African fintech’s winning formula: Build for the constraint, not the fantasy

The African market has its own challenges. For starters, phones are basic, data is expensive. Cash is still everywhere, while credit histories are thin. Card penetration is limited and payment rails are fragmented. Regulation is slow.

But, according to businessman, entrepreneur and co-founder of Bank Zero Michael Jordaan, the companies that win do not treat these as reasons to complain. They turn them into barriers that competitors struggle to cross.

“Seriously, that may get you followers on X, but it won’t get your business to succeed,” he said, referring to complaints about low-cost phones, limited data, lack of credit cards and bureaucracy. “If you want to succeed, you’ve got to treat these constraints as the moat, not as an obstacle.”

That, in essence, is the African fintech playbook. Build for the device people already have, sit behind trusted institutions, keep costs brutally low and design for the market rather than the PowerPoint version of it.

Lesson 1: Build for the device people already own

The first lesson is simple. Do not build for the customer you wish you had.

“Build for the device people already own, not the one that you wish they owned,” Jordaan said.

That explains the enduring relevance of USSD, the clunky star-hash menus that many slick fintech founders would rather pretend had been buried with the Nokia 3310. Yet USSD works on almost every phone, does not require mobile data and reaches customers who may never download a banking app.

Clickatell is Jordaan’s prime example. While much of the world chased app stores, Clickatell backed basic mobile channels and kept making what Jordaan called “boring correct decisions”. It helped turn USSD into a banking channel, invented the four-digit SMS code now commonly used for verification, enabled Absa to become available on WhatsApp, and today supports banking and payments in markets such as Nigeria.

Its lesson is not nostalgia, but distribution.

“Don’t make the customer come to a new channel, go to the one they’re already on,” Jordaan said.

That same thinking applies to conversational commerce. Jordaan pointed to Nile, which has built shopping directly inside WhatsApp, rather than forcing customers into websites, apps or payment journeys that do not fit local behaviour.

“If you think about it, WhatsApp already has an incredibly high penetration rate across the continent. For example, in Kenya, 97% of mobile phone users use it. It’s 96% in South Africa and 95% in Nigeria. So, why on earth would you build a website, an app, or some other checkout flow, and then beg the customer to switch from your content channel to your sales channel?

“So, what Nile has done is they filled the void with the only design that works locally, integrating the full shopping journey from product discovery to secure checkout directly into WhatsApp,” he said.

Lesson 2: Don’t try to be the bank

The second thing successful African fintechs do right is that they don’t try to replace banks, mobile network operators or wallets.

“If you try to replace the bank, the mobile network operator, or the wallet, you’re going to get murdered,” Jordaan said.

Instead, the smarter fintechs sit behind these institutions. The bank, telco or wallet owns the customer relationship and the licence. The fintech provides the technology, risk engine, payment layer or back-office system that makes the service work.

It may not be glamorous and there won’t be a billboard, but it avoids the crushing cost of acquiring customers, building trust from scratch or applying for a full banking licence.

Optasia is the clearest case. The company, which listed on the JSE last year, provides the credit-scoring technology behind tiny mobile loans. Jordaan said it distributes more than $30-million a day across more than 32 million loan transactions. That works out to roughly 40 US cents per loan on average.

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No traditional lender can economically process loans that small with normal banking infrastructure. But Optasia uses mobile network data, such as airtime top-ups, data usage and calling patterns, to assess risk in seconds. The customer may see the telco or lender. Behind the curtain sits the scoring brain.

“Optasia isn’t the lender on record,” Jordaan said. “The mobile operator or the registered financial institution behind it is.”

The result is lending at a scale and cost structure that conventional banks cannot easily match. Jordaan said Optasia approves customers in about 30 seconds and has an industry-leading default rate of 1.2%.

Lesson 3: Treat the constraint as the moat

The third success factor is accepting that Africa’s difficult operating conditions can become the very thing that protects a business from copycats.

This is where the boring work becomes valuable. Payments infrastructure, licences, certifications, integrations and regulatory approvals do not dazzling conference slides make. But once a fintech has spent years solving them, they become hard for a rival to replicate quickly.

MyPinPad is one example. It turns a smartphone into a payment terminal, avoiding expensive point-of-sale hardware. Instead of fighting banks for merchants, it white-labels the technology to banks. The model works because the company solved a difficult certification and security problem that could not simply be “vibe coded” in a week.

Bank Zero shows how capital structure can also be part of the product. By using a mutual bank licence, Jordaan said it required far less capital than a commercial bank and could operate with a much lower cost base.

The lesson is that the obstacle is often the opportunity. No credit cards forced mobile money services. No high-end phones forced USSD banking. No point-of-sale terminals forced soft POS. No bank accounts forced chat banking.

“African fintech that wins is a fintech that designed for the constraint instead of waiting for the constraint to disappear,” Jordaan said.

Lesson 4: Keep the economics radical

The fourth lesson is that African fintech only works if the economics are brutally lean. Ticket sizes are small, so costs have to be tiny. Volume alone will not save a fintech if every transaction carries too much fat.

“Anything that depends on a fat margin per transaction was never going to survive here in Africa,” Jordaan said.

This is why the infrastructure layer matters. Powertech, in Jordaan’s example, runs payment and engagement infrastructure behind mobile gaming, accepting mobile money because that is what customers actually use.

Zaru, the rand-denominated stablecoin, is another example of designing for a specific constraint. Jordaan positioned it not as a magic crypto wand, but as useful infrastructure for local rand-based automation: gig worker payouts, supplier settlements, energy micropayments and insurance claims.

It is also why cash cannot be wished away. Jordaan noted that in one mature African payments ecosystem, roughly 44% of value still flows through cash. That is not a failure of digitisation, but a reflection of how people live, trade, avoid fees, manage trust and run informal businesses.

He argued that Lesaka Technologies built around the reality of a cash-heavy economy rather than fighting it. Its point-of-sale terminals help micro-merchants process value-added services and cash transactions, often without a bank account — digitising around the cash customer instead of waiting for cash to vanish. Lesaka’s Kazang network extends that model deep into informal retail.

“The companies trying to change the customer too much lose to the companies that simply serve them as they are,” Jordaan said.

The examples

Clickatell shows the power of using existing channels. Its bet on USSD, SMS and WhatsApp was not fashionable, but it was practical. It reached the customer where the customer already was.

Optasia shows the power of sitting behind a telco or lender. It does not need to look like a bank to do the economically difficult work of credit scoring for tiny loans.

MyPinPad shows how a smartphone can become a merchant terminal when formal infrastructure is too expensive or absent.

Bank Zero shows how capital structure can be part of the product. By using a mutual bank licence, Jordaan said it required far less capital than a commercial bank and could operate with a much lower cost base.

Lesaka shows how to build with cash rather than against it.

And, Jordaan points out, Crossfin shows that in a fragmented market, consolidation can be as powerful as invention. He argues that South Africa’s fintech market may be big enough to create useful niches, but not always big enough to sustain dozens of similar micro-solutions. The operator that consolidates the stack may outlast the purist start-up.

His closing point was almost anti-hype: the most valuable African fintechs may be the boring ones.

“The reward goes to the boring,” Jordaan said. “Boring banking or boring fintech is sexy.”

It is not the demo that wins the room that matters. It is the business that survives regulation, paperwork, thin margins, erratic networks, small ticket sizes and customers who don’t behave like Silicon Valley case studies.

Africa’s fintech winners, in Jordaan’s telling, are not waiting for the market to become easier. They are building precisely because it is hard. DM