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It is a crowded field for the many Nigerian fintech start-ups competing for a slice of the market in Africa’s most populous nation, making it difficult to stand out.
But that is not the case with PalmPay, the mobile payment app operator that launched in 2019 with a $40mn seed funding round led by Chinese mobile phone manufacturer Transsion, the largest for an African start-up to date.
Two years later, that was followed by a further $100mn funding round, putting it on course to become one of the largest fintechs in Nigeria. PalmPay’s first appearance this year in the Financial Times’ list of Africa’s fastest-growing companies, and its ranking in second place underscores its subsequent growth.
PalmPay, which is backed by several other Chinese investors, including internet technology company NetEase and venture capital funds, began operations as a so-called neobank, part of a growing cohort of mobile app-based companies offering accounts in Nigeria. Its services range from utility bill payments to near-instant bank transfers and mobile phone airtime top-ups.
PalmPay operates a dual “smartphone first” strategy and says it has 35mn registered users of its mobile apps on Android and iOS as well as through a network of mobile money merchants and agents for customers who do not have the technological skills to use its products online. The company believes the in-person service is a potential “on ramp” for those users to eventually go digital. It also has about 1mn small to medium-sized business clients.
Sofia Zab, PalmPay’s chief marketing officer who has been with the group since launch, says the key to the company’s success was its focus on providing services for the large section of the population in Nigeria who felt excluded by traditional banks or were frustrated by the onerous requirements to open a bank account or take out a loan.
“The ultimate competition for us was cash,” Zab says of a country where cash remains king. “For us it was about digitising transactions and making the use of cashless transactions as convenient or more rewarding than using cash to change consumer behaviour. The [traditional] banks were targeting mainly the elite consumers, higher earners and businesses . . . we were focused on building digital transactions among the mass market.”
But the growth of PalmPay’s customer base has also been helped by its backer Transsion, which makes the popular Tecno, Itel and Infinix phones. All Transsion phones sold in Nigeria come pre-installed with the PalmPay app.
Although it has lowered the barrier for entry to banking services, PalmPay still has robust “know your customer” guardrails against fraud and money laundering, according to Chibuzor Melah, vice-president of partnerships. “We’ve done what the banks do but in a more innovative way,” he says.
PalmPay has expanded to Tanzania and Bangladesh with consumer-facing services and has business-to-business operations in Ghana and South Africa.
It is looking to become a financial “super app”, providing multiple services. The company offers loans and insurance products through third-party partnerships with microfinance banks and insurers. It has worked with three insurers to encourage customers to go digital, with 1mn PalmPay users taking out insurance products, says Zab.
“I think in Nigeria we’re pretty [much] there already [becoming a super app],” she adds. “Our vision is to create a comprehensive mobile banking platform that serves all financial needs in one place.”
Given the Chinese funding for PalmPay, its “superapp” strategy has drawn comparisons to those of Alipay and WeChat, as well as Elon Musk’s drive to make X what he calls “the everything app”.
But Zab says the comparisons are not necessarily that straightforward. “We’re inspired by the market leaders in other regions . . . You have WeChat and Alipay in China, Nubank in Latin America and Revolut across Europe. But it’s important to note that we’re not just trying to build the X for Africa. The reason we’ve become successful is because we’ve started with a deep understanding of the market and focused on consumer needs. It’s the localisation that is the reason behind our success.”
