Introduction to Proportionality

Digital Financial Services providers offer different product:
commercial banks generally offer deposit taking, loan, trade finances, and investment banking among other services. Their customers include individuals, SMEs, large corporations. Due to the nature of their activities and the use of leverage in their operating model, commercial banks are regarded high risk and therefore require a high level of prudential requirements in terms of capital, liquidity etc.
For payment service providers, they offer payments services such as Point of Sales (POS), online transfers, and card acquiring, among other services. their customers includes merchants, SMEs etc. They are generally low risk mostly operational risk and risk around compliance.
Fintechs provides digital services such as agent banking, digital wallet services and bill payment, their customers are generally the youth population, retail services and the informal sector. risk in this type of DFS include operational risk, data privacy concern with increasing systemic risk that requires close monitoring.

In product offering DFS providers may be differentiated in value added services, transaction focused providers and infrastructure providers.
Under customer based are differentiated in terms of wholesale or retail, agent based, merchant based and enterprise-based customers.
Risk based DFS are either prudential, financial or systemic risks

The DFS ecosystem comprises a diverse range of providers, from systemic commercial banks to specialized e-money issuers, each presenting distinct risk profiles and serving different customer segments. While traditional banks manage complex credit and solvency risks for the formal sector, smaller providers focus on high-volume, low-value transactions that are vital for rural financial inclusion but carry different operational and liquidity risks. Effective supervision, therefore, relies on the principle of proportionality, which tailors regulatory burdens to the specific scale and nature of each entity. This balanced approach ensures financial stability without imposing prohibitive compliance costs that would otherwise stifle the innovation needed to reach underserved and previously excluded markets.

In emerging market like Nigeria, Digital Financial Services (DFS) providers differ in their product offerings, customer base and risk profile, with banks offering complex multi-product services to diverse customers, mobile money and fintech serving large volumes of low-value retail users, Payment Services Providers (PSPs) operating critical payments infrastructure and digital lenders and agents posing distinct consumer protection, operational and AML/CFT risks that drive proportionate supervision

To effectively differentiate DFS providers, we need to have a good knowledge of the business of the providers and identification of their significant activities, the environment, and the sub-industry they operate in.
The complexity of the product they offer and how it is intertwined with other services in the value chain, and the inherent risk they pose, will differentiate the providers.

The clientele they serve and the environment in which they operate will differentiate them. For example, the risk of money laundering is likely to be higher for services consumed by high-net-worth individuals than for those consumed by students or the financially underserved in rural communities.

The risk profile of the DFS provider will be assessed based on the product offering, delivery channels, customer profile, and the environment or location where services are consumed.

For example, providers that leverage sophisticated technology are likely to be exposed to cyber risk. Also, heavy reliance on third-party providers could bring in a third-party risk to the services offered by the DFS. However, proportionality in regulation, licensing, and supervision will help in mitigating some of this concern, which is also the basis for risk-based supervision, by channeling effort to where risks are high.

DFS providers differ mainly by what they offer, who they serve, and the risks they face. Commercial Banks usually serve salaried and urban customers, offering full services like savings, loans, and transfers, but they carry risks like credit defaults and cyberattacks. Mobile Money Operators focus on wallets and payments for people in rural or unbanked areas, though they face fraud and liquidity challenges. Agent networks help people without smartphones by providing cash in/cash out services, but they often struggle with fraud and cash shortages. Fintechs attract younger, tech savvy users with quick loans and savings tools, but they carry higher risks from unsecured lending and data privacy issues.

The DFS include banks, electronic money issuers (such as mobile money operators), and other payment service providers that are neither banks nor electronic money issuers. Banks offer a wide range of traditional financial services including accepting deposits, enabling withdrawals, providing loan services, and offering agent banking services etc.

Electronic money issuers primarily provide electronic money services to both banked and unbanked population. However, due to technological advancements, thier offerings have expanded siginificantly. Nowadays, electronic money issuers provides saving products, facilitate government payments, bills payments, funds transfer between mobile wallets and bank accounts and vice versa, providing insurance services, and digital loans in collaboration with banks.

