Moniepoint's raise, New CFO hire, and Adult moves.

Congratulations to the latest unicorn

“1000 advisers, zero helpers” - Portable 2023

Moniepoint is sadly not going to get a commercial bank licence anytime in the next 3 years. - I had to get that out of the way first.

Last week, Moniepoint, one of Nigeria’s leading fintech companies known for its successes in revolutionising agency banking and offline merchant-related payments in Nigeria via their blue POS, announced a $110 million series C raise, confirming its unicorn status.

According to their memo, 

“The capital raised will accelerate our growth across Africa as we build an all-in-one, seamlessly integrated platform for African businesses of all sizes. This platform will include services such as digital payments, banking, cross-border payments, credit, and business management tools, making it a one-stop shop for business solutions.”

First off, Moniepoint knows small businesses better than most, and that’s been a major key to their success. If they believe their customers in Kenya need an all-in-one business suite, who am I to disagree?

That being said, raising $110 million to build what looks like (at least on paper) Stripe + Shopify + LemFi, with a little taste of credit, leaves a lot to be desired.

We've seen this playbook before - African fintechs trying to be everything to everyone, building a super app that promises to solve all business problems from payments to inventory management.

But history shows us that building a successful multi-product fintech in Africa is like trying to juggle and ride a bike - technically possible, but probably not the best use of your energy.

Each of these products (payments infrastructure, e-commerce tools, or cross-border payments) requires significant resources, deep market understanding, and years of iteration to get right.

Even global players with billion-dollar war chests have struggled to replicate their success across different product lines in Africa. Credit on its own is a separate beast which requires robust risk assessment frameworks and significant regulatory overhead.

They have cleaned up their ranks by making a few senior hires recently in Investor relations, Mergers and acquisitions, and most recently a CFO from Stanbic. They also have open leadership-level roles in Fraud, retail banking, compliance, and risk.

These are all adult hires that signify their intent towards achieving this African expansion, and a CFO from a multinational business like Stanbic brings value on board as they commence that journey. It also helps that one of their investors Verod, is no stranger to expanding businesses outside of Nigeria.

Now we have gotten the facts out of the way, here is my opinion on why and how they should shelve this Pan-African journey (for now) and double down on Nigeria with a commercial bank licence.

1) There is no money or return available to be chased in Kenya, just headaches. Ask all our Nigerian companies that have tried to expand to Kenya, Ghana and Rwanda. (Not to be taken out of context, these expansions do well for derisking Nigeria and providing business stability, same as selling airtime in 2017 and doing remittance in 2024. But at $110 million you have to keep things exciting, and make adult moves)

2) A commercial bank licence shows you have arrived: The core business of Moniepoint has a ceiling due to the macro environment we find ourselves in, and the same risk will appear in any African country they expand to at this time due to our various inflationary and foreign exchange regimes. As long as they keep serving African Businesses for day-to-day transactions, their growth potential is capped. Don't blame the messenger, blame your governments.

HOW Can they do this?
A commercial bank licence now costs N50 or N200 billion to obtain depending on your flavour. Due to their volume and spread of activity, they’d have to set up in the 6 Geo-political zones so for illustration purposes, here’s a table below:

These branches will cost money to set up and would probably cost N10-N20 billion to set up. Their existing customer base would become customers of a full-fledged renamed commercial bank from day 1. 

WHY should they do this? 

FX, Treasury, trading, Import finance, and commercial loans. 

Moniepoint’s core constituency are the SMEs on social media and in markets that directly import from Ali Express and Shein out of pocket. Imagine how supercharged their business growth would be with sprinkles of import finance and cross-border payments.

With this capital and licence, Moniepoint would be able to unlock these key business verticals of banking that are ever-growing. These are arguably the only lines of business in Nigerian commercial banking that have not shrunk in absolute USD terms - that is why the banks are okay with conceding NIP, POS, ATM, and savings account volumes to neo-banks.

Despite this opportunity, Nigerian banks are still not fully capitalised to meet the market needs in this regard - which explains why everyone is raising new Commercial Papers daily.

This is the core reason Mr. Cardoso asked the banks to undergo a recapitalisation process, as there is little capital available for banks to serve businesses today. We need more properly capitalised commercial banks in the country. In the last 8 years, we have had 7 new commercial banks (Suntrust, Globus, Titan, Parallax, Optimus, Premium Trust, Providus) established in the country, yet they have yet to make a significant impact on this market.

Moniepoint just raised the equivalent of what First Bank Holdings is in the market for, proving they know how to raise money. Coupled with their knowledge of small businesses in the country, I strongly believe that the time is ripe for a fintech-led commercial bank to challenge the status quo and disrupt the industry properly. We thought Interswitch, 9Mobile or MTN would do that, but they opted for Payment Service Banks instead.

Fintech may be easy™️, but in Nigeria today, it's miles harder than being a plain vanilla commercial bank in terms of skill set. Raising capital is the hardest part of starting a bank today, not technical skills. Hopefully, In 5-7 years, a Moniepoint-backed commercial bank could be profitable enough to fund any geographic expansion aspirations and return money to investors.