Opay is the only African fintech listed in the 2021 Top 250 by CB Insights
Opay is the only African fintech listed in the 2021 Top 250 by CB Insights
Africa's technology startup landscape has remained dominated by financial technology companies for the foreseeable future. These fintech companies have gained traction, attracted additional funding, and generally established themselves as beacons of hope for the African technology space.
Fintech companies have raised the vast majority of the continent's top six funding rounds so far in 2021, according to data from PitchBook. And today, all five of Africa's tech unicorns are involved in the financial technology sector. This demonstrates the technological dominance of the continent in the financial services sector.
Only one of them, however, was sufficiently dominant to be included in CB Insight's list of the world's Top 250 fintech firms.
Opay, a Nigerian payments company, is the only fintech company from Africa to make the prestigious Top 250 list. The fintech company was included on the list for the second year in a row.
Following a $400 million funding round, the SoftBank-backed fintech company was admitted to the New York Stock Exchange's Payments Processing and Network subsector.
Africa was represented on the list by three startups last year: Nigeria's Opay and Palmpay, as well as South Africa's Yoco, all of which are based in the country.
As reported by CB Insights, the 250 companies were selected from a pool of more than 17,000 businesses from all around the world. Others were nominated, and some of these companies applied for the award on their own initiative.
Since 2016, the 2021 Fintech 250 cohort has raised a total of approximately $73.8 billion in funding across nearly 1,200 transactions, putting them in the top 1% of all Fintech cohorts. The startups included in this category are at a variety of stages of development, ranging from seed stage to well-funded unicorns.
As of the most recent funding round, 118 of the 250 companies selected (47 percent) are unicorns, defined as companies with a market capitalization of at least $1 billion at the time of the funding round.
The fintechs were selected based on information provided by the companies, their business models, and market momentum, as well as their Mosaic scores, which are calculated using a proprietary algorithm developed by CB Insights that evaluates the overall health and growth potential of private companies.
The long journey of Opay
With a total of $570 million in funding to date, Opay launched operations in Nigeria in the country's commercial capital, Lagos. The company has raised a total of $570 million in funding to date. With the goal of eventually becoming a SuperApp, it rapidly expanded its services across the country from there.
While the company has developed a strategy of diversifying its markets in order to increase adoption of its fintech solution, competing in the Nigerian market has proven difficult, as the company has found itself unable to keep up with the pace of the market.
After years of charging a heavily discounted fee of N10 per transaction for its services, the fintech drew the ire of its users when it abruptly increased its fees to 2 percent of every transaction executed in November of this year. Following a barrage of negative feedback, Opay was forced to issue an apology and announce a new pricing structure.
At the time, the payment company stated that "we have reviewed our bank transfer fees and effective at 6 a.m. tomorrow, our bank transfers will cost N45 for the first transaction of the day and 1 percent for subsequent transactions."
Users who had become accustomed to the startup's low prices did not let this deter them from seeking out more favorable alternatives elsewhere. The significantly reduced charges were a critical component of the company's business model at the time.
Opera, the parent company of Opay, was also subjected to regulatory scrutiny when several of its fintech applications, including CashBean (India), OKash (OPay, Nigeria), and OPesa (Kenya), faced being removed from the Google Play store due to concerns about data security.
According to Hidenburg Research, the apps provide predatory loans with deceptive loan descriptions to consumers.
However, while the apps claim to offer a maximum annual percentage rate (APR) of approximately 33 percent or less, the actual rates were significantly higher, reaching 438 percent in the case of OPesa, according to the research report.
Furthermore, while they claim to offer a repayment period of 60 to 90 days, in accordance with Google's new lending policy, the actual duration was as short as 29 days (for OKash) and as short as 15 days on occasion.
These are in violation of Google's loan app regulations, which call for a minimum 60-day repayment period and an Annual Percentage Rate (APR) of 36 percent or less in order to qualify.
Although these challenges were encountered, the fintech was able to overcome them and establish itself as one of the leading fintech solutions in Africa, and possibly the world. As of December 2019, it has launched a USSD service for mobile transactions, allowing users to conduct banking transactions without the use of data, solidifying its position as a frontrunner in the race to bank the unbanked.
According to the company, its monthly transaction volume now exceeds $3 billion dollars. Additionally, it has more than 300,000 agents and more than 5 million users across the country's territory. Opay is also looking to expand into additional African markets, as well as the Middle East and the United Arab Emirates.