For non-bank and non-electronic money issuers maily provides payment solutions to enable merchants payment and collections, e-commerce solutions, payment hubs, and Switching services, while others facilitate international money remittances and cross-border payments.

In terms of customer base, nowadays electronic money issuers (mobile money operators) have more customer base than banks. This is due to widespread penetration and use of mobile phones in both rural and urban areas, compared to the pentration of traditional banks. Customers finds more convinient to use mobile phones to make transactions other than visiting physical bank branches. For non-banks and non-electronic money issuers these mostly, have very low customer base because most of them provides gateway solutions to enable bank customers and customers of an electronic money issuer to access their service. So, they heavily depend on customers of the bank and electronic money issuers.

The risk profile of these provider vary depending on the nature of their services they offer. Banks are perceived to be more riskier business than electronic money issuers and other payment service providers, however, due to strong prudential regulation, the risks are minimized. Electronic money issuers on the other side are exposed to higher operational and cyber security attacks, as they rely heavily on emerging digital payment techologies that may lack adequate preventive controls. Despite of these risks, electronic money issuers are generally subject to less strigent regulation compared to banks.

From supervisory perspective, the DFS in Pakistan’s context exhibit distinct characteristics in terms of product offerings, customer base and risk profile. Banks with broad range of financial products cater to a diverse customer base while micro-finance providers focus on serving low income individuals and small businesses. Payment system operators and service providers leverage technology and cater to tech savy strata.
State Bank of Pakistan adopts a proportionate regulatory framework and a risk based supervision approach. It tailors the supervisory intensity and frequency to specific risk profile of each institution, ensuring effective oversight and financial stability.

From a Supervisory perspective the customers or merchants are grouped into different categories depending on who they are and how they use the service. These include wholesale and retail customers, as well as agent-based, merchant-based, and enterprise-based customers.

The risk level of a DFS provider is assessed based on several factors. These include the type of products offered, the channels used to deliver the services, the type of customers served, and the location or environment where the services are provided.

Non-bank and non-electronic money issuers mainly offer payment-related solutions. Their services typically include enabling merchant payments and collections, providing e-commerce solutions, operating payment hubs and switching services, and facilitating international money remittances and cross-border payments.

In Pakistan, I think the key difference among DFS providers is how they approach digital services. Banks mostly treat digital as an extension of traditional banking, while fintech payment providers are designed to be fully digital from the start. As a result, banks focus more on compliance and credit risks, whereas fintechs are more exposed to technology, fraud, and customer trust issues.

The Digital Finance Service providers differ significantly in terms of the functions they perform, the customers they serve, and the risks they introduce into the financial system. From a supervisory perspective, the key differentiators are whether they intermediate funds, their level of interconnectedness, the scale of their operations, and their reliance on third parties.
For instance, Commercial banks offer act as an intermediary while offering deposits and extending credit. Their customers are: Salaried indivuduals, SMEs, large companies, multinationals and fintechs. They carry significant credit, liquidity, and market risk and are highly interconnected with other financial institutions and payment systems. Their leverage and systemic importance necessitate intensive prudential and systemic supervision.
Payment Service Providers (PSPs)on the other hand facilitate transactions through, e-money issuers, e-wallets, payments gateways and switches. The main customers for PSPs are merchants( supermarkets,restaurants), SMEs and Corporates. E money issuers and E-Wallets do not intermediate customer funds and are required to safeguard 100% of customer balances in trust accounts. While their prudential risk is relatively low, they face elevated operational, agent management, fraud, and AML/CFT risks due to high transaction volumes and deep penetration into informal markets. Payment gateways and Switches hold minimal balance sheet risk but are exposed to operational, settlement, concentration, and third party dependency risks — especially where they provide critical shared infrastructure.

