Now Nala has raised $40 million to build its own payment rails allowing global businesses to move money to and from Africa.



Benjamin Fernandes launched&nbsp;his fintech startup&nbsp;Nala in 2018 with the aim of speeding up money transfers within his native Tanzania. Over the next two years, the now 31-year-old former television host and Stanford MBA hit one daunting setback after another.



First, Tanzania’s largest telecommunications provider issued Nala a cease and desist letter, cutting off Fernandes’ access to one of the primary pieces of infrastructure he had been using to transfer money. Then his cofounder quit just a week before demo day at Y Combinator, the startup accelerator Nala had gained entry to in 2019, after five previous unsuccessful attempts. Finally, in 2020, the Covid pandemic hit, reducing the already lackluster demand for Nala’s domestic payment service.



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“We had to shut it down. That was really tough,” says Nala CEO Fernandes, speaking from his New York office a day after the company was featured on the iconic Nasdaq billboard in Times Square. “We had to do layoffs and clean up the team.”



Instead of walking away, over the next two years Fernandes recast and rebuilt Nala into a cross-border remittance service that now enables African migrants working in the U.S. and 20 European nations to send money back home to 11 African countries, including Kenya, Nigeria, Uganda, Tanzania and Rwanda. In all, it now has more than 500,000 registered customers, though none live in Africa.



While Nala isn’t the only one in this business, or always the cheapest service, it’s adding extras built with an understanding of its target market. In Kenya, for example, Nala directly integrates with dominant mobile money service M-Pesa, allowing those working abroad to pay their families’ utility bills back home directly from their account. “What we noticed is that diasporans care about the control of money,” Fernandes says.



This is a growth business. The United Nations projects that Africa’s population will nearly double to 2.5 billion by 2050, making the continent the birthplace of nearly one in four working-age people on Earth. Roughly a million Africans leave each year seeking work.



But Fernandes has even bigger plans. In July, despite a depressed fintech market, his 100-person startup raised $40 million (at an estimated valuation of more than $200 million, according to a shareholder with direct knowledge of the transaction). Only five other African fintechs have raised $40 million or more in a Series A fundraising since 2015, according to PitchBook. San Francisco-based venture capital firm Acrew Capital led the round, and Texas-based VC firm Amplo and DST Global, which manages $5 billion in assets, also invested.



(Most of Nala’s employees are based in Kenya and the U.K. and Fernandes spends most of his time at the London office.)



This isn’t money needed to sustain current operations. In 2023, Nala’s revenue exceeded $15 million, and this past February it became profitable on a generally accepted accounting principles (GAAP) basis, Fernandes says. “We have achieved profitability on the net profit basis,” affirms Nala’s Chief Financial Officer Andrei Klevtsov, who was formerly head of accounting at Wise. “On the EBITDA level the result is the same—we are still a very young company and don’t have any significant adjustments from non-operating activities.”



Instead, Fernandes aims to use the new cash to grow in two ways. First, Nala plans to expand its consumer remittance business to South Asian markets, including India, Pakistan and the Philippines, followed by Latin America.



Second, a share of the new capital will go into securing more licenses and funding the development of Rafiki, a cross-border payment infrastructure designed for global businesses. (Rafiki means “friend” in Swahili, a language spoken predominantly in Tanzania and neighboring Kenya.) As Fernandes tells it, the payments infrastructure in Africa is today only one percent of what it could and should ultimately be. Africa remains the most expensive continent to send money to due to regulatory issues, currency fluctuations, limited competition and a lack of payment infrastructure specifically built for global businesses.



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Growing up in&nbsp;Dar es Salaam, Tanzania, Fernandes didn’t have many tech founders as role models. Still, he wasn’t without inspiration. His parents are both renowned gospel preachers who never went to college, but built the&nbsp;<a href="https://worldagapeministries.com/" rel="noreferrer noopener" target="_blank">World Agape Ministries</a>, and launched an evangelical television station. So at 17, Fernandes started working as a television personality, hosting kids’ talk shows. He then gained international attention covering major sports events such as the 2012 Olympics in London and the 2014 World Cup.



The year after earning his bachelor’s in accounting (with a computer science minor) from the University of Northwestern-St. Paul in Minnesota in 2014, Fernandes was accepted at Stanford business school on a full scholarship as an African MBA fellow. He first started exploring a payments business while at Stanford and says his classmates–steeped in Silicon Valley’s try, fail, and try again startup culture– have been a source of encouragement.



After reinventing Nala in 2021 as a cross-border remittance service, Fernandes used the large social media following he had developed as a former TV host to grow the business. He went on Clubhouse to find customers and was able to market the company to his nearly 450,000 Instagram followers, asking them to test his products. In January 2022, he raised $10 million in funding led by Amplo, a Texas-based VC firm that specializes in international investments.



Nala makes money through foreign-exchange markups–the extra charge it levies on top of exchange rates. And it benefits from helping to supply hard currencies on a continent where many countries are&nbsp;<a href="https://www.forbes.com/sites/segunolakoyenikan/2023/07/02/africa-becomes-a-casualty-in-the-war-against-inflation-as-dollars-dry-up/">facing shortages</a>. “The banks never have enough dollars,” he says. “Because I bring in dollars to Africa, banks are willing to pay me a premium for dollars. So I have leverage on what I can charge for dollars in the market.”



With its new Rafiki infrastructure, Nala aims to create reliable, lower-cost payment rails that streamline payouts and collections for businesses. That means global enterprises, such as payroll and remittance companies looking to trade with Africa but lacking the necessary regulatory approvals, can connect to Rafiki where the infrastructure is already licensed. This would allow them to make payouts to multiple employees and repatriate collections from customers.



“For example, DHL needs to handle collections in Nigeria and repatriate the funds to Germany, where we have an entity,” Fernandes says. “Or consider businesses like Netflix trying to handle collections from customers. That’s the target market for Rafiki.”



These cross-border services are similar to those provided by global fintech companies such as dLocal and Airwallex, which revolutionized payments for businesses in Latin America and Asia, respectively. “Rafiki is the dLocal for Africa,” Fernandes says.



The Rafiki infrastructure business was born out of the founder’s desire to address Nala’s own payment challenges. In the early stages, when transaction volumes were picking up, Nala experienced reliability issues as it used external payment rails—an infrastructure that allows the electronic transfer of money from one person to another. “The cost of operation and support was becoming so expensive for us that we decided it’s better to solve the actual problem,” says Fernades. “We ended up building our own payment rails.”



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Fintech companies&nbsp;such as Remitly, Taptap Send, LemFi and Sendwave also offer services allowing workers to send money back to Africa digitally. In fact, the youngest of these companies launched a year before Nala entered the cross-border payment market. But Nala has tried to distinguish itself in several ways. By securing necessary licenses and regulatory approvals to facilitate money transfers, the startup has established direct connections with banks and telecoms in the region. This allows it to bypass multiple payment networks, which have a history of slowing down transactions, ensuring that funds are delivered directly to the beneficiary’s account.



Fernandes is also aiming to give individual customers more control over how the money they send home is used. “We enable direct bill payment in some countries, such as Kenya, where you can pay for electricity bills, water bills and other services,” he notes. “That’s actually one of our most popular features.”



Now he wants Nala’s business to extend beyond remittances into additional financial services that empower customers. For instance, the startup will soon introduce a feature enabling those working abroad to provide debit cards to their beneficiaries back in Africa that will allow these workers more control over how their hard earned money is spent. Nala is also developing a system to allow migrants to transfer their data, including credit history, to the U.S.



