Konnect: Stripe for North Africa
Konnect is powering digital payments in North Africa.
Biography:
Amin Ben Abderrahman is the founder of Konnect, a Tunisian fintech building “Stripe for North Africa”. Konnect helps Tunisian businesses and freelancers get paid online.
Last year, Konnect raised its first venture capital round. It was also the first Tunisian startup to participate in the Visa Accelerator program. The company is planning an expansion to Morocco.
In the first two years, Konnect has onboarded 27,500 businesses and individuals, on top of generating $478k in revenue.
What problem are you solving and why hasn’t anyone solved it before?
Tunisian freelancers and businesses have a hard time getting paid online. We help them do that. We aren’t the first company trying to solve this problem. Two fellow startups came before us, but ended up shutting down. There are two reasons why this problem is difficult to solve.
First, processing payments implies working with local banks. In Tunisia, the banking sector is conservative and reluctant to change (although this is rapidly evolving).
You might wonder why we don’t “bypass” the banking sector. Unfortunately, it’s not that simple. If we’re processing payments, we report to Tunisia’s central bank. But the only players that can be regulated by the central bank are banks themselves. Therefore, we either need to become a bank or be attached to one to function.
Second, regulation for what we’re building is murky. The concept of online payment is new here, and Tunisia has historically kept a lock on how its currency (the dinar) moves in and out of the country.
Konnect’s existence is contingent on stellar regulatory standing. We can’t take regulatory shortcuts, no matter how much extra time and effort they would save us. Taking such shortcuts is the mistake I believe our predecessors made.
For example, the only company allowed to process Visa/Mastercard payments in Tunisia is the Société Monétique de Tunisie (SMT), which is overseen by the government. We need to be attached to the SMT to accept Visa/Mastercard payments, which means we need to comply with its regulations.
We took our time, regulatorily-speaking. We banned betting platforms from using our product (although they could’ve been an easy solution for quick traction). We sent the central bank constant updates as we were building the MVP. Although we rarely got responses, I knew our updates were being read (I’d meet people from the central bank at events and they’d tell me). These efforts paid off, as we were recently awarded a PayFac license, the first of its kind in the country.
It’s important to nuance: yes, regulation is difficult but counter-intuitively, we’re riding a regulatory tailwind. The Tunisian government wants to transition the country from cash to digital (they have an evident fiscal reason to do so). Konnect is immersing itself within that governmental enthusiasm.
There is also a valid reason for us to be heavily regulated. In practice, we cash-in payments from the payer and then disburse them to the payee. What this looks like from afar is a bank account with a ton of money coming in and a ton of money coming out in quick succession. In other words, a potential Ponzi scheme. It makes sense that we spend a lot of time proving that we are not, in fact, a Ponzi scheme.
What particular statistics make you excited about what you’re building?
The current and future digital payment volume in North Africa is massive. We’ve already captured 4% of the Tunisian digital payment volume, but there’s so much to build.
Internal Konnect slide (source TN, source DZ, source MR)
The delta between the size of this market and available solutions is huge, and that’s where Konnect is building.
RO insights: digital payments in Central Asia
Central Asia and the Caucasus is another region where digital payments infrastructure is still scarce, despite growing volumes to process.
Here’s how Gega Tsurtsumia, the founder of Georgian fintech startup Payze, explained the opportunity:
“The need for digital payments in our region emerged later than in the West because digitization emerged later as well. There’s about a ten year lag. Here, the market for digital payments took off around the 2010s.
When the need came about, the only players capable of building payment infrastructure were banks (Tinkoff and its daughter company Cloud Payments in Russia, Kaspi in Kazakhstan, Monobank in Ukraine…) But the region remained fragmented and these players already had a lot on their plate. None of them developed fintech products for the region as a whole. VC funding and tech startups were virtually non-existent back then, so few startups were active. There was a blatant gap.
Timing-wise, Payze was lucky. My co-founder and I ran into the need for a localized, modern stack of digital payment tools while building our previous e-commerce businesses. We started Payze in 2019 and became the first Georgian startup to get into Y-Combinator. The resulting funding and network gave us a competitive advantage. YC saw that we were targeting one of the “last frontiers” in the digital payments space.”
Excerpt from Payze: Stripe for the former Soviet Union, by The Realistic Optimist
What did your MVP look like and how did you muster up initial traction?