Instead of visiting a bank, Nigerians who need to move money are now just as likely to visit a street market and speak to an agent working for OPay, a Chinese-backed fintech company. These agents form part of a vast network that has propelled OPay to market leadership in Africa’s largest economy. It’s one example of an emerging fintech scene in Africa that has benefited from Chinese expertise and investment to keep up with the rest of the world.

This week, The Wire explores the path OPay took to becoming a leading digital payments system in Nigeria and how its experience fits in with the grander strategy behind Chinese investment in African fintech.

DIGITAL SOVEREIGNTY

In December 2017, software company Opera announced the launch of a new digital payments platform, OPay, in Kenya, followed six months later with a launch in Nigeria, where the company would experience its biggest success. OPay quickly gained prominence by ensuring its money transfers were processed almost instantly, a major attraction in a country where banks have a reputation for poor reliability. A currency crisis that started in February 2023 caused cash shortages and accelerated many Nigerians’ move away from traditional banks.

“The banks under-emphasize how much of a sticking point that was for the people, and what that led to was these fintechs just focusing on being extremely reliable,” says Nchedolisa Akuma, a Lagos-based senior fintech analyst at Stears, a pan-African data analytics firm. “That’s how OPay rose above the other fintech players…by investing very heavily in their payment infrastructure.”

OPay and Opera share the same chief executive, Chinese billionaire entrepreneur Zhou Yahui, best known for founding one of China’s largest online content companies, Kunlun Tech. A Chinese consortium led by Kunlun acquired Opera, which is headquartered in Norway, in 2016. Japanese investment management giant SoftBank led OPay’s most recent funding round in 2021, during which it raised $400 million and was valued at $2 billion. That made OPay one of only six African-headquartered fintech companies to be worth more than $1 billion, according to venture capital company Crypto Valley Venture Capital.

Other Chinese-backed fintech startups have found success in Africa. PalmPay launched in Nigeria in 2019 after a joint venture company named Transsnet was formed between Shenzhen-based Transsion Holdings, one of the largest cell phone manufacturers supplying African countries, and NetEase, one of China’s largest Internet companies.

Meanwhile homegrown African fintech companies have relied on Chinese technology and investment. Kenya’s dominant fintech platform, M-PESA, partnered with Chinese telecommunications giant Huawei in 2012 to scale up its operations, and now manages transactions worth as much as 40 percent of Kenya’s GDP.

“What Chinese companies have done in order to facilitate transfers of money is to expand the ecosystems that already operate in China to East Africa,” says Gianluca Iazzolino, lecturer in digital development at the University of Manchester. “In the past, they [African businesses] used traditional money transfer systems called hawala. Because of the crackdown on hawala companies, traders have shifted to Alipay and WeChat.”

Hawala refers to informal money transfer networks that governments in Africa and the Middle East have sought to restrict because of their undocumented nature. Check out the graphic below to learn more about how Chinese investment is powering African fintech:

In 2015, the Chinese government introduced the concept of the Digital Silk Road (DSR), which aimed to advance digital connectivity between Africa,  Asia and Europe. These days, Chinese interests are making a number of mid-sized investments in Africa under the DSR rubric, rather than making the kind of large infrastructure investments China often engaged in years gone by. 

Huawei has been instrumental in building data centers in African countries where governments have introduced data localization requirements, meaning that important data can only be processed through a server located in that country. 

“Fintech is part of this expansion strategy for Huawei because the point is to reduce latency,” says Iazzolino. Latency refers to the amount of time it takes for data, like a financial transaction, to transfer across a network.

This month, OPay announced that it had achieved its first monthly profit since its inception. The platform now has 50 million users, of which 10 million carry out transactions daily, and the company aims to serve one billion users by 2031. In 2022, OPay had more than 563,000 agents in Nigeria to provide customer service, according to data and research firm Intelpoint.

“Nigeria has big markets that tend to draw in a lot of commercial activity. That’s what OPay has targeted to put a lot of their agents around,” says Akuma from Stears. “Nigerians like to know that if all else fails, they can go and meet someone on the street.”

The graphic below provides details on some of OPay’s prominent investors.