not hampered with what is now considered ‘old tech’ such as fixed phones, Africa has used the mobile phone revolution to increase financial inclusion across the continent.  This wave of innovation has continued to develop, not just geographically, but as payments are linked to most parts of a digital merchant experience the growth of smartphone is bringing new opportunities to fintech.  Consequently there are new opportunities in over the top smartphone-led initiatives such as PalmPay and OPay in Nigeria,” Greg Reeve, Director at PalmPay tells International Finance.

Mobile money startup OPay is capitalising on Nigeria’s 123 million unbanked, who account for 60 percent of the total population. “At OPay, we see this challenge as a major opportunity to deliver financial services for everyone with free, safe and easy to use mobile products under the promise of financial inclusion. Financial services should be available for everyone without regard for physical borders, boundaries or even social status,” Iniabasi Akpan, country manager at OPay Nigeria, said in an interview with International Finance.

In another example, ecommerce retail platform Jumia is helping to build the industry by solving every day challenges, including bills payment,s airtime recharges, loan approvals, or investment access. “The African fintech ecosystem offers tailor-made solutions that address local and specific customer circumstances,” Adewole explains, making them very attractive to global investors.

African fintechs: Major global investors at play

Venture capitalists have channelled huge investments into African fintechs highlighting Africa’s fintech revolution. In March, Mastercard invested $300 million in Africa’s largest payments processor Network International.

Investors put in $400 million in three payments startups in November alone. OPay, which is incubated by Chinese internet browser Opera, received $170 million funding in two series led by famed Chinese investors, including Sequoia China, IDG Capital and Source Code Capital — an equivalent of one fifth of all venture capital funds raised in Africa in 2018.

Visa announced a $200 million investment in Lagos-based Interswitch and local fintech PalmPay. Additionally, PalmPay received $40 million in a seed funding led by Chinese mobile phone maker Transsion.

An American investment firm Partech Ventures found that the total funding raised by the three fintechs represent a significant portion of the $1.2 billion in venture capital across the continent in 2018. Those fintechs emphasised that they would use the cash to expand into select parts of the region where only one-third of adults have bank accounts. This ties back into the formula that the unbanked population lacking access to the current financial developments have become one of the biggest boosters for Africa’s fintech modernisation — and for expanding investor interest.

“Global corporates like Visa and Stripe prefer to buy shares in Nigerian payment platform Interswitch and Paystack respectively considering their interest in Sub-Saharan Africa,” Adewole explains. Interswitch in a media report said Visa’s investment has valued the company at more than $1 billion — making it the first homegrown unicorn in Africa.

Also, three Nigerian fintech startups Kudi, OneFi and TeamApt raised $5 million each in funding in 2019. OPay, on its part, has been able to attract major investments because of a tremendous growth trend observed in Lagos, which ranks among the top 100 cities with a robust fintech ecosystem. Also, Lagos-based Flutterwave has established its own partnership with Visa and Chinese third-party mobile and online payment platform Alipay to offer a raft of digital payments between Africa and China.

“Things can move quickly when you get the right formula and are addressing the real underlying customer issues.  There are now a number of companies with good investments addressing a number of areas.  Some unfortunately will fail, others will pivot and find new opportunities and some will grow to be successful.  I suspect that some will become very large over the 10 year timeframe.  The important thing is that currently there is opportunity, market and talent — and that’s a strong mix.  With the right investment and a bit of luck we will see more big success stories coming out of Africa,” Reeve explains.

Chinese money hot after African fintechs trail

China has become vital to Africa’s financial services scene with internationally recognised firms investing in local fintechs. In August, Qingliu Capital, Jiuhe Venture Capital and Shaka Ventures poured an undisclosed amount into Lagos-based mobile payments provider Gona.

