- In February, reports claimed Ghanaian fintech Dash was providing false metrics on its user base and transaction volume.
- An audit showcased a significant shortfall of at least $25 million in the company’s accounts.
- Dash Fintech’s high operating expenses and monthly burn rate of $500,000 significantly contributed to its rapid fall from glory.
Africa’s fintech industry is among the fastest, and most lucrative economic activities. According to the African Development Bank, the industry will surpass its $3 billion mark in 2022. Despite its significant growth, the industry has struggled to maintain its progressive rate. The steady increase of the cross-border payment platform has flooded the franchise, ultimately, creating a negative effect on the industry. In recent news, Dash fintech, a Ghanaian fintech, shut down after raiding over $86.1 million in five years.
Unfortunately, this has been a rising trend in the industry. If not addressed, Africa’s fintech industry may fall behind the progress of other economic activities.
Fintech Dash shuts down
The fourth Industrial revolution has ushered in a wave of innovation in the African market. In two decades, the continent has witnessed a significant rise in innovation and digital adoptions. Blockchain technology, AI, and other emerging technologies have gradually increased the continent’s digital revolution. For instance, cross-border payment platforms have significantly opened many opportunities for businesses and startups all over.
Its revolutionary and secure functionalities have allowed many entrepreneurs to offer their products and services throughout the continent and beyond its borders. The success of organizations like Yellow Card, and Flutterwave has inspired many to take up the mantle and build Africa’s fintech industry. Unfortunately, this has resulted in several issues, including a high insecurity rate, hacks, and scams.
Fintech blow after FTX collapse
Unfortunately, in 2022, the entire fintech industry received a decisive blow after FTX crashed, causing a loss of millions. Several organizations are still affected by its backlash, causing a significant drop in activity. Dash fintech, a prominent Ghanaian fintech, is among the many who have failed to remain afloat.
Prince Boakye Boampong, founded Dash fintech in 2019 amid the surge of cross-border payments platforms. At the time, its revolutionary tools caught the eye of many investors, causing a remarkable seed round funding of $32.8 million.
This impressive feat significantly propelled its reach throughout the country and the continent. Soon many individuals and investors saw the next unicorn startup alongside Flutterwave. Unfortunately, its high rise to fame caused premature analysis of its capabilities. In 2021, Dash Fintech announced a feat of a billion transaction volume, and over one million users.
Its main user base resides in Ghana, Nigeria, and Kenya, popular ecosystems in Africa’s fintech industry. Unfortunately, in February, suspicions arose when reports suggested that the Ghanaian fintech was providing false metrics on its user base and transaction volume.
Later, Ghana’s regulatory body suspended Prince Boakye to conduct an internal audit. This kick-started the downfall of Dash fintech after proving the court’s suspicions. Dash Fintech dismissed Prince Boakye and appointed Kenneth Kinshua as his replacement.
Despite the Ghanaian fintech making necessary changes, the damage was irreversible. The audit showcased a significant shortfall of at least $25 million in the company’s accounts. Dash Fintech’s high operating expenses and monthly burn rate of $500,000 significantly contributed to its rapid fall from glory. This led to further investigations revealing that Boampong, during his tenure, received a monthly salary of $50,000. In addition, the investigation revealed he diverted at least $8 million for personal use.
Struggle in Africa’s fintech industry
Trust is a vital part of the financial industry. Developing a good client-provider relationship is the foundation of Africa’s fintech industry. Unfortunately, this fact is used loosely within the industry. For instance, what generally caused the FTX crash, the biggest financial upset in the 4IR, was not its illegal partnership and use of user funds, rather it was broken trust.
Upon the report’s release highlighting the misuse of funding, its user base quickly withdrew their funding. Unfortunately, FTX could not keep up, forcing the franchise to close its withdrawal features. This significantly damaged its reputation, causing many to fear cross-border payment platforms. By breaking the trust it had, its clients had to think about themselves, resulting in a massive withdrawal rate. Dash Fintech followed similar patterns, causing its user base to try and salvage what little funding they could.
Risks in cross-border payments
As a result, many investors have become cautious about dealing with Africa’s fintech industry. The FTX crash and now Dash fintech have proven the fears of many regulatory bodies, and the dangers of cross-border payment services. As a result, many governesses have become more cautious when dealing with digital money. Some have gone as far as banning the very concept.
The Ghanaian fintech has underscored the importance of having a clear and genuine mission when raising funds. Showcasing seed funding rounds and transaction volumes is a strategic move when trying to gain more users. Unfortunately, if a fintech startup cannot provide accurate information, their doom is all but assured.
Dash fintech has worsened the state of Africa’s fintech industry. It could potentially lead to increased scrutiny and skepticism among investors, making it more challenging for cross-border payment platforms. Restoring the trust broken is no easy feat and will take considerable time. Currently, the industry is struggling to survive from an influx of uprising startups and a lowering clientele base.
If unaddressed, Africa’s fintech industry may significantly drop, lowering the continent’s financial inclusion rate.