Fernandes has also tried to set his startup apart by prioritizing rate transparency, a feature that is uncommon among fintechs facilitating transactions to Africa. For each transaction, Nala displays the exchange rates offered by its competitors, even when those rates are more favorable to the customer. “That automatically builds a new level of trust with the enterprise,” he says. “A lot of the time, even though we don&#8217;t have the best rates, customers still use us because we are transparent and honest with them.” On average, Nala charges higher fees than Remitly, but Fernandes argues his customers stick with Nala for its transparency.



Service has also been a selling point. Hamad Kasoga, a 32-year-old corporate sales representative at Turkish Airlines who lives in San Francisco, California, previously used Remitly to send money home to Tanzania but switched to Nala last November. Kasoga says he believed he would receive better service with Nala, including more efficient problem resolution in his native language, Swahili.



“It was good to learn that Nala’s customer service speaks Swahili,” Kasoga says. “It gives me the flexibility to feel like I’m working with a company that understands and knows me.”



Fernandes says he has tried to keep costs low. “They&#8217;ve built this business without spending a bunch of cash,” Acrew Capital founding partner Lauren Kolodny says approvingly. “They still have a significant portion of their last round of financing in the bank.” One way it keeps costs low: Nala currently has only one employee in the United States, even though it generates more revenue and transaction volume in the U.S. than in any other markets where it operates.

Benjamin Fernandes-3

This African Fintech Is Giving Workers A Better Way To Send Money Home

Despite the overall funding decline, a significant portion of investments was directed towards climate tech, which accounted for 45% of all startup funding in Africa this year. Experts offer more insights.



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Fintech, while second in total amount raised, had the most startups securing $1 million or more during the period. However, female-founded and female-led startups continued to receive minimal funding, with 85% going to ventures without a female founder and 92% to companies led by male CEOs.
</blockquote>



Venture capital (VC) investments in Africa have hit a four-year low, with startups raising only $780 million in the first half of the year, according to research firm Africa: The Big Deal.



This figure represents a -31% drop compared to the second half of 2023 and a -57% decline from the first half of 2023, taking seasonality into account.



Dotun Olowoporoku, Managing Partner of pan-African seed stage fund Ventures Platform, tells FORBES AFRICA: &#8220;The recent drop is not entirely out of sync with the global trend in the VC &#8216;funding winter&#8217;. However, there’s hope for improvement as several VC funds have recently been closed, providing significant capital reserves, or &#8216;dry powder&#8217;, specifically for early and growth-stage startups in Africa.&#8221;



Two-thirds of the total funding was equity, and one-third was debt — a notable increase from the 17% average debt share since 2019. The bulk of investments, four out of every five dollars, flowed to startups in Africa&#8217;s ‘Big Four’ — Nigeria, South Africa, Kenya, and Egypt — with Kenya alone accounting for one-third of the total funding.



To enhance tech funding in other African countries, Olowoporoku identifies &#8220;seven main factors needed to work in sync to enable growth in the tech ecosystem and, by extension, tech funding”.



“These factors include the availability of seed risk capital, outsized entrepreneurial ambition, high-capacity technical talent pool, a large and expanding market, a sizeable number of curious early adopters, an enabling and responsive regulatory environment, and long-term stable political conditions.



&#8220;While the &#8216;Big Four&#8217; have benefited from some of these factors naturally, but deliberate efforts by ecosystem builders have been essential in integrating these elements to create structural advantages. Other African nations need to enable their ecosystem builders to synchronize these factors and overcome obstacles to bolster their tech funding lands,&#8221; he says.



The transport and logistics sector led the way, securing 28% of the funding, influenced by major deals involving companies like Moove and Spiro. Fintech, while second in total amount raised, had the most startups securing $1 million or more during the period.



However, female-founded and female-led startups continued to receive minimal funding, with 85% going to ventures without a female founder and 92% to companies led by male CEOs.



Kristin Wilson, Managing Partner of venture capital firm Innovate Africa Fund, observes a noticeable shift in investment strategies. &#8220;In theory, it does mean that investors are becoming more selective, focusing on startups with robust business models and clear paths to profitability. In practice, we’ve seen a lot of



regional diversification being explored to uncover untapped opportunities beyond traditional tech hubs like Nigeria, Kenya, and South Africa,&#8221; she tells FORBES AFRICA.



Wilson highlights an intensified emphasis on due diligence, which she hopes indicates a move towards sustainable, scalable solutions, particularly in sectors like fintech and climate tech.



However, she also expects a wave of consolidation within the tech ecosystem. &#8220;The funding crunch forces weaker startups to concede to acquisition offers from stronger startups. Investors should expect slower growth as startups navigate limited funding options, take more cautious approaches to scaling, and focus on core operations to conserve cash.&#8221;



For entrepreneurs seeking funding in this tight market, Wilson advises focusing on business fundamentals and building internal alignment. &#8220;Entrepreneurs should strengthen their revenue models and ensure clarity for boards, investors, and teams. Building internal stakeholder alignment increases the likelihood of maintaining sustainable operations that prioritize efficiency,&#8221; she explains.



Wilson encourages founders to build strong networks and leverage mentorship opportunities. &#8220;Leveraging the time away from chasing unproductive investment conversations allows them to gain valuable insights and quickly identify opportunities that they can capitalize on when capital becomes more available.&#8221;

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African Tech Funding Hits Four-Year Low Amid Global VC Downturn. The Way Forward

Young colleagues checking their crypto investment app

With Funding Down 70%, Here’s What Fintech’s High Flyers Are Worth Now

One of the primary factors contributing to the surge in debt within the continent&#8217;s startup ecosystem is believed to be the decline in equity funding. Experts weigh in.



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&#8220;The preference for debt over equity in these sectors can indicate that startups are looking to avoid diluting ownership and are confident in generating revenue to service debt.”
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According to Briter Bridges&#8217; latest report, titled Debt Financing in Africa’s Innovation Ecosystem, there has been a surge in debt financing, especially in the cleantech and fintech sectors, indicating a shift in funding trends. In the past decade, digital, technology-enabled, and green companies across the continent have secured over $2 billion in disclosed debt funding from 140 funders through more than 200 deals, making up approximately 10% of the total funding during this period.



As equity funding declines, debt financing has rapidly grown, accounting for more than a quarter of total funding to innovative companies in Africa in 2023. Cleantech, specifically, experiences debt-funding representing 50% of the total raised, indicating a changing financing landscape.



Similar to equity, over three-quarters of debt funding is directed to Nigeria, Kenya, Egypt, and South Africa.



&#8220;Over the last 18 months, there has been a notable decline in total equity funding volumes and deal flow to startups in Africa. Between January and October of 2023, investment raised hit $2.7 billion across 600+ deals, about a third less than the funding raised at the same time in 2022,&#8221; states the report.



The report analyses the uneven distribution of debt funding, with cleantech and fintech securing the majority. Cleantech sees dominance in solar home kits and pay-as-you-go products, while fintech leads in asset financing and buy-now-pay-later products. It also reveals that nearly three-quarters of debt funding flows to asset-heavy businesses in cleantech, mobility, agriculture, and logistics.



