Because it engaged in money remittance and payments services without licensing and authorization the African payments startup Flutterwave was prohibited from conducting business with banks in Kenya in July.” according to what was said by the central bank.
As part of an investigation into Ghana’s banking system, the company’s connections with the country’s financial institutions are being investigated.
Flutterwave, Africa’s most valuable and well-known startup, is the subject of regulatory examination from both central banks, which adds to the strained concentration on the company. It has been the primary focus of rising public inquiry concerning the health of compliance and corporate governance for African startups for several months. It has recently been accused of laundering money, which it has categorically denied. Still, questions around its regulatory status lead to a line of inquiry that may start being asked of other African startups more regularly.
Regulators require registration before operation.
Following a statement made by the Central Bank of Kenya that prohibited Chipper Cash and Flutterwave from conducting business within the country, Flutterwave announced that it had applied to the bank to obtain a Payment Service Provider license.
According to the statement made by the company, “our introduction into the market was via partnerships with mobile network operators and banks regulated by the Central Bank of Kenya,” which is similar to how many other financial service providers in Kenya entered the market. One of the best-kept secrets in African fintech is that some startups launch new services or move into new areas without having the necessary licenses. Instead, they behave in the manner described by Flutterwave earlier.
However, central banks are no longer turning a blind eye to the situation. However, just one week later, the Central Bank of Ghana demanded that it cease its operations, citing the fact that it did not have a license.
Dash, a Ghanaian financial technology company, raised $32 million in March for a service that will link wawalletanking accounts and wallets throughout Africa. Since then, no other information has been released concerning the newly established company.
Startups say that it is hard to grow a business across Africa because of the different rules and regulations. Compared to the need to comply with regulations that are standard throughout all nations that are part of the European Union. However, as evidenced by the actions taken by the central banks in Kenya and Ghana, the problem is not going away anytime soon. At the very least, one implication may be drawn from that.
When early-stage companies announce that they have successfully secured capital for geographic expansion, they will be required to detail the licenses they have procured to conduct business legally in the new locations.