Ebanx expands to Africa

The company started operations in Kenya, South Africa, and Nigeria in late August 2022 amid soaring demand for payments via mobile phones in recent years.

Ebanx will initially focus on mobile money, a system which allows users to exchange and store funds on their phones. The company began offering digital wallets – payment applications on mobile phones – to Brazilian consumers on a test basis in 2020.

The Brazilian startup valued at over USD 1 billion also aims to reach agreements with major ecommerce stores to provide payment services on the continent.

A high level of mobile penetration and consumption in African countries positions the region to be the ‘next frontier – but while increasing mobile access helps boost online shopping in Latin America during the later stages of digital inclusion, in Africa, mobile devices and digital money transfers are the foundation for banking access and financial inclusion for the continent’s massive population of more than 1 billion people.

Africa’s digital economy

The continent's digital economy has an estimated market size of USD 115 billion, according to a report released by Endeavor with McKinsey in June 2022. The financial services industry alone is worth USD 165 billion, dominated by payments, banking, and insurance.

The banking infrastructure is lagging in most African markets compared to best country benchmarks, resulting in a high portion of the unbanked population. Physical networks and digital channels serve as an alternative to penetrate the financially excluded population.

Multiple digital payment methods give rise to fragmentation. The fragmented digital payments landscape gives rise to challenges for customers and merchants. Therefore, customers are unsure if their preferred mode of payment is accepted. Besides, merchants have an integration problem as they have to integrate multiple payment methods to avoid losing customers.

Additionally, major digital payment players differ between countries. This gives rise to the challenge of expensive, slow cross-border payments as there is limited interoperability between players.

Financial inclusion through digitalisation

The fundamental premise behind financial inclusion is that the expansion of financial markets leads to development and poverty alleviation. Creating efficient and affordable financial products and services may boost prosperity and contributes to income equality and improves overall economic welfare.

Fintech connects services directly with consumers, bypassing financial intermediaries. Sitting at the crossroads of financial services and the digital market, fintech lowers entry to the market for new financial providers, which gives rise to new business models, applications, processes, and products. Furthermore, fintech offers the promise to reach people and businesses in remote and marginalised areas.

For example, M-Pesa, a Kenya-based payment provider, facilitates digital cash transfers by providing mobile banking access through standard text messages. In a country where many people have cell phones but no debit cards and, especially in rural areas, where poor infrastructure has made going to the bank burdensome, M-Pesa appeared as an example of a fintech company responding to an unmet market need.