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“…the outcomes of the COP28 program held in Dubai have played a pivotal role. The agreements reached during this global environmental conference have acted as catalysts, instigating substantial investment inflows into Africa&#8217;s burgeoning innovative ecosystem.”
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A significant finding is the concentration of debt funding in specific mega-deals: &#8220;Just five deals, [including] M-Kopa’s $200m, MNT-Halan’s $140m, Sun King&#8217;s $130m, Wave Mobile’s $92m, and Planet42&#8217;s $75m debt round, accounted for nearly a third of the total funding over the last decade. However, not all debt deals are mega-deals.&#8221;



A noticeable shift is observed, with almost a quarter of debt deals falling within the $1 million to $5 million range, indicating increased access to debt funding at earlier startup development stages.



&#8220;Innovations like convertible notes and revenue-based financing are making this possible, helping to increase the role of debt in Africa’s startup ecosystem and offering entrepreneurs a much-needed alternative to equity,&#8221; explains the report.



Nigerian business analyst Liadi Oluwaseyi Jimoh sees this shift as an indicator of startups&#8217; confidence in revenue generation and their commitment to maintaining ownership.



&#8220;The preference for debt over equity in these sectors can indicate that startups are looking to avoid diluting ownership and are confident in generating revenue to service debt. It also suggests that lenders are gaining confidence in the startups&#8217; long-term viability and creditworthiness,&#8221; Jimoh tells FORBES AFRICA.



He notes that &#8220;Africa, with its burgeoning population and advancing economic development, is experiencing a substantial demand for sustainable energy solutions.&#8221;



According to Jimoh, fintech companies in Africa have reached a level of market readiness, demonstrating sustainable business models that can handle debt financing.



&#8220;The robustness of these models showcases the industry&#8217;s ability to navigate the complexities of debt while maintaining steady growth.&#8221;



Nigerian cleantech expert Michael Osumune also expresses optimism, viewing this trend as a significant boost to the continent&#8217;s innovative landscape.



&#8220;This upward trajectory is notably attributed to several key factors. First and foremost, the outcomes of the COP28 program held in Dubai have played a pivotal role. The agreements reached during this global environmental conference have acted as catalysts, instigating substantial investment inflows into Africa&#8217;s burgeoning innovative ecosystem. These agreements likely underscore a shared commitment towards sustainable practices and technological advancements,&#8221; Osumune shares with FORBES AFRICA.



Focusing on startups addressing energy access, Osumune anticipates substantial funding in this sector. &#8220;This can be attributed to the growing emphasis on clean energy solutions. The continent has witnessed a remarkable shift in the paradigm of clean energy access, with advancements in Electric Vehicle (EV) mobility, solar-powered housing solutions, and eco-friendly cooking technologies, among others. This shift aligns with the global push towards sustainable practices, and investors are keenly capitalizing on the immense potential of fintech solutions addressing energy access gaps.&#8221;



As the new year unfolds, Osumune believes this trend positions African startups on the forefront of addressing environmental challenges while fostering economic development.

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Debt Financing In Africa’s Tech Landscape: Cleantech And Fintech Startups Lead The Shift

<a href="https://www.forbes.com/"></a>Valued at $2.2 billion in 2021, African money-transfer startup Chipper Cash was slow to adapt to the funding collapse of 2022. Now, after layoffs and a deep valuation cut, it’s focusing on the basics–and profitability.



The layoffs at&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions" target="_blank" rel="noreferrer noopener">Chipper Cash</a>, a five-year-old fintech startup that lets African consumers send money to each other, started slowly. In July 2022, four recruiters were dismissed. Seven quality assurance engineers came next, two months later. On a Sunday night in early December at 12:01 AM, about 50 employees, or slightly more than 10% of the company, received emails in their personal accounts telling them they no longer had jobs, and access to their work computers had been terminated. Staffers were stunned by the abrupt execution of the layoff. “There was shock and disgust,” a former employee says. Then, after another two months, even deeper cuts came: Chipper slashed about 30% of its staff.



It was a dramatic turnabout for a company that included “lead with empathy” as one of its four corporate values and had been&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions/">featured in&nbsp;Forbes</a>&nbsp;as one of the most promising startups in fintech just eight months before.



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In February 2023, Zepz, a U.K.-based international money-transfer company formerly known as WorldRemit, smelled blood and approached Chipper with a take-out offer. Zepz sent a letter of intent saying it would pay between 5% and 10% of its own stock to buy the startup, pending more due diligence. Zepz had been valued at $5 billion in an August 2021 fundraise, but market values for fintech stocks had since dropped by 50%. Even if you thought Zepz was still worth $5 billion, which was doubtful at best, the deal would have valued Chipper at between $250 million and $500 million–a brutal discount to the $2.2 billion valuation it fetched in late 2021.



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“I was fully aware that we were living in a time when capital was cheap. And when capital is cheap, that&#8217;s when you want to do the capital-intensive things.&#8221;— Ham Serunjogi
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The talks broke down. A Zepz spokesperson says the company walked away from the deal because they couldn’t get enough financial information from Chipper, and what they did see made them question the viability of the business. Ham Serunjogi, Chipper’s now 29-year-old CEO, says that Chipper provided all information requested, Zepz refused to share its own financial metrics and Chipper was the one to walk away. “I have never had any intention to go out and look for a buyer or to be acquired,” Serunjogi told us in May, speaking from his office at his home in the San Francisco Bay Area.



In April, Chipper lowered its internal 409A valuation–the market value it uses for issuing employee stock options–by 70%, cutting its common stock share price from about $13 in late 2022 to $3.89, according to a former employee and a document viewed by&nbsp;Forbes. It also raised roughly $25 million in convertible debt, says a person familiar with the financing–debt that will convert to equity at a $450 million valuation if Chipper gets acquired or has another big fundraise.



Chipper’s predicament is emblematic of the challenges many fintech startups face today. In 2020 and 2021, as Covid pushed more transactions online and consumers flocked to fintech apps, startups and their backers acted like the fast growth and good times would continue for years. Chipper, which offers low-cost money transfers, bill payment, stock investing and crypto trading for consumers in Africa, plus payment services for businesses there, had amassed five million registered users in seven countries, including Uganda, Ghana and Nigeria, in just the four years after its founding. It booked more than $75 million in revenue in 2021 (excluding cryptocurrency transactions), according to the company, and between $100 and $150 million in 2022, says a person familiar with its finances, compared with $18 million in 2020.



Serunjogi was pursuing a land-grab, growth-at-all-costs strategy, aiming “to capture as much market share and new geographical footprint as possible. And that&#8217;s an expensive endeavor,” he admits. Then as interest rates rose and the stock market sank, investors put away their checkbooks. Profitability suddenly became more important than growth.



Now Chipper is trying to dramatically cut costs and change its strategy while preventing employees from thinking they’re on a sinking ship. “I feel like I’ve grown up so much in the last 12 months,” Serunjogi says.



He has wrestled with the emotional toll of layoffs and a feeling that his employees weren’t taking their jobs seriously enough. In January, he decided to eliminate “lead with empathy” as one of Chipper’s four corporate values. “It was becoming a substitute for accountability,” he says. As he tries to turn the company around, he faces the tough task of still striving for rapid growth–and getting close to profitability–on a much tighter budget.



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Serunjogi grew up in&nbsp;Uganda, and while in high school he saw the problems his dad faced trying to move money through Africa’s disjointed banking system. A couple of years later, he enrolled at Grinnell, a small liberal arts college in Iowa, where he met Maijid Moujaled, a Ghanaian computer science major. The two soon began talking about developing an app that could become a Venmo for Africa.