Digital financial services providers in Ethiopia’s capital markets ecosystem fall into five practical types: digital brokers and mobile trading applications, robo advisers, crowdfunding platforms, payment service providers supporting funding and settlement, and market infrastructure providers such as digital custody, digital registrars, CSD connectivity providers, and market data platforms. Each type plays a distinct role in how capital is raised, traded, safeguarded, and reported, and that role determines the customer base and the dominant risk profile that supervision should prioritize.
Digital brokers and mobile trading applications provide access to the market. They enable investors to place orders, monitor positions, and transact with minimal friction. Their product scope typically includes equities and bonds, The principal risks are market conduct and execution integrity: best execution failures, order handling errors,
Payment service providers become capital markets relevant when they fund accounts, facilitate subscriptions and withdrawals, support recurring contributions, or provide escrow and onboarding services. Their products include e money accounts, payment rails, escrow arrangements, KYC utilities, and settlement workflows. They typically serve mass retail at scale and are a primary entry point to investing. Their dominant risks are financial crime and safeguarding: AML and sanctions exposure, identity theft and account takeover, fraud, commingling of funds, reconciliation failures, and uncertainty around settlement finality. Investor harm can be immediate through lost funds, delayed withdrawals, or failed funding and redemption flows.
Market infrastructure DFS providers operate in the post trade and information layer. Digital custody, registrars, CSD connectivity providers, and market data platforms support safekeeping, ownership records, corporate actions processing, and reliable dissemination of information. Their customers are typically institutions and intermediaries, and failures can be systemic. Dominant risks include custody and segregation failures, cyber and operational resilience weaknesses, data integrity issues, business continuity gaps, vendor and concentration risk, and corporate actions or recordkeeping errors that undermine legal certainty of ownership.
From a regulator’s lens, supervision should first rank investor protection intensity and systemic importance. Brokers medium to high depending on leverage and advice features. Market infrastructure providers are often highest on systemic importance because custody, CSD connectivity, and market data failures can disrupt the whole market. Payments sit in between, it may not drive price formation, but safeguarding failures can create immediate investor harm and reputational damage.

Supervisory focus should therefore be differentiated. For brokers, prioritize best execution, order handling, conflicts, market abuse controls, and resilience. For payment providers, prioritize safeguarding, segregation, reconciliation, AML, fraud controls, and settlement finality. For custody and infrastructure, prioritize segregation, cyber resilience, operational continuity, data integrity, and concentration risk management

In Tanzania, Digital Financial Services (DFS) providers differ in their products, customers, and risk profiles.

Commercial banks offer deposit-taking, lending, trade finance, and digital banking services to individuals, SMEs, corporates, and government entities. They are exposed to credit, liquidity, market, and operational risks and are systemically important, requiring strong prudential regulation and close supervision.

Electronic Money Issuers (EMIs) provide e-wallets, transfers, bill payments, and merchant payments, mainly serving retail users, micro and small businesses, and the informal sector. EMIs do not intermediate funds and must safeguard customer balances in trust accounts. Their prudential risk is high as they face higher operational, fraud, agent, cyber, and AML/CFT risks due to high transaction volumes and wide outreach.

Non-bank non-EMI DFS providers, such as payment gateways, switches, and aggregators, support payment processing and interoperability for banks, EMIs, and merchants. They generally do not hold customer funds, but are exposed to operational, settlement, concentration, and third-party dependency risks, with potential systemic impact if disruptions occur.

In Ethiopian Capital Market, Digital Financial Service providers include robo-advisers, crowdfunding platforms, collective investment scheme operators supported by digital systems, and portfolio managers supported by digital services. These service providers have different economic functions, sources of capital, and levels of risk exposure. Applying proportional supervision to these DFS providers is important for effective risk mitigation and efficient resource allocation.

