Minka, a Colombian fintech that recently announced operations in East and Southern Africa, is trying to resolve the complexities of interbank transactions, which can be costly and less time consuming because of the meticulous processes that accompany ensuring that the ledgers of both institutions’ correspond.
When moving money from one bank to another, it is very easy to get things wrong and record errors that could be detrimental to business operations. Minka is launching its services in parts of Africa to solve many of the same payment problems as in its native Latin America.They have confirmed ongoing conversations have begun in Eastern & Southern Africa as well as Nigeria.This B2B product, founded in 2016, intends to help local banks establish a common communication infrastructure that will enable them and other financial institutions to account for transactions made between different platforms.
“We started off by actually building a new payments protocol and some three or four years ago, we started with a large project in Colombia where together with local financial institutions and the local clearinghouse, we launched one of the largest real-time payments projects,” said Minka’s founder and CEO, Domagoj Rozic during a webinar hosted by The Kenyan Wall Street.
Although banks are the startup’s major focus, the technology Minka deploys can be useful to other entities such as co-operative societies, B2C fintechs, and trade unions. Minka will unify their online ledgers and free these institutions from the distress associated with the verification of financial transactions.
Foreseeable ChallengesMany financial institutions in Africa operate in a closed loop system that does not easily adapt to new market players. This, in a large way, hampers baseline communication whenever transactions are made between them resulting to even more troublesome delays.
Even on occasions where government regulators direct banks to adopt certain measures that enhance interoperability, enforcement is hindered by the lack of efficient players that would provide the technology needed to achieve this.
Minka also anticipates the ‘cash is king’ challenge that permeates the African market. Adopting technologies has been problematic to average consumers because of a hard-to-erase skepticism fortified in a population where 90% of the people prefer cash.
Even in mobile money heartbeats like Kenya, frequent disruptions in systems like M-Pesa, and the unreliable options, force many people to make cash transactions. Inadequate financial inclusion is further cemented by the operational challenges within the financial sector which Minka intends to surmount by encouraging awareness and sectoral collaboration.
“What we have done before is we have tried to adopt this top-down and bottom-up approach in terms of our conversations. We also talk to those that can influence financial literacy as well, which I think is really a key part of the puzzle,” the company’s growth lead in Africa, Alexander Perko told The Kenyan Wall Street.
“Whilst it is true that there are some challenges, there is a huge opportunity in Africa. We are focusing our efforts in terms of trying to plug some of these gaps, which include lack of interoperability and fragmented ecosystems,” Perko added.
Minka’s African ExpansionMinka raised Series A funding worth US$ 24 million in 2022. This prompted the fintech to consider expanding to other markets which share a penchant for growth in mobile money and digital banking. It intends to rake in partnerships with local financial institutions and companies with insight on how to upscale. These companies, Minka believes, will help them attune their solution with the unique needs of the regional market.
“East Africa is a good starting point for us because of the 500 million people it has and the growing GDP, fastest on the continent between 5% and 6%, and the region also has proven opportunities and Fintech success,” Perko added.
Minka also emphasized that its safety factor is unique because it did not involve ‘walls and more walls’ of protection, but involved a combination of asymmetric cryptography, cloud-based and internet security standards, as well as notifications in case the ledger itself is compromised. The fintech also said that throughout their entire operation, a client’s money remained safe in the account as Minka only dealt with accounts’ information – verifying their authenticity.
“We are not going to hold the money, the money is still in your bank account. We are just going to coordinate the debt-clearing process and as long as we can prove that this request is from this bank, and show it to you, you can verify it yourself,” said Minka’s Founding Engineer, Jorge Zaccaro.
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