The two Chinese giants Huawei and Transsion are collaborating with Africa’s fintechs through partnerships and smartphone sales. A year ago, Chinese investors would have set eyes on Silicon Valley for investment potential but that has now shifted. Their focus is being redirected toward Africa because of the prolonging trade war with the US and the continent’s sudden tech eruption.

Experts believe that Chinese investors constantly need to explore new investment markets — and for that reason, the next obvious destination would be Africa — where business and consumer landscape is primed for development in the coming decade.

Are African fintechs the hottest in the world now?

Sub-Saharan Africa leads the world in per capita registered and active mobile money accounts, outlets, and volume transactions which have set the region apart, in terms of observable trends in fintech growth and investments.

It should be noted here that early developments on the part of some companies have made African fintechs the hottest in the world now. The challenges Kenya’s first mobile wallet M-Pesa faced in cross-border paymensts is being addressed by a Nigerian startup Flutterwave. The startup has integrated Africa’s fragmented payments system through a single API allowing local merchants to make transactions anywhere on the continent and to accept payments from an M-Pesa user. In fact, a large number of mobile payment providers in Kenya have transformed the payment landscape to an extent that 45 percent of the country’s GDP came from mobile payments infrastructure.

Now the fintech presence can be strongly felt across most urbanised African countries. Sami Louali, who is the Executive Vice President for corporate development and financial services at Jumia, makes a valid point to International Finance, “Africa has the world’s youngest workforce with a rapidly increasing rate of smartphone use.”

Although the continent is a latecomer to the fintech revolution, it has leapt straight into it with a a modern mobile infrastructure. “Mobile ubiquity enables scale and speed-to market that makes the cycle of innovation and experimentation much faster than in other sectors,” MFS Africa founder and CEO Dare Okoudjou says in an interview with International Finance.

Jumia is focused on mobile technology and the creation of supporting infrastructure. Even OPay is opening up a suite of digital offerings because “Technology and infrastructure are key components for the adoption of fintech services around the world,” Akpan says. “Currently, OPay has greater ambitions to consolidate the brand positioning in Nigeria and plans to bring more vertical services such as ORide and OFood. It also has further plans of expanding brand visibility to other African countries like Kenya, Ghana and South Africa.”

A majority of evolved fintechs are closely tied to the region’s payments infrastructure creating new business models and unconventional practices. For example, Lagos-based startup PalmPay’s new payment app will be preinstalled on Transsion’s mobile brand Tenco as part of a tie-up, with an estimated reach of 20 million phones in 2020.

“Complementary business models in Sub-Saharan Africa have made fintechs attractive to both private and public investors worldwide and targets for mergers and acquisitions,” Adewole says. “Overall, the sector exhibits promising signs of accelerating growth, ample investment and business opportunities.” The merits of this ambitious mindset for growth among African entrepreneurs are pulling venture capitalists from around the world toward them.

Does the fintech regulatory ecosystem suppport growth?

Africa requires a powerful regulatory framework, presaging a new fintech era. “While current laws in certain jurisdictions offer guidance and moderate protection, they will need to be continuously updated to cover issues that will arise from the development of fintech products. It is already happening, but pan African companies such as Jumia would like to see more alignment and coordination between the central banks of the continent,” Louali says.

Some African countries’ regulatory frameworks have already put financial inclusion and innovation on the forefront for further development. “The regulatory environment across the continent is certainly adapting to the growing demand for fintechs as governments are starting to establish incentives. The regulations are aimed to balance the growth of the sector while providing appropriate protection for consumers. In a few other African countries like Uganda or Tanzania, regulators are receptive to fintech developments and they see fintechs as an important driver for financial inclusion,” Adewole explains.

Countries such as South Africa, Kenya, Ghana and Uganda have developed an advanced data regulation framework. Yet, they face challenges such as non-existence of centralised approach to fintech regulations and no single regulatory policy on fintech.