In the Ethiopian context, DFS are dominated by a mix of telco-led mobile money platforms, bank-led digital wallets and banking apps, and fintech bank partnerships focused on lending and payments. The sector has recently started growing rapidly, driven by the NBE’s directives on payment instrument issuers and agents, that is enabling uncollateralized digital credit, access and expanded payment mechanisms. Though access is increasing, penetration remains uneven because of mobile money ownership and usage of digital payments among many reasons. These providers differentiate along with product offerings, basic payments vs. advanced lending, customer base, unbanked rural vs. urban MSMEs, and risk profiles 3rd party dependencies. vs. regulatory exposure. Telco-led prioritize simplicity and scale for everyday transactions, while bank-led offer depth. Fintech partnerships innovate in credit, filling gaps like MSME financing amid collateral challenges. customer differentiation wise, Telcos reach broader, unbanked masses, but they're not fully inclusive. Banks serve reliable, banked clients, fintech's target niche growth segments like MSMEs. All face third-party risks from modularization, API dependencies for fraud detection or cloud, but banks have stronger buffers via regulation. Telcos/fintech's risk higher volatility from low agent networks and dormancy.

In the Ethiopian capital market Eco system, the major DFS providers are-

1. Digital sub brokers
is a provider of digital platforms for the trading of securities on a licensed securities exchange or over-the-counter trading facility through a licensed Securities Broker or Securities Dealer.

2. Robo-advisors

is a securities investment adviser that provides services through digital channels and conducts analysis using algorithms to provide advice after identifying the risk profile, income level and investment objectives of the client.

3. Crowdfunding platforms
is a website, platform, online portal, application, or other similar platform through which a Crowdfunding Intermediary facilitates interaction between investors and entities seeking to raise funds.

4. Collective investment scheme operators
is a legal entity that has overall responsibility for management and performance of the functions of a CIS.

5. Custodians
is a financial institution that hold customers securities for safekeeping or convenience.

6. Central security depositories
refers to a system for central handling of immobilized/dematerialized securities held in custody.

Their customer base is divers which include people at all legal investing age (mostly above age 18) and all type of background, including institutional clients.
They have common risks that include market, operational, cybersecurity, and systemic risks and risk that are specific to the respective services they provide.

The statement " Ensure low risk providers are not overburdened while risks form larger/critical providers are effectively managed " is my key take away from this video.

As explained by @Nardos Melaku and others, DFS providers at ECMA, as per the licensing directive, include digital sub brokers, robo-advisors, crowdfunding platforms, collective investment scheme operators, custodians, and central security depositories. Unfortunately, the only licensed and functional body to date is Central security depositories. Assuming licensed and operating in the future three of the service providers’ products, customer base and risk level demonstrated as follows.
1. Digital sub brokers: mainly they provide a trading platform. Their customer base and risk profile includes individual and institutional clients yet most of the time they serve individual investors who have no access to modern technology infrastructure and are characterized by low-risk profiles.
2. Robo-advisors provide automated investment advisory services which enable us to construct a portfolio, make decision of buying and selling instruments. Their customer base ranges from beginners to high-net-worth individuals, in which their risk profile is characterized as lower.
3. Crowdfunding platforms: such platforms enable individuals, organizations and businesses in general to raise funds from many people, mostly in a small contribution form to attain their project goal. Both their customer base and risk profiles are diverse.

The bottom line: regulation as well as supervision for each should be proportionate, meaning consider their product nature, risk profile and customer base.

In context of Pakistan, regulated entities differ in size, complexity, and risk profile. Commercial banks offer a full suite of products and serve a broad customer base, including corporates and retail clients, which exposes them to diverse credit, market, operational, and cyber risks.

Microfinance Banks and EMIs are more focused on retail and financially excluded segments. MFBs offer small ticket loans to underprivileged sector, while EMIs typically offer payments and wallets services with higher exposure to operational and consumer protection risks.

PSOs and PSPs primarily facilitate payment processing and digital transaction infrastructure, serving businesses and financial institutions; their risk profile is largely concentrated in operational resilience, technology and settlement.

