African startups should adopt a cautious approach to fundraising in the current climate. That was the consensus of fintech players who spoke during a fireside chat on “Innovating in Payments and Tech” at Moonshot by TechCabal on Wednesday.
The session included Francis Nwoboshi, CCO Sochitel Group; Wole Ayodele, CEO Fincra; Ahunna Ogunedo, an investment manager with 54 Collective; and Vivian Mbene, COO, The Tonic Technologies.
“Startups should start by raising a very small amount of money to help them properly understand their solution,” said Ogunedo. This approach, she said, allows African startups to validate their ideas before seeking larger rounds of funding, potentially putting them in a better position for long-term success and avoiding the pressure of expectation that comes from raising a large round.
The discussion also touched on various aspects of fintech innovation, from blockchain adoption to regulatory frameworks and strategies for startup expansion.
As Ayodele noted, “Every transfer you’re making today to a driver, someone at a fast food restaurant, a delivery person, to an open account, or a wallet, is a case for fintech.” He added that fintech had encroached into high-risk spaces like retail and consumer lending which traditional banks shy away from, which he says is a testament to how fintech has become a positive disruptor.
Blockchain technology, in particular, was highlighted for its potential to improve trust. “With blockchain adoption, it improves security and transparency. I know in Nigeria, we tend to suspect anything and everyone. We say ‘shine your eyes’ or ‘no gree for anybody’,” explained Vivian, emphasizing how blockchain could eliminate those fears for financial transactions.
On regulation, Ahunna noted that approaches across the continent vary, with some countries adopting a risk-based approach and others preferring a bank-led model.
“For fintechs, the first thing is to identify how the regulatory landscape in your market works, whether bank-led or risk-led.”
According to her, fintech operators need not have an antagonistic mindset toward regulators but should work in lockstep with them and stay up to date with the latest compliance standards.
For startups looking to expand, the panel emphasized the importance of strategic partnerships. As Francis noted, “If you want to go fast, go alone, but if you want to go far, go together. So one of the things I would recommend for a startup is if you must expand and you must go to new markets, do your research and find partnerships that could help you leapfrog certain processes and stages.”
The panelists also spoke on financial inclusion. While progress has been made, they agreed that more needs to be done, with building trust and combating fraud identified as crucial steps in accelerating financial inclusion.
Collaboration between banks and fintechs was seen as a key driver of innovation. “Collaboration is a win-win situation for everybody,” said Vivian.
As fintech continues to grow in Africa, regulators and players must continue to collaborate to ensure there’s a level playing field rooted in a foundation of trust, which would ultimately breed innovation.