They cofounded Chipper in 2018 and eventually raised $300 million in funding from investors including FTX, Ribbit Capital and Bezos Expeditions. Serunjogi spent aggressively to grow his customer base because of the nature of the money-transfer business: if you’re a consumer in Nigeria, you’d rather be able to send money to twenty different countries than two. “I was fully aware that we were living in a time when capital was cheap. And when capital is cheap, that&#8217;s when you want to do the capital-intensive things,” he says.



At the end of 2021, Chipper created its 2022 financial plan and intended to keep burning through large sums of cash, assuming capital would still be abundant. As tech stocks tumbled through the spring of 2022, Chipper began revising its plans. But while&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/07/28/in-fintech-2022-is-becoming-the-year-of-layoffs" target="_blank" rel="noreferrer noopener">many fintech companies started doing layoffs that summer</a>, Serunjogi and Moujaled held out.



Serunjogi focused on driving Chipper as fast as possible–one way he tried to do that was by keeping the board small. Though he insists he has a large group of advisors, Chipper only had (and still has) just three voting board members: Serunjogi, Moujaled and Dan Kimerling, who runs fintech-focused venture capital firm Deciens. Similar-stage startups usually have five or more. “At the early stage of a business, the founders’ vision still has a premium. You&#8217;re trying to execute on something you uniquely see,” Serunjogi says.



By mid-2022, Serunjogi wanted to slow down expansion, but he concluded Chipper had already progressed so far on some projects that it would be too costly or wasteful to abandon them. One example: The company had already done much regulatory legwork to launch money transfers simultaneously in 10 new nations, each with its own set of legal requirements. So it charged ahead anyway with the big rollout over a two-week period in the fall of 2022.



When asked whether he chases too many goals at once, Serunjogi says, “If you set a goal of 10 versus a goal of 100, you will get to 9 out of 10, and you&#8217;ll get to 90 out of 100 … I strongly believe in setting stretch goals–that has been my style.”



Chipper hired about 150 employees in 2022, hitting almost 450 at its peak size. It spent aggressively on marketing, paying spokespeople like&nbsp;<a href="https://www.youtube.com/watch?v=SqkjPTzP_6Y" target="_blank" rel="noreferrer noopener">Burna Boy</a>, Africa’s most streamed artist, to appear in ads. Within the fintech industry and in Africa, Chipper was gaining attention. In the middle of last year,&nbsp;Forbes&nbsp;published an article chronicling&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2022/06/06/how-two-africans-overcame-bias-to-build-a-startup-worth-billions" target="_blank" rel="noreferrer noopener">Chipper’s founding story and fast growth</a>.



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When crypto exchange&nbsp;FTX collapsed suddenly last November, the mood inside Chipper grew much darker, former employees say. Sam Bankman-Fried’s company had been a major investor in Chipper’s 2021 mega funding round, and staffers found the situation deeply unsettling. It also exacerbated the bear market for the digital asset industry and dampened interest in something that had been helping Chipper attract new users: crypto investing.



With marketing efforts drastically reduced, Chipper saw its number of active users shrink in 2022, according to a former employee, and though it had more than five million registered users, only about one million of them were engaging with the app monthly, the company says. Serunjogi admits Chipper has seen a dip in usage and attributes it to Chipper’s raising prices on money transfers and other features to focus more on profitability. He says that new-user signups and “people who use multiple products” still “continue to fare quite well.”



Chipper will soon start offering U.S. dollar-denominated accounts to African customers to try to entice more users. Serunjogi says receiving international payments has been one of the most requested features, particularly for freelancers earning a living online. While crypto was once a major growth driver for Chipper, the startup seems to be going back to basics. “We’re essentially giving anyone access to one of the most trusted currencies in the world,” he says.



On top of spiking interest rates and a dormant funding market, Chipper has been facing another macroeconomic headwind: the naira, Nigeria’s currency that Chipper needs to hold to enable customers’ money transfers, has dramatically declined in value. It had been falling since early 2020, and in the second half of 2022 it lost another 8%, ultimately contributing to a negative gross profit margin for Chipper, an unusual financial profile for a company of its size. Today Serunjogi says Chipper has a positive gross margin.



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When the fintech market&nbsp;recovers from its deep downturn, entrepreneurs’ approaches to layoffs will likely turn out to have had a major impact on startups’ survival and trajectory. At Chipper, Serunjogi and Moujaled have done at least five sets of layoffs over the past 13 months. Judging by the frequency and increasing depth of the cuts compared with those of other major fintechs, Chipper waited too long to get lean.



“Layoffs were agonizing decisions. That is the stuff that kept me up at night,” Serunjogi says. “It’s like a piece of your humanity dies … Imagine having a conversation with people who you really like, who are very good, who made sacrifices for the business to be where it is today. They depend on that income. And you tell that person, ‘I have to cut you.’ And they have a family to look after.”



Why didn’t he opt for a smaller number of deeper cuts to get them over with faster? “These are human beings we’re talking about,” he says. “If I can save someone&#8217;s job, I&#8217;m going to try to find a way to save it until clearly it doesn&#8217;t make sense to be saved.” He adds that some international rules require companies to do layoffs over a period of three months, which drags out the process.



Some former Chipper employees think Serunjogi has botched the communication of bad news over the past year. For instance, after layoffs began, workers started asking questions about revenue and how much cash was left in the bank at company-wide meetings. Serunjogi often responded to the effect of, “Why do you guys keep asking this? You don’t need to know,” according to a former employee. Another staffer felt Chipper became a “very secretive environment.”



“We have various responsibilities and confidentiality we have to maintain in running a business,” Serunjogi says. “In all our all-hands meetings we used to show revenue, revenue growth by product, et cetera–until people started leaking it. We would start to see these things showing up in the press,” he says, chuckling.



He started to believe employees felt too entitled and weren’t taking their jobs seriously enough. That led him to remove the “lead with empathy” corporate value–he thought people were using it to excuse mediocre performance. Chipper replaced it with “be customer obsessed.”



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“Don’t mistake the early successes we’ve had with ‘we’ve made it.’ No, we can still die.”— Ham Serunjogi
</blockquote>



“If you make a mistake, I have to come down hard on you, because the consequences for all of us are that much greater [at a startup],” Serunjogi says. “Don’t mistake the early successes we’ve had with ‘we’ve made it.’ No, we can still die.” He admires Bill Gates for working all the time and not taking vacation during Microsoft’s early days, and he appreciated&nbsp;<a href="https://www.forbes.com/sites/edwardsegal/2022/11/17/elon-musks-ultimatum-to-twitter-employees-ramps-up-companys-crisis/">Elon Musk’s November 2022 ultimatum to Twitter employees</a>&nbsp;that staying at the company would require “extremely hardcore” work and long hours.



In the spring of 2023, some employees began saying Chipper had just ten months of cash left in the bank, with one posting it in&nbsp;<a href="https://www.glassdoor.com/Reviews/Employee-Review-Chipper-Cash-RVW75333016.htm" target="_blank" rel="noreferrer noopener">a Glassdoor review</a>. People inside the startup were asking how it could have blown through the $300 million it raised, according to a former engineering manager.



