2020 has been a huge year for African fintechs. First WorldRemit, the English money transfer service, paid $500 million to acquire remittance company SendWave, which is based in Kenya. Then two months ago, Stripe announced its first African M&A transaction, buying Paystack for $200 million in Nigeria’s largest startup acquisition to date.

Now Cellulant, another Kenyan fintech valued at over $100 million, has announced a strategic partnership with Entersekt, a South African omni channel authentication platform. Entersekt is planning to integrate directly with Cellulant’s product stack to proactively prevent fraud. According to a recent press release, two large banks in Kenya that partner with Cellulant have already begun deploying Entersekt’s solutions.

What Does the Cellulant-Entersekt Partnership Mean for Digital Banking in Africa?

As a partnership between two African companies, the Cellulant-Entersekt agreement demonstrates that the continent is building self-sustaining, end-to-end fintech solutions. This Africa-specific focus is important, as the continent faces specific challenges in digital banking that this partnership is trying to solve.

47% of banking clients in the Middle East, Turkey and Africa suffered some form of bank fraud within six months of last year, according to a recent survey by Kaspersky. Bank accounts contain sensitive data, including personally identifiable information, like home addresses, names and ages. Hackers not only receive access to this information, but can use breaches as an opportunity to directly transfer money out of user accounts.

Just over two months ago, a hack into Pegasus Technologies, Uganda’s leading mobile phone company, “plunged the country’s telecoms and banking sectors into crisis,” according to a QuartzAfrica article. By compromising 2,000 mobile SIM cards, hackers were able to access users’ mobile banking accounts and request wire transfers. The ultimate amount of money illegally transferred was at least $3.2 million, a devastating figure for one of the world’s poorest countries.

Data security in payment solutions is incredibly important for maintaining user trust in the payments and fintech space. Cellulant Chief Technology Officer George Murage noted trust was a key factor in his company’s decision to partner with Entersekt: “Our clients trust us to not only be constantly innovating around digital banking and payments but also to guarantee safety and security. Being able to provide the powerful security and authentication services of Entersekt will significantly add to our platform offering. Through this partnership, we can deliver some of the most sophisticated services available anywhere in the world.”

Schalk Nolte, CEO of Entersekt, also added that increased trust in digital banking will encourage more consumers to use digital payments in Africa: “This collaboration will mean their partner banks’ end-customers can enjoy increased safety and security while transacting. We are very happy to support Cellulant’s cybersecurity efforts to drive consumer confidence in digital banking and boost the adoption of digital payments on the continent.”

By joining forces, Cellulant and Entersekt hope to actively avoid any future Pegasus Technologies-like situations. Hackers will continue to target Africa’s growing market of digital bankers. Therefore, improving security protocols is mandatory for all African fintech companies.

The Future of African Fintech

Africa has become a booming market for tech investing, particularly fintech. Total venture capital investment in Africa catapulted to over $2 billion in 2019, up 74% from a year earlier. The continent is home to some of the youngest, fastest growing countries in the world. Many Africans are increasingly moving onto the internet and migrating to cities. The increase in consumer purchasing power in urban environments and familiarity with the internet will substantially increase the demand for online payments and other digital finance solutions.

The fact that both SendWave and Paystack were acquired at record-breaking valuations this summer, amidst a global pandemic, demonstrates the structural advantages favoring the African tech market long-term. The future of fintech in Africa is already underway.

ABOUT THE WRITER

Quinn Barry is a Tech Innovation Fellow from Stanford University covering innovations in digital privacy across finance and government.