Konnect Networks, founded in January 2021, is a pioneering payment orchestration platform in Tunisia. After two years of dialoguing with the Central Bank, the fintech has received first the payment facilitator licence.
Founder and CEO Amin Ben Abderrahman tells Condia that Konnect now has a 4% market share of the country’s online payments space with 20% CMGR over a year.
Last year, Visa chose Konnect as the only Tunisian startup to participate in the first cohort of its highly competitive Africa Fintech Accelerator which had an acceptance rate of 2.2% of 1044 applications. Fellow pioneering neo-bank Flouci, licensed by the Central Bank of Tunisia, got into the second cohort of the Visa Africa Fintech Accelerator Program. No Tunisian startup is in the current cohort.
Recently, Konnect raised $1.5 million from Renew Capital, 54 Collective, Visa, Plug and Play Africa and others. The paytech startup was Renew Capital’s first investment in Tunisia.
Konnect was Amin’s third attempt, in five years, at building a company that the market wanted.
As part of our ongoing series spotlighting the Tunisian ecosystem, we interviewed Amin to learn firsthand what it is like to be an entrepreneur in Tunisia, particularly in the fintech space.
Enjoy the full conversation that has only been lightly edited for clarity.
Starting out
Benjamin: How did you get into the world of startups and entrepreneurship?
Amin: I come from the world of corporate finance. My whole career before being an entrepreneur was supporting big companies in their consolidation process within international firms.
In 2016, I decided to try entrepreneurship, after working in multiple countries—the United Kingdom, Cameroon, and Switzerland—as the technical right-hand of financial departments within these international groups.
I co-founded a company called Vink (Bitinar) to save all local transactions to the Bitcoin ledger. I lost $15,000 in coming up with a proof-of-concept. Clearly, it was too early to try to do something between Bitcoin and the Tunisian dinar, called e-dinar.
In the second company, I was the CTO. It was called T-Ledger, Tunisian Ledger. For this one, we focused on the underlying technology of bitcoin, not bitcoin itself. So we built something based on the hyperledger fabric, like a blockchain system. And we were trying to sell it to banks with a white or grey label. It was a solution for banks to offer bank-led mobile money payment capabilities, not telco-led mobile money. This is because North Africa doesn’t have mobile money like in East Africa [Safaricom, a telco, is the mobile money leader in Kenya], for example. So, we spent, one year and a half, maybe two years, building this solution and trying to sell it to banks. Banks were very much interested, but none of them was ready to really sign this kind of project. It was clearly too early, again, or maybe we focused a little bit too much on the technology and they were a little bit afraid of going into these disruptive technologies. It didn’t work. I decided to leave this company and focus on something that the market is asking for.
So, I built Konnect in 2021. At Konnect, we don’t talk about technology anymore because, in reality, no one cares except geeks like me. Konnect is about helping businesses get paid securely and seamlessly, backed by regulation.
Benjamin: Interesting, so why Konnect?
Amin: In Tunisia and North Africa, it’s very complicated to get access to a payment gateway. Usually, it takes at least four weeks, a robust technical team, and connections to the bank or its agent to lobby access to the APIs. Afterwards, you will go through the bank’s compliance process before you can start selling online.
So we made this easy. We got access ourselves as Konnect, the company. What we did was, use this payment gateway to allow access to online payments for our merchants. When we started this we made it very easy, like in 15 minutes, to get access to a payment gateway with all the compliance processes (KYC/KYB) behind it. That was already a big win.
Licensing
Benjamin: Hmm, did you have a licence for this?
Amin: The problem is when we started, there wasn’t any regulation for payment facilitators because this is what we are at the end. So, we found ways to start our operations. We found ways to not scare the central bank, and not put our operations at risk by: sending regular reports to the central bank, letting them know what we’re doing, and asking for their guidance on open questions.
I believe they very much appreciated this transparency and in the end, they agreed to work with us on a new regulation for Payment Facilitators, in partnership with our acquiring bank. So we went with our acquiring bank to the central bank and initiated the process to get formal approval for our activity. And we got it.
