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Africas tech ecosystem just got a boost of attention, with South Africas TymeBank and Nigerias Moniepoint both raising funds in recent weeks at valuations of over $1 billion and joining the coveted unicorn pantheon. But those valuations dont just reflect investor confidence. They signal the success theyve had in taking disruptive fintech models originally developed for mature economies, and scaling by tailoring them to work in a region where nearly half the population remains unbanked.Both companies primary aim has been to simplify banking for individuals and businesses in two of Africas largest economies. TymeBank began by offering retail customers low-cost bank accounts and savings products before expanding into business banking, providing working capital to small businesses in South Africa.Meanwhile, Moniepoint started out in Nigeria supporting small businesses with accounts, payments, loans, and expense tools and has recently expanded into retail banking.Importantly, both fintechs are taking a hybrid approach to banking, blending the convenience of digital banking with real-world, physical touchpoints.In Africa, its a catch-22: you cant have one thing without the other, said Lexi Novitske, general partner at Norrsken22, an investor in TymeBank, to TechCrunch. Many tech companies must build customer acquisition and engagement through highly analog or physical efforts.Highly informal markets call for a mixed approachTheir strategy contrasts challenger banks in the U.S. and other developed markets. Revolut, Monzo, and Chime operate as their names suggest: digitally. Even some platforms in emerging markets, like Nubank and JPMorgans C6 in Brazil or small businesses like Open in India, have focused on digital-only channels to build regional category leaders.But a purely digital approach isnt ideal in Africa. There are exceptionssuch as Valar-backed fintech Kudabut theres a cap on the number of customers such a platform could reach. Thus, as Stephen Deng, co-founder at DFS Lab, an Africa-focused early-stage investor, puts it, they will run into (domestic) revenue ceilings.On top of this, its a region where cash is king, internet connectivity can be unreliable, and trust in purely online systems remains low.Cash remains the most dominant payment method across Africa, accounting for over 90% of all transactions, according to a McKinsey report. Meanwhile, GSMA says 43% of Sub-Saharan Africa has internet access. Tymebank and Moniepoint have crafted a middle path that thrives on meeting retail and business customers where they are. TymeBank currently claims 15 million users across South Africa and the Philippines, while Moniepoint says over 10 million people and businesses use its services. (Kuda,valued at $500 million, isnt far off, though, with about 7 million users.)When venture capital was abundant you could pay people to adopt your digital-only product, but there isnt enough average revenue per user (ARPU) out there to justify the costs longer-term, Deng said. Moniepoint, Tyme, and others have figured out that you need to build physical touchpoints that interface with the mass market while maintaining the ability to push your tech through those interfaces. We call this a cybernetic approach because it enhances informal often in-person channels with tech while not falling into the costly trap of trying to fully digitize those channels.Models tailored to the maturity of banking marketsOne of the key things TymeBank has done to scale is forge retail partnerships with supermarkets like Pick n Pay and Boxer to extend its reach in South Africa. These retail touchpoints act as quasi-branches: TymeBank uses kiosks and ambassadors at these stores to assist new customers in opening accounts and depositing funds, adding a human element to its operations for those who prefer face-to-face interactions.Its a model that works because it recognizes and adapts to how the average African consumer interacts with financial services. Walking into a supermarket to buy groceries and leaving with a new bank account feels natural for many people. TymeBank has over 1,000 kiosks and 15,000 retail points across South Africa. Meanwhile, its sister company, GoTyme a joint venture between parent company Tyme Group and local conglomerate Gokongwei Group, launched in 2022 adopts the same strategy and has nearly 500 kiosks and 1,500 bank ambassadors in the Philippines.In Nigeria, the QED-backed Moniepoint has taken a slightly different approach, building an extensive network of agents nationwide. About 200,000 of these agents are small business owners equipped with point-of-sale (POS) devices and act as human ATMs, enabling cash deposits, withdrawals, and bill payments. The system mirrors the model that has driven mobile money success in Africa, which Safaricoms M-Pesa pioneered in Kenya.Decentralizing its operations through agents bridges the gap between urban and rural populations by providing financial services in areas where traditional banking infrastructure, a bank or an ATM, is nonexistent or unreliable (The World Bank estimates just 16.15 ATMs per 100,000 adults in Nigeria as of 2022.)Similarly, countries like Nigeria thrive on so-called informal commerce beyond the purview of tax collections and other authorities which makes up nearly 60% of its GDP. Combining that with the high number of unbanked consumers and businesses, a model that has physical elements is more of a necessity than an innovation.Both companies now provide retail and business banking and have used the hybrid model as the foundation for adding other services, such as credit, working capital loans, business management tools, accounting and bookkeeping, and insurance.Following their recent unicorn rounds, both will be looking to replicate their designs beyond their home markets, where they claim to have reached profitability. For Tyme Group, which recently announced a $250 million Series D led by Nubank at a $1.5 billion valuation, an expansion into Vietnam and Indonesia is already underway. Much like Africa, emerging economies in Asia present a mix of digital adoption and offline dependence. If anything, GoTymes current growth trajectory makes the move a logical next step.After raising $110 million, Moniepoint will seek to deepen its operations in Nigeria and expand into other African markets, such as Kenya. It might also explore these markets through acquisitions, which would pave the way for more regional consolidation.Outlook outside of fintechIn all of this, perhaps the most compelling part of the hybrid model is what it reinforces for African fintech, as TymeBank and Moniepoint arent the first fintechs to deploy the model on their way to unicorn status.And this is playing out in their scale. The first set of billion-dollar African fintechs, including Interswitch and Flutterwave, provided infrastructure and payment solutions for local and global merchants across the continent. Subsequent fintech unicorns, including Softbank-backed OPay, Stripe-backed Wave, Chimera Investments-backed MNT-Halan, all provide financial services to tens of millions of customers across Africa using a mix of digital apps and real-world touchpoints.Fintech is arguably the most successful category of startups at the moment, accounting for eight out of nine startups valued at over $1 billion in the region. As it continues to capture more investor interest locally and globally, such a model could serve as a blueprint and best bet to attain venture-type returns and, at the same time, drive financial inclusion.Yet, at the same time, theres significant potential to apply the hybrid model in industries beyond fintech, especially in Africas informal markets. For example, telemedicine an industry that heavily depends on trust could leverage local, in-person touchpoints to onboard patients while streamlining operations through digital platforms, according to Novitske. E-commerce and group insurance models are other industries she cites.We think most successful startups in Africa will master a hybrid approach, Deng commented. The interface between digital and physical is often where innovation happens because aggregating informal markets requires physical touchpoints. In B2B marketplaces, procurement is often informal. In cross-border payments, including with stablecoins, domestic payouts are often informal. In local retail, payment and delivery is often informal.