In Nigeria banks are permitted to partake in lending activites and also engage in foreign exchange transactions ( both elevating their risks) while mobile money operators for instance do not offer such, but basically - cash-in-cash-out (cico), transfers, airtime vending and similar services. Another category is the payment solution service providers and the switching companies. These do not even engage in cico,as they are more like back-end service providers that ensure efficient processing and routing of payments transactions respectively. Supervisors must deploy propotional supervision to each category. There is one cap fits all.

DFS in Tanzania include banks, Non-bank payment services providers, and Digital lenders from Tier II Microfinance Service Providers. In DFS Banks deliver services such as lending, payment services and agent banking while EMIs initially in 2008 focused on wallet services for both banked and unbanked populations, but their product suites have broadened to include savings, government and bill payments, wallet to bank interoperability, insurance, and digital credit in partnership with banks and MSPs. On Non-bank payment side, they largely operate in the operational technological infrastructure of the ecosystem, offering merchant acquiring, payment gateways, switching, e-commerce enablement, and remittance solutions. Their reach therefore depends heavily on customers held by banks and EMIs.
Risk exposure differs by business model in which the FSP operate. Contextually, Banks carry broader calculated financial risks and operate under strong prudential and market conduct oversight while Digital lenders from Tier II Microfinance Service Providers face broader risk in Nonperforming loan as such loans do not have collateral and they are not allowed to take deposit. EMIs and other non-bank payment services providers face elevated cybersecurity vulnerabilities because they rely on digital technologies.

In Uganda, Commercial banks offer the widest range of DFS including deposits, credit, foreign exchange, trade finance, and digital banking services. Their customer base comprises of mainly corporations, government, SMEs and higher income individuals all of which have high value and complex transactions. As a result, their risk profile is complex combining credit, liquidity, operational and systemic risks.

E-money issuers and mobile money operators on the other hand have a lower risk profile because customer funds are safeguarded as per prudential requirements. With a focus on payments, transfers, and basic financial services, their client base is large including rural low-income individuals with high transactions volumes but low values. Fraud, consumer protection and data privacy risks are high due to reliance of technology and agency business models.

Fintechs and payment service providers mainly offer digital aggregation and payment gateways services. They serve niches and rely on partnerships with banks and mobile money operators. Their risks are more about data privacy and operational resilience as they rely heavily on technology.

In Uganda, banks typically provide a wide range of services ie savings and current accounts, loans, payments, investment and insurance products to mainly formally employed individuals, SMEs and corporates and have a higher risk since they face significant credit, liquidity, compliance and operational risks due to balance sheet lending and regulatory requirements.
Mobile network operators focus on mobile money services like bill and merchant payments, transfers and growing savings and micro loans.These have the widest reach targeting rural and underserved areas and low-income users and have a lower credit risk profile despite participating in digital lending and are exposed to operational, fraud and AML/CFT risks.
Fintechs on the other hand focus on technology driven solutions like digital credit, personal finance tools and have cybersecurity and consumer protection risks due to rapid innovations and the evolving frameworks in their space.

In my own opinion, Payment Service Providers or DFS in this context in Nigeria differ not just by what they offer, but by who they serve and the risks they carry. Mobile Money Operators for example drive inclusion but face AML/KYC challenges, switches are systemic infrastructure with cyber risks, gateways power e-commerce but battle fraud, digital banks expand services with credit/cyber exposures, agents bridge rural access but face cash fraud, and digital lenders push liquidity but struggle with defaults and data privacy. That’s why the supervisory Body in Nigeria, tailors oversight to each category’s unique profile

In Pakistan, DFS providers differ notably in products, customers, and risks. Digital banks offer full banking services to urban clients and SMEs, carrying higher credit and balance sheet risk. EMIs focus on wallets, remittances, and payments for low-income and unbanked populations, with lower balance sheet but significant operational and safeguarding risk. Fintech lenders target credit-invisible consumers and SMEs using digital scoring models, facing higher credit and data risks. Payment and remittance providers serve merchants and P2P users, with limited credit exposure but high operational and concentration risk. These distinctions help supervisors tailor proportional oversight based on business model, scale, and risk profile.