It took us like one year and a half and we are one of the first to receive the central bank PayFac licence. They gave four licences but we were the only one operating in the market. Thus, it is safe to say that we are the first operating payment facilitator in Tunisia. And we are the ones that initiated this process with the central bank. This could deemed the second big achievement.
Ben: Broadly speaking, what will you say are the license categories in Tunisia?
Amin: The licence categories are banking, payment system provider (PSP) and payment facilitator (PayFac). Banks and PSPs report directly to the Central Bank while PayFacs report to the acquiring bank which reports to the Central Bank.
Ben: Thanks and congratulations on securing your licence.
Amin: Thank you.
Some other fintechs that were operating in the same space in Tunisia have been shut down. This is because, as explained above, regulation wasn’t clear and they had taken some risks by processing payments for betting platforms.
And, you know, betting platforms are very risky for fintechs because it’s perfect for money laundering and everything. We didn’t want to take any risk, thus, we refused to process their payments considering the grey zone that they and we were operating in.
So, the strategy of navigating this ecosystem has been one of the challenges that we don’t often talk about. We’re often focused on traction, product, and market penetration. But in reality, in our markets, one of the most complicated things is navigating regulation and the financial ecosystem including the collaboration with banks and the regulator.
Ben: Okay, so beyond payment facilitation which you introduced, how are the regulators now thinking about encouraging innovative solutions in Tunisia? At the Tunisian Ecosystem Week, I learnt that the CBT has a sandbox. Can you speak more on that?
Amin: Yes, they have a sandbox which was a very good idea that everyone was excited about. The sandbox was meant to be a safe space for the central bank and fintechs to work together on innovative digital financial solutions.
However, the Central Bank has run only one cohort, about three years ago, which admitted four startups. Unfortunately for Konnect, we arrived on the fintech scene a few weeks late and were not able to be part of it. However, older fintechs like Flouci (founded in 2020) participated, likewise, my ex-CBDC startup.
For now, nothing is visible. But they have offered this sandbox environment to banks. And now banks, with or without a partner fintech, can go through a fast-track program within the sandbox environment, to work on innovative solutions.
Ecosystem support
Benjamin: What support does a startup in Tunisia receive from the tech ecosystem?
Amin: We are a clear product of the Tunisian ecosystem. It started in 2016, I believe when the Ministry of Technology decided to create an ecosystem of innovation called Smart Capital. The company is a public and private venture aiming to offer a lot of advantages for startups that have received the “startup” label.
If you are a startup that has gone through the selection process, you can get several advantages. These advantages include tax breaks and more. The label also helps the collaboration between the private sector and the startups as well.
Since then about 1,000 startups have received this label, meaning that they have gone through this selection process with an independent professional committee judging the quality of the work: the market, the idea, the pitch deck and the business plan and model.
A whole ecosystem has formed around this which includes incubators and accelerators, and early-stage investors like Flat6Labs. We, at Konnect, were a part of their acceleration. We received the first fund from them and other business angels including the former minister of technology. We have recently completed a second fundraise from Venture Capitals as mentioned earlier.
Benjamin: Any challenges?
Definitely, we are still missing a lot of institutional investors. There are not many financing possibilities. For instance, Smart Capital has two programmes to support startups with grants. If I remember clearly, it’s $10,000 and $60,000 depending on the stage of your startup.
Increasingly, Tunisian successful companies have to find funds internationally. Yet, international investors are not comfortable with investing in Tunisia because the currency is Dinars, and repatriation in dollars can be complicated.
Thus, successful Tunisian companies need to find funds at a regional level. So, they have to move their headquarters to either Europe or the US, like us, to be able to find funds. For example, Konnect now has an entity in France and the US.
Looking forward
Benjamin: What advice would you give to founders or investors looking to enter the Tunisian fintech market?
Amin: Tunisia offers a pool of skilled talent and innovative ideas, but the market is small and navigating the regulatory landscape can be challenging. For founders, it’s crucial to be adaptable and persistent. For investors, Tunisia presents an opportunity to identify promising startups with the potential for regional or global expansion.
Benjamin: What are your thoughts on the future of fintech in Tunisia?
Amin: Despite challenges, the future of fintech in Tunisia is promising. With continued support from regulators, increased access to funding, and a focus on talent development, Tunisia can become a leading fintech hub in North Africa.