“Fintech regulations can vary among different countries, which is why we’ve seen that a localised approach is necessary to ensure success,” Akpan explains. Regulators believe that a traditional prescriptive regulation might suit stable sectors, while it is not ideal to define a set approach for fintechs as they will always encounter last moment crisis. As Akpan describes, “It’s not a ‘one-size-fits-all’ approach, so being thoughtful about expansion and actively monitoring the regulatory environment is essential as these companies scale.”

Another unique challenge Louali states is the differences in African ecosystems, where some economies are led by banks and others by telcos. So the venture capital investments are naturally pulled toward larger economies — making it difficult for fintechs operating in smaller markets.

In Okoudjou’s view, “Regulation must be progressive, proportionate, and pro-mobile.” It is now the mobile channels are more easily accessible and affordable for the marginalised and poor customers. So these customers should be positioned at the centre of any regulation.

Secondly, the proportionate factor that Okoudjou mentions points to the fact that low risk of low-value transactions will not increase as they cross a border. The risk of those transactions decreases considerably when using a mobile channel over cash. Thirdly, it is of utmost importance to embrace mobile that is the present and future of digital transformation. “Regulators can focus on ways to leverage the strengths of mobile channels, rather than the ways in which mobile money is ‘less than’ traditional banking services,” Okoudjou explains, as it will reinforce the benefits of the pro-mobile period for people in Africa.

Despite that, many African fintechs are facing challenges related to a somewhat uncertain regulatory landscape. According to Adewole, “The gap in adequate ICT infrastructure across Sub-Saharan Africa is a major challenge that leads to the failure of some fintech startups.”  Paga, for example, started operations two years after being established because of constraints in obtaining an operating licence from the government.

Okoudjou says that real infrastructure challenges across the continent can be addressed with the help of platforms like MFS Africa that aim to connect various service providers including banks, mobile network operators and fintechs. For many, the continent’s fintech regulatory environment can be further improved by using social and economic impact assessment to outline regulatory priorities. That in turn will help to identify areas with insufficient domestic demand — or cherry pick the segment, technology or solution with the highest potential gain for the economy at large.

The unbanked frames the future of African fintechs

Africa’s fintech outlook heavily relies on favourable demographics, high mobile technology use and existing gap in financial inclusion.

“Fintech innovation is expected to increase in the region within the next five to 10 years. The number and diversity of African fintechs will multiply to provide innovative financial solutions to the large demography and customer segment including the untapped financially excluded market,” Adewole says. Sub-Saharan Africa’s fintech sector will continue to be dominated by payments solutions until the gap in financial inclusion is bridged. “It can be expected that the smaller segments will expand their footprints in the sector as consumers shift their attention to solutions that satisfy other previously underserved financial needs,” he adds.

The industry foresees a lot of market consolidation, especially in the next three to five years. “By examining the current ecosystem it will only become simpler and simpler to link mobile wallets at a continental scale,” Okoudjou concludes.

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4G Capital mixes customer oversight and training for achieving a 94 percent return rate on unsecured loans provided to SME’s. With the new decision, the company will be lending more in 2019 than all the previous years added together.

The number of loans given by 4G Capital since its inception until the end of 2018 are estimated to be at least 345,000 that accounts for a total of about $44 million.

The year 2019 will see the firm disbursing 420,000 loans that will be worth $46 million. The total value of loans disbursed will then add up to $90 million.

CEO and founder of 4G Capital, Wayne Hennessy Barrett, stated that the success of the firm is due to the increased investments in partnerships and the expansion of the firm’s presence across East Africa. He added that the company increased the number of teams in Uganda and Kenya from 28 to 96 and has also increased customer acquisition in the East African region.

The introduction of mobile money M-Pesa in 2007 led to a boom in the fintech sector in Kenya, with over 150 fintech startups operating there presently.

Earlier in 2019, 4G Capital had expanded its services to Uganda to make it available to all types of enterprises in the country. 4G Capital Kenya is targeting to impact one million people by 2020, as a part of its expansion.

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