Uganda's DFS landscape is shaped by a diverse mix of providers that differ markedly in their product offerings, customer base, and risk profiles. Mobile money operators like MTN Mobile Money and Airtel Money serve the broadest population including rural households, women, and low-income earners through basic transfer, payment, and airtime services, and carry the highest systemic risk given their scale, agent network complexity, and the volume of customer funds they hold. Digital banks like Stanchart and Stanbic serve more urban and formally employed customers with sophisticated mobile banking, savings, and credit products, facing both traditional prudential risks and growing cybersecurity vulnerabilities, while fintechs like Numida target micro-enterprises and gig workers with digital credit products that, despite their smaller scale, pose significant consumer protection risks through opaque pricing and inadequate recourse mechanisms; risks that are further amplified by the financial vulnerability and low literacy levels of the populations they serve.

There are a range of DFS providers ranging from Commercial banks, Non banks, PSPs, Fintechs among others. These usually attract different customers which dictates the products they offer. The commercial banks offer lending that usually requires formal collateral while Fintechs for example will lend money without the traditional collateral. This will hence pose different credit risks and those that do not resort to traditional collateral may find it difficult to recover their money. The products offered really attract different customers. Commercial banks offer formal banking, Fintechs focus on tech-survey persons by offering products like agent banking. These usually face the same risks like operational and credit risks whose degree is usually different depending on how quickly and easily the DFC Provider can recover from the effects of the risk event.

Just like in the many other jurisdictions that our colleagues have mentioned, Uganda’s landscape reflects a differentiated structure of providers with varying mandates, customer segments, and risk profiles.

In Uganda, Digital Financial Service providers differ significantly across Tier I (Commercial Banks), Tier II (Credit Institutions), Tier III (Microfinance Deposit-Taking Institutions), Tier IV institutions, as well as mobile money operators and fintechs.

Tier I commercial banks offer a full package of services including deposits, credit, trade finance, and digital banking solutions, serving corporates, SMEs, and retail customers.

Tier II and Tier III institutions typically have more limited product offerings and smaller balance sheets, often focusing primarily on retail and SME lending.

Tier IV institutions and fintech lenders tend to serve lower-income and underserved populations, mainly through microcredit and digital channels.

Their risk profiles vary accordingly. Tier I banks face broader prudential risks including credit, liquidity, and market risks (such as interest rate, price, and foreign exchange risks, particularly for institutions with significant foreign currency exposures).

In contrast, mobile money operators (The telecoms) and fintechs are more exposed to operational risk — including failures in processes, systems, people, or external events — as well as third-party risk. For example, we have observed scenarios where submarine cable disruptions affected internet stability, demonstrating how infrastructure dependencies can quickly translate into operational disruptions. These providers are also significantly exposed to safeguarding, AML/CFT, and technology-related risks, which is something the country attempts to address through various KYC procedures

From a supervisory perspective, cybersecurity and data governance are increasingly at the forefront. The use of external data centres, cloud service providers, and in some cases cross-border data storage raises concerns around operational resilience, data sovereignty, incident response coordination, and regulatory access to information. As these digital finance providers compete for customer data and leverage it for credit scoring and product innovation, We supervisors feel we must improve our oversight to manage the consumer protection risks while still supporting innovation and financial inclusion.

Kenya's DFS ecosystem is one of Africa's most developed, featuring a diverse range of providers that differ significantly across key dimensions. M-Pesa dominates mobile money with transfers, payments, and savings products, serving over 30 million users including low-income and rural populations. Commercial banks like Equity and KCB offer the full spectrum of credit, deposit, and investment products to more formally employed, urban customers. Fintechs such as Tala and Branch focus narrowly on digital credit for the informal sector, while payment service providers like Pesalink facilitate interoperability between platforms.

