Nikki Kettles, Executive: Licences and Payments Regulation at Mukuru
Genuine financial inclusion is vital if we are to bring millions of unbanked and underserved communities in Africa into the mainstream economy. This doesn’t just benefit the communities, it has a knock-on effect for economies, regions and the continent. Financial services are tightly regulated and this presents a challenge for fintechs — how do you innovate while working effectively within differing regulatory frameworks on the continent? While these frameworks may differ substantially, there are common barriers fintechs need to overcome.
Before we get there, it is important to start at the beginning. Not many people understand what financial inclusion actually means. There is a misconception that financial inclusion means giving someone access to a bank account. Nothing could be further from the truth. Imagine someone being paid $100 into a bank account, and drawing out all the cash minus the bank charges, the second they’re paid, before engaging with the informal economy. That’s not financial inclusion.
Genuine financial inclusion is bringing marginalised people into a formal financial services environment. This is the best chance at breaking the cycle of poverty. When underserved people start using formal products their income is protected, which is the opposite of having no security in the informal sector. They can also incrementally start making use of more digital financial services.
Each country and region on the continent has its own set of regulations, frameworks and implementation requirements. These are designed to protect the financial integrity of the financial system. Grey listings in the region have also naturally impacted regulations.
In this context, Fintechs need to craft solutions to address the regulatory hurdles that limit access to financial services for low-income populations. At Mukuru, we are passionate about constructively working within regulations, which is why we sponsored a recent Fintech Association Botswana Power Breakfast to unpack, as an industry, regulatory barriers faced by fintechs. It was rewarding to see that everyone, from the central bank, to the investment community, the country’s innovation hub and all the banks, are aligned on the importance of fintech in driving meaningful financial inclusion.
At a high level, central banks want to ensure two pillars: the integrity of the financial system and the protection of customer funds. We all want this because it is good for customers, businesses, the economy, trade, the country, regions and the continent. Ask yourself this question: Why would I give my cash to any institution that is not looking after my money for me? That cannot give me my money when I need it?
It is important to appreciate the mandates of regulators when looking at regulatory barriers, which aren’t new and certainly not something only fintechs face. The first is onboarding. This is an expensive exercise and needs to follow a risk-based approach. The second is protecting customer funds. This includes trust accounts and safeguarding the money in the system. Again, this carries a cost burden, especially as a fintech scales. Then, there is great complexity in data protection and data control and processes. Many countries demand in-country data storage and processing. A multinational business needs to navigate this effectively and compliantly.
Regulatory sandboxes drew great debate at the breakfast. They support innovation. Fintechs need them to test value propositions, new products, new solutions and new ways of engaging with customers in a live, but ring-fenced, environment.
However, sandboxes need solid business cases because a fintech cannot run in a pilot long term without being formally licensed and paying the licence fees. And licences, as we know, come at no small cost. Mukuru has 49 licences in 15 countries, enabling send, store and spend functionality for our customers, providing international money transfers, wallet solutions as well as insurance offerings. Each regulator has different pain points and it is complicated terrain to navigate.
So, what can fintechs do to make the process of navigating regulation easier and more efficient? The first is to understand that customers really don’t care how fancy or flashy a solution is. They want to know they are getting the service they actually need. They don’t want to be told what they should need. They want the right product, at the right place, at the right time, at the right cost, and it must solve a challenge for them and improve their lives. Always put the customer first, with simple products and simple customer interfaces. Then, grow with the customers as they incrementally need more sophisticated products.
This has a direct bearing on navigating the often-complex landscapes of different countries. It’s also why sandboxes need to be very carefully designed coupled with solid business cases. Working with regulators, you can arrive at a reasonable place of what needs to be done, and how to develop new products.
Relationships with regulators should be mutually beneficial. Aren’t all relationships the same? At Mukuru, we work closely with regulators, and in good faith, because we genuinely want to understand the challenge and why the regulations areas drafted so that we can implement accordingly.
Finally, if all this innovation is to drive financial inclusion then we, as an industry, need to benchmark ourselves. Enough with the talking. We need to be able to show how our products are genuinely bringing neglected and underserved communities into a formal financial services environment.
About Mukuru
Mukuru is a leading next generation financial services platform in Southern Africa that offers affordable and reliable financial services to a customer base of over 16 million+ across Africa, Asia and Europe.
With over 100 million transactions to date, our core was built providing international money transfers and from this base, we’ve developed a set of services to address the broader financial needs of our customers. We now operate in over 60 countries and across over 500 remittance corridors.
We are a business that puts the customer at the centre of everything we do, and for that reason, we serve clients across physical and digital channels, by various payment methods (cash, card, wallet) as well as a range of engagement platforms including WhatsApp, USSD, contact centre, App, website, agents and a branch and booth network.
Mukuru has, for the fifth consecutive year, been listed as one of the top 100 Cross Border Payments businesses in the world in the 2024 FXC Intelligence Top 100 Cross-Border Payment Companies, one of only six African companies to receive this accolade.
In 2023, Mukuru officially ranked sixth on the LinkedIn Top Companies List in South Africa.
Mukuru was celebrated for innovation and excellence at the 2023 Africa Tech Festival Awards, receiving the Fintech Innovation of the Year Award – an acknowledgement of the transformative power of financial technology in driving economic growth, financial inclusion, and digital transformation.