How fast can you build a successful digital bank in Africa?

I was talking to Kyane Kassiri and he said something like "Nu Bank is the most successful digital bank in emerging markets because it has been able to become a primary bank for most of its customers"

Africa is known for many opportunities, one of the most promising one is "building a digital bank which will serve millions of customers across countries". I think the opportunity is clear but the time it takes to build it out and the amount of efforts needed is always under estimated. When I think of neo banks or digital banks in Africa, I think of Kuda from Nigeria, TymeBank in South Africa as well as Wave Sénégal .

May be I (we) shouldn't include mobile money operators as digital banks but it is tempting to say Africa is different and for that reason we may not see the likes of monzo or nubank but rather neo banks will come in different formats and more important from different places or parents (parent corporations)

Whether you are building a digital bank, challenger bank, or neo bank in Africa, you are basically building 5 things including digital touch points, physical touch points, back office operations, core financial system, and securing licenses

Digital touch points are the ways that customers interact with the bank digitally, such as through the bank's website or mobile app. Physical touch points are the ways that customers interact with the bank in person, such as through Cards, Agents or ATMs. Back office operations are the behind-the-scenes activities that support the bank's operations, such as processing transactions, treasury and managing customer accounts. Core financial system is the software that runs the bank's operations and connects to everything else. Regulatory licenses and approvals are the permissions needed to operate in a particular country.

While putting together all of these elements, neo banks in Africa can focus on aggressive customer acquisition and provide a safe and affordable experience for the millions of customers.

Now let us take a deeper look into each of the 5 building blocks for a digital bank while we also establish how long it takes to put it up regardlessly of whether you are using a partner, building it in house or both.

1. Digital Touch Points:???

The digital customers' interface, which includes mobile apps, devices and web platforms, is crucial for customer interactions and brand representation of your bank. It provides a user-friendly and convenient way for customers to access their accounts, make transactions, and manage their finances.Build or Partner: In most cases, You'd want to control the majority of these touch points as they actually represent the main customers’ facing look and feel channels, and the primary platform they interact with all your services.

Time to Build: With a talented tech team and a few interns working full time, this important block should take 1 to 3 months to be fully functional and it is actually a continuous work.

2. Physical Touch points:???

While digital banks primarily operate online, many choose to provide limited physical touch points, such as Agents, ATM networks or, in some cases, shared physical locations for customer support. Although less common but very important, physical touch points can add a layer of convenience for customers and fast track onboarding.Build or Partner: As a digital bank? you are more tech than a traditional bank so it is expected to borrow most of the physical touchpoints by integrating with dedicated providers like VISA, Mastercard for Cards and ATMs or Build out your own agents network and a card like WAVE or even better start by using agents and cards from Other established providers.??

Time to Get it working: It might take you a few months if you decide to integrate with partners who provide these physical touch points but if you want to build it always goes beyond 12 months, It is also advised to do both depending on the situation and time.

3. Core Financial System:???

This should be your proprietary tech stack, Since the core financial system is the backbone software of the bank, managing transactions, accounts, and financial data as well as connecting everything else. It's essential for the bank's operations and ensures that all activities are executed, recorded accurately and compliantly.

Build or Partner: As a digital bank or a challenger bank you are more tech than a traditional bank so it is expected for you to internally have a tech team which handles the core platform plus all the required integrations.

Time to build it out: This may take you 3-12 months after you have the regulatory approvals or primary partners with required licenses, This would go in parallel with any other block but only after approvals are in place. This piece includes all the required third party integrations with other financial institutions or KYC providers to make the processes smooth, seamless, accessible and cheaper.?

For instance in Tanzania, You will need to integrate with at least 10 providers including 4 different mobile money operators, 2 Banks, 2 KYC services providers and 2 payments processors to have a stable digital challenger bank. These providers will help with cash in, cash out, merchants, interoperability as well as agents.

4. Licenses and Regulatory Compliance: ???

This is a foundational component and a critical building block. Digital challenger banks must to a degree adhere to some financial regulations and obtain the necessary licenses to operate legally. Regulatory compliance ensures the security and protection of customer funds and it also gives confidence to all stakeholders including investors and partners.

Build or Partner: This is the most critical block as financial services are highly regulated and you want to tread carefully here and there. You would want to be clear on how to approach this. You can apply for a few licenses you need for your business or partner with those who are able to provide you with license sponsorship in some countries. Ideally over time and your business matures you want to have a good mix of licenses and approvals.?

Examples of known players who started with limited regulatory approvals and partnerships and years later went for their own regulatory licenses include Tembo , Flutterwave , Revelut , Monzo , and NALA ?Or Just buy a license and cut the b–isht: Sometimes it is effective to just buy someone who already has a license to quickly move into a market and launch products like how MFS Africa did in Tanzania, Uganda, Nigeria or like Branch did in Kenya

Time to Secure a license or regulatory approvals averages 9 - 36 Months: Here you need no interns, You need people who have done it before. Depending on a jurisdiction and their licensing process you may spend an average of 9 months to 2 years preparing required documents and responding to additional questions by regulatory authorities or implementing what the physical inspectors advised in the process of due diligence.

In most countries, These licenses might be PSP licenses, EMI or MFI covering products like mobile money, micro lending, payments and remittances services.

5. Back Office Operations:???

Behind the scenes, back-office operations handle tasks like customer support, AML & KYC checks, treasury and float management, agents management, account management, and other day? to day administrative functions. These operations are essential for the smooth functioning of the challenger bank or a digital bank operating in any market.

Build or Partner: You'd want to control the majority of these as they really touch the core of your business efficiencies, operations and may realize economies of scale as you grow the customer base.

Although KYC and AML are very critical here you may start by using a provider like ComplyAdvantage, SmileID or Veriff or even decide to build yours like ChipperCash as you grow.

Time to set up: If you have assembled a very able team or seasoned practitioners working full time, this building block should take 3 to 12 months to be fully built in-house, running and functional as it scales with the business volumes.

Conclusion: The time it takes to build and launch a neo bank can vary significantly depending on various factors, including the complexity of the project, regulatory requirements, technology infrastructure, and the team's experience. Generally, it can take anywhere from 1 to 3 years across continents.

When it comes to achieving success with the neo bank it is a whole new set of challenges but in terms of how long it will take you to hit 10 million active customers (That's my success standard) it is a question of your prowess in actual execution and luck (huge opportunities). Usually it takes 5 to 10 years to hit 10 million customers from founding date of the neo bank.