Regarding Chipper’s rumored short runway, “I genuinely don&#8217;t know why and who would say something like that,” Serunjogi says, expressing frustration that anyone would discuss internal company matters publicly. “We have a tremendous amount of money on our balance sheet, so we’re fine,” he told us in late May.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Serunjogi doesn’t like talking&nbsp;much about the specifics of what he would have done differently if he could do it all again. When asked the question multiple times, he told us, “We are laying the foundation for what is going to make us successful over the next 10 or 20 years. I obsess less about what was happening in the last six months or three months or 12 months.” He concedes there are many things he’d do differently but demurs from spelling them out and says, “We are one of the most successful companies in Africa.”



What is clear: Chipper has cut nearly 175 people and scrapped plans to expand into Europe and the Middle East for now, since entering a new country takes months of work–it requires hiring lawyers and consultants and sometimes staffing at least 10 people in a new nation. It has refocused on Africa, cutting many U.S. employees who sit thousands of miles away from its customers. Serunjogi plans to hire fewer than 50 people this year. The marketing budget has been “meaningfully scaled back,” Serunjogi says, and he claims the company is “about to be profitable.”



Somehow, when asked to reflect on the past year, the young entrepreneur always comes back with a positive spin. “What we’ve achieved so far–if I went back and started the whole thing again, I would be very happy to come back to that same exact point.”

Ham Serunjogi and Maijid Moujaled by Ethan Pines for Forbes 130L-03-0027

Inside Chipper Cash’s Grueling Battle To Survive The Fintech Winter

Forbes2021-86

Nigeria’s Fintech Frenzy: Onwards And Upwards

Sweden-based Klarna is Europe’s biggest privately held fintech company with 4,000 employees and a $31 billion valuation, pumped up by investors like Softbank, General Atlantic and BlackRock. The company has become elephantine in such a short time by offering customers the ability to make purchases and pay later, making money by charging merchants to utilize Klarna’s payment technology. Today Klarna names a new investor: rapper, designer and producer A$AP Rocky.&nbsp;



“It’s a radical way to approach the crediting system,” says Rocky (real name Rakim Mayers), 32. “It helps people with financial literacy.”



In addition to the company’s tremendous growth, Rocky was motivated to invest in Klarna from his own experiences growing up in Harlem. He notes the difficulties making payments, especially on student loans with interest, for people from low-income backgrounds. “You’re setting yourself up for financial debt,” he says. “There’s no system that helps us deal with things when it comes to student loans, the IRS, banking or credit.” He describes Klarna as a “layaway plan” at a global scale.



This is a new chapter in the “funny history” (Rocky’s words) between the performer and Sweden. In August of 2019,&nbsp;<a href="https://www.forbes.com/sites/isabeltogoh/2019/08/14/aap-rocky-found-guilty-of-assault-handed-suspended-sentence-over-stockholm-brawl/?sh=24f16c994ebf">Rocky was released</a>&nbsp;back to the United States after the country held him in pretrial detention—on an assault charge—after a post-concert fight in Stockholm. Rocky’s cause sparked international outrage, fueled in-part by then-President Donald Trump, who lashed out on Twitter to advocate for the rapper’s release and return to the U.S.&nbsp;



Now, reclaiming his relationship with Sweden as an investor in one of the country’s most significant companies, Rocky (who starred on the&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2016/02/09/aap-rockys-sequel-a-cash-prince-aims-for-the-fashion-crown/?sh=4c5f206a6052">2016&nbsp;Forbes&nbsp;30 Under 30 cover</a>) will curate upcycled and vintage fashion experiences in the Klarna smartphone app.&nbsp;



For Klarna’s&nbsp;<a href="https://www.forbes.com/profile/sebastian-siemiatkowski/?sh=599119366e25">billionaire CEO and cofounder Sebastian Siemiatkowski</a>, bringing Rocky to his cap table is a strategic brand move. Klarna prides itself on being the anti-bank bank: its color is bubblegum pink and it rans ads in major cities with investor Snoop Dogg surrounded by Afghan Hounds. “We’re a very diverse group of people with over 50 nationalities represented, speaking multiple languages that have a very different approach to business,” says Siemiatkowski. “We wanted our brand to represent that—to represent approachability and availability. We also did want to add a portion of fun to it.”&nbsp;



The company’s trajectory has been anything but relaxed. Making the bulk of its revenue from charging merchant fees between 3 and 7%, revenue grew 37% from 2019 to 2020 to $1.2 billion. Klarna has over 90 million active users around the world who make an average of 2 million transactions per day with over 250,000 merchants like Nike, Amazon and Sephora.







Buy now, pay later, however, has led to backlash by critics who say Klarna encourages overspending. “A decade on from the financial crisis, a new generation—some of whom were barely out of primary school during the last credit crunch—is being courted by new types of lenders who are rewriting the language of debt for the Instagram era,” said the&nbsp;<a href="https://www.ft.com/content/8c751ac6-bb63-11e8-94b2-17176fbf93f5" target="_blank" rel="noreferrer noopener">Financial Times</a>&nbsp;in 2018 of Klarna.&nbsp;



The company insists it’s an antidote to the credit system. A representative for Klarna says: “Each new transaction is evaluated before it gets approved, and we have limits in place on how much shoppers can spend when using our services. Every time a customer makes a transaction using Klarna, we reassess their ability to repay and evaluate if the payment option they wish to use is suitable for them at that time.” They also note that customers are banned from using Klarna until their outstanding balance has been paid. The company also rarely charges interest to customers, unlike creditors.



For all these reasons, Rocky believes Klarna is his best investment yet. “I’m really hands-on involved,” says Rocky. “It’s a no-brainer.”



By Alexandra Sternlicht, Forbes Staff

2019 Rolling Loud LA

A$AP Rocky Becomes The Latest Investor In $31 Billion Fintech Platform Klarna

Stay-at-home consumers and stimulus checks have been a boon for online installment financing, digital banks and day trading.



In 2015, Nick Molnar was living with his parents in Sydney, Australia, and selling jewelry from a desktop computer in his childhood bedroom. Hocking everything from $250 Seiko watches to $10,000 engagement rings, the 25-year-old had gotten so good at online marketing that he had become Australia’s top seller of jewelry on eBay, shipping thousands of packages a day.



That same year, he teamed up with Anthony Eisen, a former investment banker who was 19 years his senior and lived across the street. They cofounded Afterpay, an online service that allows shoppers from the U.S., U.K., Australia, New Zealand and Canada to pay for small-ticket items like shoes and shirts in four interest-free payments over six weeks. “I was a Millennial who grew up in the 2008 crisis, and I saw this big shift away from credit to debit,” the now 30-year-old Molnar says today. Either lacking credit cards or fearful of racking up high-interest-rate debt on their credit cards, Molnar’s generation was quick to embrace this new way to buy and get merchandise now, while paying a little later.



Five years later, Molnar and Eisen, who each own roughly 7% of the company, have become billionaires—during a pandemic. After initially tanking at the start of lockdowns, shares of Afterpay—which went public in 2016—are up nearly tenfold, thanks to a surge in business tied to ecommerce sales. In the second quarter, it handled $3.8 billion of transactions, an increase of 127% versus the same period a year earlier.



