Flutterwave is a debacle

Amid fraud allegations and alleged security breaches, Flutterwave is doubling down on international business development in the U.S. and Europe.

After a year of staying in the news mostly for controversies, Africa’s fintech poster child is finally making headlines for its positive business moves.

In June, Flutterwave announced three partnerships that could help its business grow. On June 6, the company said it was collaborating with payment infrastructure provider Token.io to give its merchants access to customers in the U.K. and Europe. On June 21, Flutterwave said it would provide payment services to popular U.S. music-streaming platform Audiomack. And the very next day, the company said it had entered into a five-year agreement with Microsoft to facilitate transactions on Azure across the African continent. “With Flutterwave and Microsoft’s plans to power payments to-and-from Africa, this collaboration is an incredible opportunity to impact growth across the continent,” Flutterwave said.

In an email to Rest of World, Flutterwave CEO Olugbenga Agboola said the company is in talks for more such deals in the future.

“We are building something for education payments and have concluded a partnership that will improve international aviation payments for Africans, too,” – he said.

These back-to-back announcements come after a year of scandals that rocked Flutterwave. Since April 2022, the company has faced allegations of mismanagement, sexual harassment, administrative errors, and security breaches, among other issues. Experts, however, believe Flutterwave is likely to emerge from the bad press and legal hurdles because of its scale and importance in the African tech ecosystem, which make it almost too big to fail.

“Flutterwave has cornered a valuable position in the marketplace that’s hard to replicate. The company and its leadership have made a number of errors, to be sure. However, the company still creates a lot of value for its existing partners [like Uber and Netflix], and the payments and fintech ecosystem at large.”

– Emeka Ajene, serial entrepreneur and founder of early-stage investment firm Afri.capital, told Rest of World.

Zachariah George, managing partner at venture capital firm Launch Africa, is a former investor in Flutterwave. He told Rest of World he believes the fintech company managed to secure these partnerships due to its market size and position.

“Microsoft needs more merchants on the African continent to use Azure. So, Microsoft partners with Flutterwave to reach these guys. Ultimately, it’s a volume game, and Flutterwave has built such scale across multiple countries.”

– Zachariah George said.

Flutterwave has definitely not fully recovered from controversies yet. In June, even as it announced new partnerships, a judge in the Kenyan High Court placed a temporary ban on 45 bank accounts and 10 MPesa mobile money wallets belonging to Flutterwave.

This was the result of a petition filed by more than 2,000 investors, who claimed that Flutterwave had teamed up with sports betting company 86 Football Technology to defraud them of $12.04 million. Flutterwave has denied the allegations.

“Ultimately, it’s a volume game, and Flutterwave has built such scale across multiple countries. The media has reported a baseless and misrepresenting account of the event,” – he said.”

– CEO Agboola told Rest of World that the company’s accounts were frozen as a procedural step in a civil case.

This is barely a year after dozens of bank accounts linked to Flutterwave and its affiliate firms, which held about $200 million, were frozen in Kenya on allegations of money laundering. That case has since been withdrawn from court, and the lien on accounts has been lifted.

In February, some accounts on Flutterwave’s platform were reportedly hacked, leading to losses of over $3.6 million from customers’ funds. The company denied this report, and said that its system detected an “unusual trend of transactions on some users,” triggering a review. But it later admitted to the security breach in some court documents.

“For a company that has been vocal about their ambition to go public, they will be shortsighted if they don’t start taking their reputation more seriously and course-correct some of their internal operations. If Flutterwave is going to IPO, they have to start thinking about public opinion in America: what will institutional and retail investors think about their governance and culture?”

– Victoria Crandall, an African startup public relations consultant, told Rest of World.

Ajene told Rest of World that Flutterwave is in a position where it should always be prepared to face strict public scrutiny.

“Flutterwave was once Africa’s most valuable startup and may very well still be, and many stakeholders on and off the continent view the company as a proxy for Africa’s tech opportunity at large. As such, much attention is paid to the company — for good and bad.”

Source: restofworld.org

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