Fintech companies across Africa are looking for solutions to survive in a growing regulatory environment, as policies are put in place to protect consumers in the booming digital payments sector.
Tuesday in Casablanca, Morocco, African Financial Summit (AFIS) took up this challenge by organizing a roundtable titled “Innovating under pressure: the future of fintech payments in Africa”.
A panelist, David Akinin, founder and CEO of JABUa financial technology company operating in Zambia, said the country presents unique challenges due to strict data localization requirements.
“Zambia specifically requires that we have everything on a local server, like all the personal data that we collect, and that all of those things are entered into a local server. fintech (business), you use international data cloud providers, (and) you try to manage your systems in a way that you are not dependent on data servers locally; I mean, we have electricity problems in Zambia,” he said.
“This has become a bit of a problem for us because it means we have to store our data locally and then replicate it and send it internationally to one of our international data servers,” Akinin added.
_(1).jpg?width=700&auto=webp&quality=80&disable=upscale "David Akinin, founder and CEO of JABU, speaking at AFIS 2024 in Casablanca, Morocco.")
David Akinin, founder and CEO of JABU, speaking at AFIS 2024 in Casablanca, Morocco. (Source: Eden Harris)
These regulations will only strengthen as the African digital payments sector is expected to reach $195.5 billion by the end of 2024 and post a compound annual growth rate (CAGR) of 12.65% between 2024 and 2028, reaching $314.8 billion by 2028, according to data from Statist.
Solutions from the Deputy Governor of the Central Bank of Uganda
Michael Atingi-Ego, deputy governor of the Central Bank of Uganda, sympathized with fintech executives, calling them “newcomers” during his speech to the African fintech panel.
He told Connecting Africa that he wants regulations that support the development of fintech companies across Africa.
“It doesn’t have to be so intrusive, but it should be flexible enough to allow them to grow, because these guys are trying new products in a very uncertain market. You don’t know if they’re going to be successful or not,” he said.
“There is therefore no need to impose strict regulations on them; they need better regulations, regulations commensurate with the risks they will face, without discouraging the innovation they put in place,” said Atingi-Ego. added.
.jpg?width=700&auto=webp&quality=80&disable=upscale "Vector illustration of the concept of mobile payments using applications on a smartphone.")
Statista predicts that the African digital payments sector will grow from US$195.5 billion in 2024 to US$314.8 billion by 2028. (Source: Image by vectorpocket on Freepik)
Stricter regulations are coming into force in regions like East and Southern Africa.
For example, Kenya implemented the Data Protection Act 2019 provide explicit guidelines to fintech companies regarding the collection, processing and storage of personal data.
Atingi-Ego, who is also a former deputy director of the International Monetary Fund’s Africa department in Washington, DC, also highlighted the critical role data plays in driving fintech innovation, raising a key question.
“Some of these fintechs even need data to help them design their products, so how do you support them with that data? Because if you’re going to deliver a product, that product has to be informed by data. How can you share that data with them in a way that does not compromise consumer data protection?
He also highlighted the need to encourage innovation in the fintech sector within a controlled framework.
“Innovation should be rewarded, and one of the rewards should be less regulation. You can undertake this through a regulatory sandbox. When they come up with a business idea that (says) ‘I want to offer these products’ , tell them in a regulatory sandbox, test their products, in a controlled environment, and let them try them with a few customers,” Atingi-Ego said.
Solutions from an Africa-based fintech CEO
Interoperability, exchange and use of information is a solution offered by the Akinin company for payments across Africa.
He highlighted the importance of interoperability and efforts to facilitate the movement of funds across Africa.
“We cannot win without cross-border payments and without making Africa one place and without free trade if we cannot even make free trade within the country (possible), if we cannot making systems interoperable. I think the solution is really to create interoperability and accountability,” he told Connecting Africa.
Before operating in Zambia, Akinin was in Namibia, but he said the regulatory environment was untested, which slowed him down in starting his business.
“Namibia’s regulatory environment was much younger and unexplored. The process of launching our product and implementing it on the ground was (much) longer… but Zambia, in fact, became our operational headquarters. Zambia is incredibly enabling, and the ecosystem is very vibrant, which has allowed us to launch and generate revenue and actually be profitable at this stage,” he told Connecting Africa.
Akinin stressed the importance of uniform regulations across the continent.
“We need to harmonize the regulatory environment so that (at the national level) we don’t have to decide where we are going to be operational,” he concluded.