Africa’s first fintech licence passporting system sets tone for future cross-border expansion

In February, the Bank of Ghana and the National Bank of Rwanda signed a Memorandum of Understanding (MoU) to implement Africa’s first fintech licence passporting system. This agreement allows fintech firms licensed in either country to operate in both without undergoing redundant approval processes.

Scaling across African borders presents a logistical nightmare for fintech companies looking to expand operations. With 54 countries, each enforcing unique financial regulations, firms face fragmented licensing requirements that impair innovation and restrict financial inclusion.

“Fintechs’ annual growth rate is sitting at 24% over the past decade in Africa,” said Meagan Rabe, Visa’s senior director of fintech management in sub-Saharan Africa, at an Absa commercial payments summit last Wednesday. A licence passporting system could expedite this growth even further.

Africa’s fintech boom

Africa’s fintech sector is thriving. In 2020, the industry generated approximately $3.8-billion (R72.5-billion) in revenue, projected to reach $12-billion by 2025. The demand for digital banking, mobile payments and alternative financial services continues to surge as millions of Africans remain unbanked or underbanked.

(Source: Birguid. Created by Kara le Roux using Napkin AI)

A November 2024 report by the Africa Fintech Network noted: “While certain fintech licences show some uniformity across the continent, compliance standards in leading fintech markets like South Africa, Nigeria, Kenya, and Egypt vary greatly, posing substantial barriers to entry.”

Could South Africa be next? 

Despite having one of the most advanced financial sectors on the continent, South Africa does not have a fintech passporting framework. Currently, companies must navigate separate licensing processes in each new country they enter — an often complex and expensive ordeal.

South Africa’s fintech revenue is valued at R77.7-billion, with digital payments, landtech and insurtech accounting for more than 60% of that figure. ​

According to the FinScope Consumer South Africa 2023 Survey, South Africa’s formal financial inclusion rate is 98%, indicating that only 2% of the adult population remains unbanked. This reflects a significant improvement compared to previous years. However, the survey also points out that a substantial portion of South Africans, especially those in rural areas and townships, predominantly conduct transactions in cash, highlighting the opportunity for fintechs to develop solutions to address access to formal financial services in cash-reliant communities.

“Rwanda has a very big SME [small and medium-sized enterprises] community, much of it informal, like in most countries across the continent,” noted Ndima. “This creates an opportunity for fintechs to develop solutions that solve problems in the SME market.” There are approximately 2.6 million SMEs in South Africa.

Regulatory collaboration could create a more unified financial ecosystem.

“We’ve got to be dropping down the barriers of what works well in East Africa, what doesn’t work well in west Africa or in southern Africa,” said Chris Wood, the managing executive of product at Absa. “If the solution is there and there’s a customer base that really wants it, then let’s push it out there.”

The free trade zone effect

Regulatory harmonisation is gaining momentum, particularly within the framework of the African Continental Free Trade Area (AfCFTA), which seeks to establish a single market for goods and services, including financial services.

“Inter-Africa trade is growing, and where goods and services move across borders, money must follow,” said Ndima. Free trade agreements were a key driver of this discussion, she said, and given Africa’s reliance on US dollar transactions, governments wanted to encourage financial integration.

Overcoming regulatory challenges

Despite its promise, fintech passporting comes with obstacles. “Licence costs vary. Some are free, while others can exceed $2-million,” explained Ndima. “If you are a fintech looking to scale across the continent, navigating complexity with regulators is a big challenge.”

According to the Africa Fintech Network, key challenges include:

• Divergent regulations: Different licensing procedures create uncertainty and inefficiencies for fintech firms expanding across borders.


• Compliance risk: The absence of uniform customer protection laws could expose consumers to fraud and financial crime.


• Data protection concerns: Countries have different data privacy laws, complicating cross-border financial transactions.

Collaboration over competition

Even without formal passporting agreements, partnerships between banks and fintech companies are becoming increasingly common.

Wood believes that the days of fintechs and banks competing are “almost over”. While fintechs provided expertise on niche financial services, banks had the regulatory infrastructure and so partnerships made sense, he said.

The head of pan-African digital payment operations at Absa, Vickey Ganesh, noted that the African Union was already discussing regulatory alignment.

“The challenge is turning these conversations into practical stuff to put on the table that benefits everyone,” said Ganesh.

“This has got to be a conversation that happens at an industry level,” said Ndima. “It’s got to happen at a government level. It’s got to happen with investors.” DM