Tanzanian Fintech Selcom acquired a bank. Here is why this is interesting
Insights on the impact of Selcom acquisition of Access Microfinance Bank
Selcom started in 2001 in Tanzania, as an airtime distributor for Celtel, the telecom company that was later acquired for $3.4 billion. Over the past 23 years, Selcom has evolved from being an airtime distributor to providing merchant payments, agency banking, card issuing, e-commerce, and switching services for banks. This week, it entered the banking sector after acquiring Access Microfinance Bank Tanzania.
Selcom Executives
My friend, Reuben, co-founder of TemboPlus, says “When a bank acquires a fintech is news, When a fintech acquires a bank it's Big news. BUT when a homegrown fintech acquires a bank that's even BIGGER news.” Here is why this is bigger news;
A Call for more bank and startups partnerships
In a country like Tanzania, most traditional banks, or banks run by people who haven’t been involved in startups, have always been slow and not confident in partnering with most startups. This is primarily because they don’t understand startups well and don’t see much potential in partnering with small companies that haven’t yet validated their business ideas at scale and models. Additionally, banks perceive it as risky to partner with some startups due to various risk factors, which is understandable.
Tanzania Fintech stakeholders
The ideal bank that can partner more readily with startups is the one that is run by people who have a startup background or has worked with a number of startups as customers before. As a leading payment company in Tanzania, Selcom has been working and partnering with startups of different sizes and levels in Tanzania, including startups like mine, Swahilies, and others like Nala. Selcom having a bank is like a call to foster more partnerships between banks and startups in the ecosystem.
SME Banking Opportunity
Selcom has over 60,000 agents on its agency banking network who have been distributing banking and other services for different banks, governments, and other institutions. The prospect of getting all of them to distribute Selcom banking services excites me about the potential reach of their bank. On otherside, Selcom has been powering over 100,000 merchants on payment processing.
Now, is an opportunity for them to bank both agents and merchants, and extend their business models to generate revenue beyond just the C2B or consumer and agent payment transactions. It is more of B2B or SME banking, and it means business.
Selcom tried to launch a consumer digital banking app
Three years ago, Selcom wanted to launch its full digital consumer bank service, Ara, in partnership with a bank, but they were not able to do so. Not being able to launch banking with a bank partner inspired Selcom to acquire a bank? Maybe yes, maybe no, but the good thing I have learned is that it is always great to try to do something. Whether it takes off or not, you will gain insights into the next best alternative. Now, with their own bank, I hope they can do even more and better.
Affordable Consumer banking opportunity and hope
When Selcom wanted to launch a consumer digital bank, their main PR and promotion emphasized that it would be almost FREE. This is because digital financial services are very expensive in Tanzania. I sometimes think that traditional financial institutions charge high fees due to their inability or blindness to see the long-term potential. They fail to recognize that charging lower fees to many customers can generate more revenue longterm, rather than charging high fees to a few customers, which excludes many people from participating in the digital financial services.
Overview of Bank fees in Tanzania
From a payment company perspective, where margins are low (1% to 3%), creativity is essential for making money from low margins. For context, in Tanzania, mobile money companies can have margins of up to 20% per C2B payment transaction.
19% in C2B mobile money transaction fee
Being in the payment industry pushes you to think very long-term. Selcom, as a payment company acquiring a bank, might offer hope for affordable banking services in Tanzania, provided by a company that understands that more money shouldn’t come from charging high fees to a few customers.
It is a dream come true
Wishing all the best to the Selcom team. Such kind of moves and milestones really play a big role in the maturity of our Fintech ecosystem.
Thanks for reading! You can personally contact me via Twitter or LinkedIn or Email me at founder@swahilies.com for any feedbacks.