An uptick in system breaches and exploits by bad actors has resulted in mounting losses for African businesses in recent years, with fintechs among others paying the price as targets of fraud and money laundering activities.
In Nigeria, for example, a crisis is brewing as the country grapples with an alarming wave of cybercrime that saw three prominent fintech companies collectively lose more than ,USD 6 M over the first eight months of 2023, data from the Financial Institutions Training Centre shows. Last week, Africa's highest-valued startup Flutterwave was reported to have lost between USD 7 M to USD 13 M in a breach, following the turmoil of the previous year during which it reportedly lost USD 14 M across several breaches while managing to shake off a money laundering case in Kenya.
As concerns about the industry's vulnerability rise, the need for potent solutions heightens. Storied entrepreneur and operator Sylvia Brune, is taking on the challenge with pawaPass ; a regulatory technology (regtech) startup rethinking user verification and compliance.
The situation, she tells WT in an interview, urgently calls for an "inclusive, efficient and scalable innovation in regulatory technology, to tackle compliance failures and prevent cybercrime across sectors, to de-risk Africa's digital business landscape."
However, compliance presents a formidable and complicated challenge, particularly in regions like Africa with diverse regulatory landscapes.
The compliance conundrumCompliance presents a daunting task for businesses globally, but in Africa, it takes on a unique complexity. Regulatory frameworks constantly evolve, demanding businesses stay abreast of changes to avoid penalties or potential shutdowns.
Brune succinctly encapsulates this challenge, stating, The regulators are changing things every day. They expect you to be up to date on everything and, at the same time, they say you need to take a risk-based approach. This dual expectation places immense pressure on companies to not only comprehend but also proactively manage their compliance risks.
The ramifications of non-compliance are grim. According to the African Development Bank, Africa loses an estimated USD 90 B annually to illicit financial flows, emphasising the urgency for robust compliance measures.
Additionally, anti-money laundering sanctions on global financial institutions surged by 57 percent in 2023 alone and another study suggests around USD 4 B is lost annually to cybercrime in Africa. Moreover, financial executives in Africa have identified cybercrime as a greater risk than political instability according to Deloitte's 2023 African Financial Industry Barometer .
A shot at solving the puzzlepawaPass emerged in 2022 from the need to simplify and streamline compliance processes for African businesses, promising a unique combination of low-touch data points, non-ID-based user verification, and anti-duplication technology to build fit-for-purpose and compliance solutions for African businesses.
Its solutions, WT understands, are being utilised in the gaming and sports industry across Rwanda, Uganda and Ghana where it verifies over 6000 athletes for payments worth up to USD 132 M a year, having also proved effective in identity verification and fraud prevention for both finance institutions and government security protocols.
"pawaPass can be used by digital businesses of all sizes; it's scalable - works across geographical regions respecting unique data requirements; inclusive - ensures genuine users have access to required services; and sector-agnostic," explains Brune.
Drawing from her background in investment and entrepreneurship, Brune adopts a cautious yet strategic approach. She emphasises the importance of market validation before seeking investor funding. My background coming from the investor side and having started another company made me cautious about rushing to investors before a viable product-market fit is established, she says.
This approach enabled Brune to focus on creating a product that addresses market needs. By engaging with customers and iterating based on their feedback, pawaPass has developed solutions that appear to be making significant inroads.
Notably, as Brune pointed out, the fledgling startup was leveraged for compliance purposes in the deployment of USD 2 M worth of shares for Mchezo company across 11 African markets in 2023, showcasing its versatility and applicability across various sectors.
A collaborative effortCollaboration forms a cornerstone of pawaPasss strategy. Brune underscores the importance of aiding businesses in understanding the risks they face and how to mitigate them. Its about helping them understand the risks theyre taking. If you understand the risks and vocalise them at every step, you can decide