These differences translate directly into varying risk profiles that demand proportional supervision. M-Pesa holds customer float in trust accounts, limiting intermediation risk and justifying relatively lighter oversight. However, its systemic scale means any operational disruption has economy-wide consequences. Digital lenders raise greater consumer protection and data privacy concerns, having historically operated with limited regulatory oversight. Commercial banks face the full complexity of credit, liquidity, and AML/CFT risks, further compounded by their role in holding mobile money float and processing fintech transactions. As regulators, we must therefore calibrate supervisory intensity carefully across each provider type, ensuring smaller fintechs are not overburdened while systemic risks from larger players are effectively managed.

DFS providers range from conventional banks, digital lenders, MNOs, payments fintechs etc... Key differences exists in the range of products offered. Conventional banks have a broader product range (loans, payment systems, deposits, custodial services etc..) while the product range of other DFS providers is limited to payments & wallets and digital loans. In terms of customer base, conventional banks have a wider customer base (corporate, SMEs, retail etc..) but the customer base for other DFS providers is the unbanked and largely merchants. In terms of risk profile, conventional banks have elevated risk profiles compared to other DFS providers.

In the Ethiopian digital financial services (DFS) landscape, the market has evolved into a high-stakes arena where state-owned giants, aggressive private Telcom, and nimble fintech's compete. The differentiation among these providers is primarily driven by their regulatory "pedigree" (bank vs. non-bank) and their relationship with the government.
1. Product Offerings: Utility vs. Ecosystem
While basic Peer-to-Peer (P2P) transfers are now a commodity, the "Super App" race has created clear product divergence. Telco-Led providers like telebirr and M-Pesa focus on micro-lending (such as Mela), overdrafts (such as Endekise), utility payments, and international remittances. Their unique value proposition lies in deep integration, as their services are embedded directly into the SIM and network, utilizing high-speed USSD for accessibility in rural areas.
Traditional Banks, including CBE Birr, Awash, and Dashen, focus on digital savings, mortgage or car loan applications, and foreign currency accounts. Their strength is trust; they are perceived as safer for large deposits and offer higher transaction limits compared to telco-led wallets.
Independent Fintechs such as Chapa, Kifiya, and Santim Pay specialize in payment gateways, merchant aggregation, and B2B supply chain financing. Their advantage is agility, offering faster API integrations for e-commerce and specialized digital tools for small and medium enterprises.
2. Customer Base: Mass Market vs. Niche
The target audience is largely determined by physical reach and the digital literacy of the users. Telebirr dominates the unbanked and rural mass market. With over 50 million users, it leverages Ethio Telecom’s massive infrastructure. Its customer base is often integrated into the system through necessity, such as mandatory digital fuel payments.
M-Pesa (Safaricom) primarily targets urban, tech-savvy, and younger demographics. They focus on users who value a superior user interface and experience, often catering to those who use both M-Pesa and a traditional bank app.
Commercial Banks retain the formal workforce and high-net-worth individuals. Their digital customers are typically people who already have a physical relationship with a bank branch and use digital tools for convenience rather than as their only means of banking. Fintechs serve the merchant and developer ecosystem. Their customers are frequently other businesses (B2B) rather than the average consumer on the street.
3. Risk Profile: Systemic vs. Operational
Risks vary based on how each entity is structured and supervised by the National Bank of Ethiopia (NBE). Banks face systemic risk because they hold the actual trust accounts for fintechs and telcos. They deal with traditional liquidity and credit risks; if a bank fails, the digital wallets mirrored there are also at risk.
Telcos and Fintechs face higher operational and cyber risks. Telcos, in particular, have a massive network dependency risk. In Ethiopia, a network outage is not just a loss of signal but a total shutdown of the payment rail. They also face higher fraud risks due to a large volume of users with lower digital literacy. Independent Fintechs face regulatory risk. Operating on thinner margins, they are the most vulnerable to policy shifts, such as changes in transaction fee caps or increased capital requirements.
Compliance risks are also evolving. With the rollout of the Fayda National ID, all providers are transitioning to biometric eKYC. Telcos face a steeper challenge in retroactively verifying millions of legacy accounts compared to the more contained customer bases of traditional banks.