<hr class="wp-block-separator"/>



<h3 class="has-text-align-center has-vivid-red-color has-text-color wp-block-heading">Buy Now, Pay Later</h3>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">After a steep drop in Afterpay’s stock in March, the eCommerce boom and credit card-weary Millennials have propelled the installment payment company’s stock to record highs, nearly doubling its value in six months.</blockquote>



<hr class="wp-block-separator"/>



They are not the only ones whose fortunes have taken off in the last few months. According to Forbes’ analysis, at least five fintech entrepreneurs including the two Aussies have been vaulted into the billionaire rankings by the pandemic. Others include Chris Britt, founder of digital bank Chime, and Vlad Tenev and Baiju Bhatt, the co-CEOs of “free” stock trading app Robinhood. Several other founders from such companies as Klarna and Marqeta have also gotten boosts and are suddenly approaching billionaire status.&nbsp;



As in other sectors, the Covid recession has created both fintech winners and losers. For example, LendingClub, which offers personal loans to higher-risk consumers, laid off&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/21/lending-club-is-laying-off-460-employees-or-30-of-staff/#4ddcb1bc3c7e">30% of staff</a>; small business lender On Deck was sold in a&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/05/11/fintechs-for-sale-post-covid-its-partner-or-perish-for-many-startups-heres-a-buy-list/#2747c79f6b3b">fire sale</a>.



But for a sizable crop of consumer-facing and payments-related fintechs, the virus has delivered a gust of growth, just as it has for e-commerce behemoth Amazon and&nbsp;<a href="https://www.forbes.com/sites/greatspeculations/2020/09/14/zoom-docusign-okta-work-from-home-stocks-poised-for-further-gains/#76e7336611b2">work-from-home players</a>&nbsp;Zoom, Slack and DocuSign.&nbsp;



“Consumer fintech adoption was already strong pre-pandemic, especially among the 20s to early 40s age group,” says Victoria Treyger, a general partner who leads fintech investing at Felicis Ventures. “The pandemic has become a growth rocket, fueling the rapid acceleration of adoption across all age groups, including 40- to 60-year-olds.”



Several Covid-driven developments are helping specific types of fintech players. For example, consumers’ shift to more online spending and delivery services is a boon to certain companies powering payments. Marqeta, a specialized payments processor whose clients include Instacart, DoorDash and Postmates, has been in talks to go public at an&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/07/17/pandemic-power-payments-company-marqeta-could-fetch-8-billion-in-ipo-doubling-value/#3a7e25491c9e">$8 billion valuation</a>, four times&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2019/03/26/it-took-three-tries-but-this-entrepreneur-transformed-his-struggling-startup-into-a-2b-unicorn/#4cdfdd23706d">what it was valued at in March of 2019</a>. That would give CEO Jason Gardner, who owns an estimated 10% of Marqeta, a stake worth $800 million.



Meanwhile, the $2 trillion-plus CARES Act Congress passed in March, with its $1,200 per adult stimulus checks, student loan payment holiday and (now expired) $600 a week unemployment supplements, helped many Americans keep financially above water—and some digital banks like Chime to prosper. 



<hr class="wp-block-separator"/>



<h3 class="has-text-align-center has-vivid-red-color has-text-color wp-block-heading">Debit It!</h3>



<h4 class="has-text-align-center has-white-color has-black-background-color has-text-color has-background wp-block-heading">Spending on the travel and luxury items U.S. consumers typically put on credit cards has fallen with the pandemic, while spending on debit card necessities is up.</h4>



<hr class="wp-block-separator"/>



In the second quarter of 2020, amid Covid lockdowns and fears, consumers slashed spending on travel, restaurants and luxury items they usually put on their credit cards, but continued to spend on necessities and smaller items—the sort of things they’re more likely to pay for with debit cards. During that quarter, Visa credit card transaction volumes were down 24% from the year before, while debit card transactions were up 10%, according to research firm MoffettNathanson. And debit cards (rather than checks or credit cards) are the spending vehicle most frequently offered by fintech neobanks like SoFi, Dave and MoneyLion.



San Francisco-based digital bank Chime, in particular, has used the stimulus payments to its advantage. In mid-April, about a week before the $1,200 government-stimulus checks started hitting Americans’ accounts, the company&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/09/digital-bank-chime-now-offering-stimulus-check-advance-to-100000-users/#40758dfb1c10">advanced customers that money</a>, eventually extending over $1.5 billion. “Following the stimulus advance, we had the largest day for new enrollments in the history of the company,” CEO Britt reports.



The pandemic has depressed total consumer spending, and the unemployment rate remains at a high 8.4%—two factors that affect Chime’s middle-income customer base. Yet on a per-user basis, “average spend per customer is up over last year,” Britt says. “Part of the reason for that is the government programs around stimulus payments and unemployment.”&nbsp;



Today, Chime’s annualized revenue is running at a $600 million rate, according to a person familiar with the private company’s numbers. At its eye-popping new valuation of $14.5 billion announced along with a $485 million fundraise in mid-September, venture capitalists are valuing the company at 24 times its revenue. Some investors are asking if Chime should get such a lofty value when Green Dot, a publicly traded fintech that offers checking accounts and prepaid debit cards for low-income customers, trades at two times revenue. “We really look more like a payments-processing business,” answers Britt. That’s because virtually all of Chime’s revenue comes from interchange—the fees merchants pay when Chime’s users swipe their debit cards. The company doesn’t make money on interest through its new secured credit card (that’s a starter card where the holder puts up money to cover his or her credit limit), although Britt says he doesn’t rule out lending in the future.&nbsp;



Now Britt himself has sailed into the “three comma club.” Forbes estimates his Chime stake is at least 10%, meaning his holdings are worth $1.3 billion-plus (Forbes applies a 10% discount to all private company holdings). And he’s planning an IPO. “Over the next 12 months, we have a number of initiatives to get done to make us even more IPO-ready,” he says.&nbsp;



<div class="wp-block-image is-style-default"><figure class="alignleft size-large is-resized"><img loading="lazy" decoding="async" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg" alt="" class="wp-image-47930" width="286" height="360" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg 812w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-300x379.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-600x757.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-238x300.jpg 238w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-768x969.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1218x1536.jpg 1218w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1624x2048.jpg 1624w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled.jpg 2029w" sizes="auto, (max-width: 286px) 100vw, 286px" /><figcaption>Robinhood Co-Founder and Co-CEO Baiju Bhatt. (Photo by Steve Jennings/Getty Images for TechCrunch)</figcaption></figure></div>



Then there’s the Robinhood phenomenon. The boredom of being stuck at home, wild stock market swings, and government stimulus checks have turned some Millennials and Generation Zers into day traders and options players. Robinhood’s most recent fundraising round in September gave it an $11.7 billion valuation and its cofounders a paper net worth of $1 billion each. But considering Morgan Stanley’s $13 billion February acquisition of E-Trade and Schwab’s earlier purchase of TD Ameritrade for $26 billion, some think Robinhood could garner a $20 billion valuation if it went public or were acquired. 



If there’s one fintech segment that has been an unalloyed pandemic winner, it’s the business Afterpay is in: online point-of-sale installment financing. It’s benefitting from both consumers&#8217; shift to online buying and their reluctance, in these uncertain economic times, to take on new credit card debt.



While Afterpay’s Nick Molnar and Anthony Eisen hit billionaire status in July, their competitors aren’t far behind. Take Klarna, which was founded in Stockholm in 2005 and entered the U.S. market in 2016. Two of the three founders, Sebastian Siemiatkowski and Niklas Adalberth, met while flipping patties at a Burger King in Sweden. They pioneered the buy-now, pay-later model in fintech, calling it “try before you buy” and letting people own products for 30 days before making their first payment. (That’s a lot more attractive than old-fashioned layaway, the store system once popular for Christmas gifts and large appliance purchases, in which buyers had to make all their installment payments before getting an item.)



