There is an emerging need for collaboration between fintechs and payment solution firms to bolster fintechs’ play in the ecosystem while keeping them in business for much longer.
This is according to the global payment solution firm Visa, which says most fintechs in the country and the continent at large, lack the required potential to keep par with internationally recommended security standards.
“We recognize the opportunity and importance fintechs have in the payment space. However, they lack the muscle and level of investment required to ensure the payment ecosystem is safe and secure,” said Irene Auma, the regional risk management director at Visa.
She was speaking during a media roundtable on emerging risks in the digital payment ecosystem on Tuesday.
She added that working closely with them would help in co-creation to facilitate robust security enablement through innovation.
“As a payment solution firm, we do not discriminate on them, instead, we have set programmes such as the Visa everywhere, which seeks to onboard fintechs to foster innovation and capacity building while helping them stay afloat,” Auma said.
E-payments have been gaining momentum since 2000 and, as in the rest of the world, took a leap forward during the COVID-19 pandemic.
According to McKinsey’s survey of payments experts across Africa, many African countries have seen record growth in e-payments over the past two years.
Around 80 per cent of respondents to McKinsey’s survey of payments experts across Africa believe that the shift to e-payments not only will endure but will accelerate, with 84 per cent expecting e-payments to grow by at least 30 per cent per year through 2025.
A third of respondents expect a 50 per cent annual increase.
Overall, McKinsey anticipates that between 2020 and 2025, the e-payments market will grow by around 150 per cent to reach almost $40 billion (Sh6.1 trillion) in revenues from domestic payments alone, with about 188 billion in transaction volumes.
In Kenya, startups have been backed to be the steering gear towards e-transformation, with the Communications Authority saying they have the potential to accelerate up to 70 per cent of Kenya’s digital transformation.
However, the CA mirrored Visa’s concern saying the startups, moreso fintechs, are being faced with major bottlenecks such as funding and compliance constraints, reasons that see majority of them close shop in less than a year.
“Close to 80 per cent of startups often die within the first year of operation, while only three to five per cent make it beyond the one year period of survival,” the regulator noted in July.
"The remaining 15 per cent fall under the unpredictable category, who still have very low chances of survival.”
To cure this, the regulator called on startups, specifically fintechs, to partner with investors across different sectors to ease their challenges.
"Leveraging partnerships means the firms will be able to enhance financial control and drive operational efficiency by providing valuable insights and other strategic support functions, enabling them focus on core activities and achieve their strategic goals,” it said.
