A Q&A with Quona’s Africa associate Kofoworola Agbaje
Looking back at 2020 through the lens of African fintech, what is the deal that most excited you, and why?
Stripe’s acquisition of Paystack was easily the most exciting, as it felt like the whole ecosystem won. Not to get too sentimental, but Paystack was founded by two homegrown Nigerians. The company is headquartered in Lagos with a predominantly Nigerian workforce. During the US election this year, there was a lot of conversation about how much representation matters, and this is not dissimilar from the Paystack acquisition. There is now a stronger sense of belief among entrepreneurs in the African ecosystem along the lines of “If Paystack can do it, I can do it too.” Additionally, we get to shape Stripe’s impact in Africa, because Stripe retained all Paystack employees to continue to build products and tools for the global stage, with a local context.
How does this development contrast with, say, 2019 and the activity we saw there in African fintech?
2020 was the year of exits, but more importantly 2020 provided ample proof of international interest in and excitement about the African VC/Tech ecosystem. In addition to the Paystack exit signalling Stripe’s interest in Africa, WorldRemit acquired Kenya-based Sendwave and Dubai-based Network International acquired DPO Group. On the Funding side, Jeff Bezos invested in Chipper Cash in a round led by Ribbit Capital for their first African investment.
What kinds of fintech segments are you seeing emerge that are more region-specific? Are there things that work better in East Africa vs. Southern Africa? Are there fintechs that work better in cities like Nairobi or Lagos, but that don’t work so well outside of cities?
Actually unlike what I call “FinTech 1.0” (i.e., m-Pesa, Flutterwave, PayStack) that was very region-specific, we are starting to see some trends across all of Africa from SME marketplaces such as Sokowatch to Open-API startups such as Stitch, OnePipe and Mono. Africa has also caught the open API bug, and with this comes additional investment opportunities for Quona as more traditional companies become fintech. I expect these trends to continue as more African countries pass the first payment infrastructure hurdle and start to build off innovating infrastructure. Though there have been talks of “Super Apps” for a long time in Africa, there are currently no clear winners on this front as the distribution challenge is still being solved.
What are the most promising fintechs you’ve seen serving MSMEs right now in Africa?
I really like the SME accounts/banking/tools space. SMEs remain the backbone of economies in Africa and remain widely underserved. Some Nigerian fintechs digitising MSMEs include Swipe, Wallets Africa, Prospa and Brass.
What kinds of obstacles do you think fintechs can help consumers overcome next in Africa?
Financial education, personal finance management and wealth management are areas that need attention.That might seem like a lot, but they are related. There was the wave of loan and payment products, and I would love to see more people being educated to climb the financial ladder.
What kinds of obstacles do you think fintechs can help MSMEs overcome next in Africa?
Intra-Africa trade and remittance!I really can’t stress the huge gap in this space enough. To move money, people, goods, etc. between African countries requires going via Europe or sometimes Asia, and that really shouldn’t be the case. It is way too expensive, inefficient and slow. Companies like VertoFX and Jetstream are working on different aspects of this space, which is promising.
What would you say to a startup fintech that wants to raise money in the post-COVID environment — what has changed, what hasn’t changed, and what do you think investors will care about in the future now that we know what a pandemic can do?
Ideally, investors want startups that can weather all storms. This is practically impossible as we can’t predict the next storm, so we want founders solving a real need and more importantly, having the ability to adapt to changing market conditions.
What are you most looking forward to for 2021 from a fintech investor perspective?
Traditional companies and traditional banks collaborating with fintechs. I believe we will start to see more of these with open APIs and banking, but I believe it is required sooner rather than later to increase buy-in from regulators.
Kofoworola Agbaje is an Investment Associate for Quona Capital. From her base in Lagos, Nigeria (her hometown), she works on regional sourcing and due diligence of investment opportunities in Africa, and also provides valuable support to Quona’s portfolio companies.