Klarna charges retailers 3% to 4% of each transaction—slightly lower than the 4-5% Afterpay charges—to offer its service. One key difference that separates the two companies: Klarna is becoming a full-fledged financial services business. It became a licensed bank in Sweden in 2017 and offers longer-term financing of up to 24 months, with interest charged, for high-ticket items like laptops sold through a small number of retailers. Siemiatkowski has already turned Klarna into a digital bank in Europe with a debit card for spending on everyday purchases. He’ll likely do the same in the U.S. soon.



<div class="wp-block-image is-style-default"><figure class="alignright size-large is-resized"><img loading="lazy" decoding="async" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg" alt="" class="wp-image-47928" width="350" height="233" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-2048x1365.jpg 2048w" sizes="auto, (max-width: 350px) 100vw, 350px" /><figcaption> Co-founder and CEO of Klarna Sebastian Siemiatkowski . (Photo by Noam Galai/Getty Images for TechCrunch)</figcaption></figure></div>



The pandemic has catapulted Klarna’s business onto a steep trajectory. By the end of 2020’s first half, its U.S. customer base hit nine million, up&nbsp;<a href="https://www.klarna.com/assets/sites/15/2020/08/27060125/Press-release-Klarna-interim-report-January-June-2020.pdf" target="_blank" rel="noreferrer noopener">550%</a>&nbsp;from the same period the year before. Globally, 55,000 consumers are downloading the Klarna app every day, more than two times last year’s pace. Klarna is now available in 19 countries, has 90 million users and expects to bring in more than $1 billion in revenue this year. When it raised a new round of funding last week, its valuation nearly doubled from a year ago, hitting&nbsp;<a href="https://www.klarna.com/international/press/klarna-announces-650m-funding-round-to-further-accelerate-global-growth" target="_blank" rel="noreferrer noopener">$10.7 billion</a>.



Cofounder Victor Jacobsson has a 10% stake, while Siemiatkowski’s has 8% in the still-private company. (Niklas Adalberth retains just 0.4% after selling some shares to fund his philanthropic organization and investing in startups. Neither he nor Jacobsson are still involved in Klarna.)



<blockquote class="wp-block-quote is-style-large is-layout-flow wp-block-quote-is-layout-flow">&#8220;Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, and it now finances purchases of Mirror </blockquote>



Not surprisingly, as the installment purchasing fintechs gain more customers and attention, they’re also facing additional scrutiny from regulators. In March, Afterpay agreed to fork over&nbsp;<a href="https://dbo.ca.gov/2020/03/16/point-of-sale-lender-afterpay-agrees-to-cease-illegal-loans-pay-refunds-in-settlement-with-the-department-of-business-oversight/" target="_blank" rel="noreferrer noopener">$1 million</a>, including $905,000 in consumer refunds, after California’s Department of Business Oversight (DBO) concluded the&nbsp;<a href="https://www.afterpay.com/en-AU/terms-of-service#:~:text=Late%20Fee%3A%20%2410%20Late%20Fee,the%20payment%20is%20still%20unpaid." target="_blank" rel="noreferrer noopener">late fees</a>&nbsp;Afterpay charges meant it was running an unlicensed lending business. “Afterpay rejects the view that the Company operated illegally,” the Australian company said in a&nbsp;<a href="https://www.afterpaytouch.com/images/17032020-US-Regulatory-Settlement.pdf" target="_blank" rel="noreferrer noopener">statement</a>. “While Afterpay does not believe such an arrangement required a licence from the DBO, Afterpay has agreed to conduct its operations under the DBO licence as a part of this settlement.” A spokesperson adds that Afterpay “has been applying for, and has been granted licenses [in other states] where needed.” In 2017, Klarna was fined $15,000 in New Hampshire for operating without a lending license. Today Klarna has such licenses in every U.S. state.&nbsp;



Another fintech winner in the installment-payment business is Silicon Valley-based Affirm, the creation of serial entrepreneur Max Levchin, a founder of PayPal, which itself<a href="https://www.forbes.com/sites/jeffkauflin/2020/08/31/paypal-enters-installment-loan-business-targeting-fintechs-affirm-and-afterpay/#1b1568291478"> jumped into the installment business</a> just last month. Between <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/4VcgC4xW0MfEm41WiO1FBR?domain=affirm.com" target="_blank">November 2019</a> and <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/f0yMC5yAGNi3xkGKtO8dp_?domain=affirm.com" target="_blank">July 2020</a>, Affirm nearly doubled its U.S. users to 5.6 million. It raised $500 million last week at a valuation of more than $5 billion, up from $2.9 billion last year. While Levchin’s exact stake is undisclosed, it’s likely worth hundreds of millions. 



<figure class="wp-block-image size-large is-style-default"><img loading="lazy" decoding="async" width="1024" height="683" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg" alt="" class="wp-image-47929" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-2048x1365.jpg 2048w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption> PayPal Co-Founder &amp; Affirm CEO Max Levchin. (Photo by John Lamparski/Getty Images)</figcaption></figure>



Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, whose sales have surged as affluent young consumers, missing the motivation of group exercise classes, have flocked to buy the $2,000-plus stationary bikes with their streaming workout classes. Affirm also now finances purchases of Mirror, the hot $1,495 in-home fitness coaching device acquired by Lululemon this summer.&nbsp;



Of course, the fintech companies’ current lofty valuations depend on consumer spending staying strong and consumers retaining some of the online shopping habits they’ve developed over the past six months. With a pre-election agreement between Congress and the White House on a new stimulus package looking unlikely and the future course of Covid-19 unknown, there are no guarantees. But for now, these fintechs are riding high.



By Jeff Kauflin, Forbes Staff &amp; Eliza Haverstock ,Forbes Staff



With additional reporting by Max Jedeur-Palmgren.

TechCrunch Disrupt NY 2016 – Day 2

The Pandemic Plutocrats: How Covid Is Creating New Fintech Billionaires

People’s safety concerns about transmission through contact has resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.  



While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.



This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.



Derek Cikes, Commercial Director at Payflex, says the pandemic represents a watershed for the payments industry.



“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments&nbsp; to the fore including lower fees,&nbsp; convenience, seamless delivery, greater security, and more flexible payment options,” says Cikes who adds that what makes this trend so interesting, is that historically, people used to hoard cash in times of crisis. Now, the opposite is occurring.



<a rel="noreferrer noopener" href="http://newsroom.mastercard.com/mea/press-releases/mastercard-study-shows-south-african-consumers-make-the-move-to-contactless-payments-for-everyday-purchases-seeking-touch-free-payment-experiences/" target="_blank">A study</a> by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and eight percent for transport.



Similarly, recent figures from <a rel="noreferrer noopener" href="https://www.bain.com/insights/the-covid-19-tipping-point-for-digital-payments/" target="_blank">Bain</a> echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 &#8211; 10 percentage point increase globally, above what was previously anticipated at 57% before Covid-19 to 67% after Covid-19.   



Are contactless payments here to stay?



Cash is perceived as a vehicle for the transmission of the virus.&nbsp;As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.



 “Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers.&nbsp; Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” says Cikes.



Creation of new payment habits



From banking facilities like tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking&nbsp;and&nbsp;e-wallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.



