Africa is currently experiencing a growing adoption of digital payments fueled in part by the growth of e-commerce. In Africa, the total value of e-commerce was estimated at $16.5 billion in 2017 and is projected to cross $29 billion by 2022. As of 2021, 43% of e-commerce transactions in South Africa are settled by card payments, and the figure is 35% for Nigeria and 25% for Kenya. In each of these three countries, less than half of e-commerce transactions are settled with cash.
The continent also has a strong and growing smartphone and overall mobile penetration, which many rely on for communication and financial transactions. Nearly half a billion people subscribe to mobile services in sub-Saharan Africa, but that is still only a 45% penetration rate for the region of over 1 billion people, leaving a lot of growth potential. The continent is ripe for financial innovations.
Currently, there is an ongoing movement to digitise cash transactions and provide more payment options across Africa. Additionally, a growing extension of the reach of financial services formerly only available to the privileged few. This movement, and the subsequent flood of fintech innovation and funding, has turned African markets into some of the fastest-growing for developers in the world, as per GitHub reports, and these developers are increasingly attracted to high-growth fintechs.
These developer communities are young: the average experience level of developers in South Africa is 7.3 years; Nigeria 5.5 years; Egypt 4.1 years; Kenya 3.8 years; and Morocco 3.8 years. Nevertheless, both the individual developers and fintech startups are building fintech solutions to aid the digitisation of cash for the over 1 billion individuals across Africa and, in the process, financially include them.
Today, fintech is the most funded sector in Africa, raking in billions of dollars since 2015 at an average annual growth of 120%. This year, Africa has surpassed the $3 billion funding threshold as of October 2021, with most of this going to fintechs.
Despite all this, it is still challenging to build and scale a fintech solution in Africa. From the high fees to complex partnerships with banks and other partners, and little or no existing software infrastructure to onerous regulations and compliance requirements that differ from one market to the next, fintech startups and developers face an impossible set of problems. Mainly because, in most cases, you have to build the necessary technical infrastructure stack from the ground up in each market.
Africa presents an opportunity for a solution that seamlessly integrates financial building blocks – the elements needed to provide different financial services, such as performing identity verification and demonstrating bank account or business ownership or the ability to accept payments seamlessly performing identity verification - across the continent. Achieving this will unlock massive value that will contribute to the continent’s economies as a whole.
Such infrastructural solutions, such as APIs, have proven to be a vital foundation for fintech products in established markets, as we have seen with Plaid, Tink, and Truelayer. Moreover, given that Africa is undergoing an unprecedented adoption of open banking policies and best practices, APIs also present an opportunity to lay a firm foundation for fintech products and innovations in Africa. Stitch is capitalising on this opportunity.
The Future: Stitch
Stitch only came out of stealth mode and officially launched in February 2021. Since then, a lot has changed. The company started their journey by providing fintech companies with access to financial account data. Over the past several months, it has grown its API volumes by over 40% month-on-month and launched Account to Account (A2A) payments.
Stitch’s mission has always been to make it easier for businesses and developers in Africa to build and scale innovative fintech products. Through their APIs, the company aims to reduce the challenges of building across African geographies dramatically. Today, Stitch is the go-to API partner for some of Africa’s leading fintech players, including Paystack (acquired by Stripe), Chipper Cash, Yoco and FlexClub. Similarly, traditional insurance players such as Sanlam also rely on Stitch’s API.
Stitch wants to provide full API access to financial accounts across Africa and recently expanded into its first market beyond South Africa, its launch and initial market. In October, Stitch announced its launch in Nigeria, one of the most populous countries globally and arguably among the densest and fastest-growing fintech ecosystems. It is quickly becoming a hub for engineering and product talent and a must-have market for fintechs. Stitch is also imminently looking to launch in additional markets like Ghana, Kenya, and Egypt in no particular order.
How does Stitch Work?
Stitch offers a single API that makes it easy for developers building digital finance solutions to add functionalities that are conventionally hard to build—for instance, accessing user financial data and enabling a seamless and instant payments experience - so developers and fintechs can focus on building great user experiences.
With Stitch’s API, developers can connect their apps or platforms to users’ financial accounts within seconds, allowing users to share their transaction history and balances, confirm their identities and initiate payments. As a result, it helps businesses easily develop more user-friendly, innovative and inclusive digital finance products at lower costs and without fraud.
The company’s tooling allows businesses to innovate with new and improved services, including personal finance, lending, insurance, payments and wealth management, amongst others. Stitch also enables fintechs to work with traditional financial institutions in a safer and more compliant way.
The product is designed to fit the needs of unique African markets by integrating with institutions and third-party apps in multiple markets. Businesses using Stitch only need to integrate once and immediately have access to financial institutions across the continent. It is also tailored to typical consumer behaviour surrounding recurring payment needs such as buying electricity, cell phone data, pan-African remittances etc. More importantly, it adheres to African compliance and regulation, making it even easier for African developers to build African products.
The founders and leadership team draw on their extensive experience building API products for local markets and have worked at Smile Identity, Jumo, MTN, Stripe, Root, Bain & Co and more.
In 2017, Stitch CEO Kiaan Pillay worked as the head of the South African insurance API platform Root. Then, he left to join Smile Identity, a San Francisco-based identity API company. He worked with fintechs across Africa and learned firsthand about the infrastructural issues around compliance and identity they faced.
Around this time, Stitch CTO Natalie Cuthbert — a software architect Kiaan met at Root — and Stitch CCO Priyen Pillay had started building WigWag, a Venmo style wallet for Africa, as a side project after realising how challenging it was to send P2P payments to one another.
While building the front end went pretty quickly, they spent more than eight months connecting WigWag to banks, realising how the lack of available infrastructure to make something like this in Africa significantly slows down progress. As a result, they decided to focus instead on building that infrastructure, and Stitch was born. Today, WigWag still lives as an internal P2P payment and testing tool, with the Stitch API enabling instant payments.
As of writing, Stitch is live in two markets, and the team has grown from the original three to more than 30 since launching officially in February 2021.
At Future Africa, we are excited to be a part of Stitch’s journey to transform the future of fintech across Africa. We welcome Stitch’s team to the Future Africa community.