The magic word is compliance

Why are Nigerian regulators after fintechs?

The saying, “Please hug any Nigerian founder you see outside,” rings especially true for fintech executives in 2024. Besides navigating inflation and a volatile dollar, they operate under regulators that have banned customer onboarding for six weeks and are constantly imposing heavy fines. 

The regulators have also ramped up the surprise inspections of fintech offices and increased KYC requirements to include address verification, doubling the cost of KYC processes. 

This increase in compliance pressures across the board comes as Nigeria is desperate to get off the FATF Greylist (a list of countries which could be blacklisted in international finance) by reducing fraud and improving anti-money laundering practices. 

Fintechs have faced heightened scrutiny after a 2023 report by Nigeria’s financial crime intelligence agency revealed that over 90% failed to report suspicious transactions. With most bank fraud occurring through digital channels, banks also blame the fintechs for fraud. 

The fintechs have responded by hiring more compliance staff (some have 20), placing internal controls for suspicious transactions and reporting them, and physically verifying the addresses of customers and POS agents. 

While the fintechs should have been doing this initially, they preferred operating in the regulatory grey zone due to a combination of lax KYC measures and weak oversight. But the events of 2024 ended that era, and now fintechs have to wear big pants. 

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Contactless payments are not yet ubiquitous in Africa. The reasons are threefold: in some countries, consumer education is lacking; others lack the necessary technology infrastructure; and some have no regulatory frameworks to support it.

Egypt falls into the first category. The country has the tech infrastructure—NFC-enabled cards and POS systems—but adoption remains slow.

Apple Pay, Apple’s contactless payment solution, has now launched in Egypt, marking its first expansion into Africa. Apple partnered with Egypt’s three largest banks by asset base: National Bank of Egypt, Banque Misr, and Commercial International Bank. These banks dominate Egypt’s banking sector and can potentially give Apple Pay access to nearly 40 million customers.

These banks will issue cards that can integrate with Apple Pay to provide contactless payment solutions.

The timing is right. Egypt has been working to encourage contactless payments, introducing tokenisation regulations in 2023 to allow smartphone-based card registrations. This framework creates a ready environment for Apple Pay’s entry.

However, Apple Pay’s reach is limited—it’s exclusive to iPhone users. While smartphone penetration is high in Egypt, iOS devices make up just 14% of the market. This significantly narrows Apple Pay’s adoption potential.

Still, this could also be a subtle Apple move to strengthen its presence in Egypt after the country announced new taxes on imported smartphones in November. Egypt, alongside South Africa and Nigeria, is a key market for imported smartphones in Africa, like Apple devices.

The difficult task here for Apple is to encourage people to buy more iOS devices in Egypt, despite the phone taxes—which is no easy task given the high cost of iPhones, strong competition from cheaper Android alternatives, and limited purchasing power in a price-sensitive market.

Despite its small market share, Apple is showing that it is keen on staying and participating in Africa. Apple Pay will enjoy a first-mover advantage in Egypt as other contactless payment solutions and competitors, Samsung Pay and Google Pay, are not yet available in the country.