“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” says Cikes.



Retailers drive adoption of digital payments



Both online and brick and mortar retailers are helping to accelerate this trend with stores like Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods.&nbsp;There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.



Another contactless payment method driving this trend is e-wallets with over&nbsp;<a href="https://www.theafricareport.com/25846/africa-over-500-million-mobile-money-users-expected-in-2020/" target="_blank" rel="noreferrer noopener">500 million mobile money</a>&nbsp;users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.



 Flexibility needed more than ever



According to&nbsp;<a href="https://www.transunion.com/blog/financial-hardship-study/South-Africa" target="_blank" rel="noreferrer noopener">TransUnion’s Financial Hardship Survey</a>,&nbsp;conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82% of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R 7 542.90 when paying bills or loans.



“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” says Cikes.



A report by&nbsp;<a href="https://blog.globalwebindex.com/trends/coronavirus-international-study/" target="_blank" rel="noreferrer noopener">GlobalWebIndex&nbsp;</a>shows that 83% of South African consumers are expecting flexible payment options from brands.



“We have seen this play out in the increased uptake of our Payflex&nbsp;Buy Now Pay Later&nbsp;payment solution, which allows people to make interest-free payments over two paychecks,” says Cikes.



With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.



“Digital payment solutions provide an avenue which safeguards against physical interaction, enabling both consumers and business to navigate the environment as the economy is restarted.&nbsp; These digital adoptions will not only help manage the current situation but will also have far-reaching benefits, facilitating a more customer-centric, efficient and resilient economy,” concludes Cikes.



-Derek Cikes, Commercial Director, Payflex

Financial technology concept.

Op-Ed: From Cashless To Digital: The Covid-19 Tipping Point

The billion-rand spaza shop (township tuckshop) industry in
South Africa is not a regulated sector. Most transactions at these shops are in
cash, and not electronically tracked. This makes it difficult for spaza shops
to be financially credited in South Africa.



But there are now fintech solutions such as Zande Africa offering financial and distribution platforms, operating out of warehouses, to assist these spaza shops in their townships, by delivering daily necessities to them.



READ MORE: <a href="https://www.forbesafrica.com/economy/2019/02/20/in-pictures-the-occupation-of-unemployment-in-south-africa/" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">IN PICTURES | The Occupation Of Unemployment In South Africa</a>



&nbsp;In this image, Tedy
Tizedo, the owner of Thandabantu, a tuckshop in Ermelo in the Mpumalanga
province of South Africa, pays a local Zande Africa agent for delivering bread
from its distribution warehouse. 



&nbsp;The fintech company
provides cash and credit service offerings to all spaza shop owners and creates
relationships with them for better pricing and service.&nbsp;

Credit

Cash, Credit  And Community

Venture capital-backed financial technology companies raised a record $39.57 billion from investors globally in 2018, up 120 percent from the previous year, according to research by data provider CB Insights published on Tuesday. 



Funding was raised through 1,707 deals, up from 1,480 in 2017, the research said.



The surge in funding was due in large part to 52 mega-rounds, or investments larger than $100 million, which were worth $24.88 billion combined, the research said.



A $14 billion investment in Ant Financial, the payment affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd, accounted for 35 percent of total fintech funding alone last year, the research said.



In the last three months of the year, five companies joined the coveted ranks of fintech “unicorns”, or companies valued at more than $1 billion. These include credit card provider Brex, digital bank Monzo and data aggregator Plaid.



Venture capital investors have been pouring billions of dollars into fintech companies, in the hopes that they can gain market share from incumbent financial institutions by offering easier to use and cheaper digital financial services.



Fintechs have emerged globally across all sectors of finance, including lending, banking and wealth management.



While the large rounds minted new unicorns and led funding to hit a record high in 2018, CB Insights estimates these will likely delay initial public offerings.



“IPO activity is likely to remain lackluster in 2019,” the research reads.



Asia saw the biggest jump in number of deals in 2018, growing 38 percent from the previous year and accounting for a record $22.65 billion, according to the study.



In the United States, fintechs raised a record $11.89 billion through 659 investments, while the number of deals dropped in Europe, but funding reached a record $3.53 billion. -Reuters



-Anna Irrera

1096088158

Fintech Companies Raised a Record $39.6 Billion in 2018: Research

In its research report on financial technology (FinTech), The Future of FinTech and Banking, Accenture signalled that the revolution is well under way. The report indicated that global investment in FinTech companies had tripled to $12.2 billion last year, up from $4 billion in the previous year. Although it said Africa was lagging behind, the continent holds a lot of promise.
In the latest report by WorldRemit, Currency Cloud and Ixaris, titled Payments Innovation Jury Report 2015, Africa is seen as more promising than the traditional financial capitals of the world.
The digital revolution is not new in Africa. Mobile payment systems on the continent have set the pace internationally. The extraordinary story of M-Pesa, which in just six years enabled more than 15 million Kenyans to send and receive money electronically, is a good example. With more than 140 million registered accounts, mobile payments in Africa are quickly becoming mainstream. M-Pesa’s recent innovations, such as M-Shwari, a mobile bank account which facilitated loans worth of more than $200 million in Kenya last year, is set to continue blazing a trail in global FinTech innovation.
The remittance market is another important area for African FinTech. With the amount of money sent to sub-Saharan Africa via mobile phones set to hit $33 billion this year, it is easy to see why this market is attractive. Innovation is expected to bring down remittance charges, which currently stand at twice the global average according to the Overseas Development Institute, an independent think tank. Innovators, such as MFS Africa, are honing in on the intra-African remittance market, where remittances can rise up to 20% of face value. World Bank figures indicate that $11 billion is sent within Africa each year and African companies are taking advantage of the 650 million mobile phone subscriptions to tap into this field.
Agriculture is another sector being invaded by FinTech. Already, several innovations are bringing financial access points closer to the farmer. E-wallet in Nigeria allows farmers to receive subsidised seed and fertiliser vouchers on their mobile phones. Likewise, Intellect Tech in Kenya is helping farmers and insurance firms track compensation claims. With proven success, it’s not surprising that funding has followed. In June, two start-ups were awarded $50,000 through Village Capital FinTech for Agriculture: East Africa 2015.
Despite the obvious success, there are still many barriers for FinTech in Africa. One key obstacle is regulation. Africa has more than 50 countries, each with their own regulations, resulting in restricted capital flow, like the exchange control that is still in place in South Africa. Another issue is the focus on local problems – innovators need to realize that FinTech is part a global ecosystem. Nonetheless, Africa still faces a massive opportunity to lead the way in the FinTech evolution.
Although funding was a major barrier in the past, the situation is slowly improving. Incubation hubs have sprung up all over Africa, kick-starting the next generation of technologists. Rand Merchant Insurance (RMI) in South Africa has a club called AlphaCode that helps provide networking opportunities for the local FinTech entrepreneurs. Recently, Barclays Bank Kenya launched an innovation lab that will provide a base for local developers to come up with game-changing ideas that will change the future of the financial industry. All this makes the sector an attractive option for investors. Investment in FinTech companies is expected to double to $8 billion in 2018, according to Accenture.
With a young population set to explode in the coming decades, Africa is positioned to benefit from financial innovation. FinTech is making essential services more accessible to the wider population. The African companies providing these services are on the march and there doesn’t seem to be any way to stop them.

Tag: FinTech

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