- Nala Money has Payment Service Provider licenses in several countries, including its founder’s home, Tanzania.
- In 2020, Africa’s e-payments industry, across domestic and cross-border payments, generated approximately $24 billion in revenues, of which about $15 billion was domestic electronic payments.
- Africa’s domestic e-payments market is expected to see revenues grow by approximately 20 per cent per year, reaching around $40 billion by 2025
“Little did I know that if a European-based client of mine could have subscribed to Nala Money, I would have received $100 more to my fee. Unlike Nala, the money order service I use has a low exchange rate and is somehow unconventional.”
This testament is not a promotion or a boost for the latter but an admission of facts and experiences Tanzanians who might receive remittance often or once could face.
Nala, started by Tanzanian youth Benjamin Fernandes in 2017, aimed to increase economic opportunities for Africans at large.
The digital payment company began its consumer remittance product in 2021 with a team of 7 people. The firm took a bold step, and so did its outcomes. Nala now operates under 80 employees, provides service across 18 countries, and has scaled to multiple countries, and the challenge to beat is more straightforward than ever – making payment reliable in Africa.
“The African population is growing at a breakneck pace, and payment solutions are more urgent than ever,” said Fernandes.
Read Also: Digital payments in Africa redefining financial transactions
In 2023, Nala Money acquired Payment Service Provider licenses in several countries, including its founder’s home, Tanzania, where the technology is directly integrated with banks and telcos, partnering with Tanzania’s leading network, Vodacom M-Pesa.
Similarly, last year, the company revealed its plans to ease remittance business in East Africa by making Rwanda a settlement hub. The country will now be able to terminate all international money transfers that Nala processes for beneficiaries in East Africa, before being transferred to other accounts across the region.
Nala is funded by the world’s most prestigious accelerators and VCs, including Y-Combinator, Bessemer, and Accel. We also have the support of angel investors personally involved with founding and building Monzo, Robinhood, Revolut, Wise, and many more.
Still a long way off
According to Nala, digital payments in Africa digital payments are still lingering within a 1 per cent rate only. Like other innovators, entrepreneurs and capital, Nala confidently takes up the challenge and vows to reshape Africa’s fast-growing electronic payments. The latter comes with solutions for consumers and businesses—a recipe for progress.
On a broader scale, according to a McKinsey September 2022 report globally, electronic payments are a booming industry, having attracted more investment than any other financial services sector and delivered the highest returns and growth in the sector over the past decade.
Africa has been no exception. In 2020, Africa’s e-payments industry, across domestic and cross-border payments, generated approximately $24 billion in revenues, of which about $15 billion was domestic electronic payments.
One of Africa’s leading lenders, the World Bank, argued that payment reliability and speed is a massive challenge across Africa due to the fragmented nature of the payment ecosystem. Sending money to Africa remains the world’s most expensive continent for remittances, with costs averaging 7.84 per cent.
A McKinsey report argued that Africa’s domestic e-payments market is expected to grow revenues by approximately 20 per cent per year, reaching around $40 billion by 2025, compared with about $200 billion in Latin America. By comparison, global payments revenue is projected to grow 7 per cent annually over the same period.
Further down the line, the region E-payments in Africa have been gaining momentum since 2000 and, as in the rest of the world, have leapt forward during the COVID-19 pandemic.
Read Also: Nala, Selcom join efforts for remittances boost in Tanzania
Many African countries have seen record growth in e-payments over the past two years. Mobile money transaction volumes in Nigeria doubled to around 800 million in 2020, according to the Central Bank of Nigeria. Moreover, data from South Africa shows that online commerce grew by around 40 per cent during lockdowns in 2020 and 2021.8
However, sending remittances is still expensive globally, with an average cost of 6.20 per cent of the amount sent surpassing the SDG target of 3 per cent.
The region strives to ensure digital payments are integrated into the financial structure as smoothly as possible, including ushering in strong facilitators.
In Africa, digital payment technologies championed by Flutterwave find regulators are evolving as enablers with laudable initiatives like the Nigeria-Egypt fintech bridge and regulatory sandboxes in Egypt, Ghana, Nigeria, South Africa, and Uganda.
“The Pan African Payment and Settlement Systems (PAPSS), which enables instant, cross-border payments in local currencies between African markets, is another great initiative,” a report by Flutterwave reads in part.
On the other hand, Fernandes confidently elaborated on the necessity to solve problems at the core and yield better progression results.
“We built the Rafiki infrastructure not by choice but by the nature of the market. When we started, we were experiencing 15% failure rates from partners as we started to scale, affecting our cost of operations massively. The only way to solve this problem was at the source, to get licenses and build payment and treasury infrastructure reliably,” said Fernandes during an interview with TechCrunch.
Nala Money ascending to profit
Like any other business, Nala Money trials and opportunities yielded fruits, and profits recently became normalised. According to Techcrunch, the platform is gearing up to scale in new markets and just recently hired ex-Wise staffer Andrei Klevtsov as its head of finance and ex-Currency Cloud executives Will Staples and Jan Philippaerts as heads of Risk & Compliance and Operations, respectively.
Further, Nala’s scaling plans come against the backdrop of its revenue growth, which the CEO said grew 10 times in the last 12 months as its consumer product saw an increase in user base.
The remittance business growth coincides with reports that remittance flows to sub-Saharan Africa will continue growing.
However, on the other side of the aisle the World Bank, the amount of remittance flows to sub-Saharan Africa is expected to have increased to $54 billion in 2023, a 1.9 per cent growth, driven by key markets like Nigeria and flow growth in Mozambique, Rwanda and Ethiopia.
Notably, the inflows figure is much higher when historical data from RemitSCOPE and transfers done through informal markets as this report states, are considered.
On the bright side, the company is part of the success story, particularly in East Africa. World Bank data shows, Tanzania, Kenya, Uganda and Rwanda all together received roughly $6.36 billion in remittances in 2022.
