How Digital Payment Data Is Changing Access to Finance for African Startups

The majority of African startups and small businesses, getting a bank loan has often depended on having financial records that many young businesses simply do not have. Banks have traditionally relied on payslips, bank statements and credit histories when assessing loan applications. While those remain part of the process, they do not always reflect how entrepreneurs, freelancers and small businesses earn their income. That is beginning to change. Banks now combine mobile money transactions, point of sale (POS) systems, digital wallets and telecom data with traditional credit checks. The additional data helps lenders assess businesses that have limited borrowing histories but process regular digital transactions.

Alternative credit bureau Notto says it has analysed more than one billion transaction records, built credit scores for more than eight million consumers and completed credit assessments for more than five million mobile money users in South Africa, Zambia and Zimbabwe. According to the company, only about 1% to 2% of those consumers previously had access to formal credit. It says lending increased almost tenfold after lenders introduced its scoring models, while non-performing loans stayed below 4%.

Digital Records Give Banks More Information

Dalumuzi Mhlanga, Chief Executive Officer of Notto, said many businesses already generate the information banks need, but banks have not always included it in their lending decisions. Instead of relying only on previous borrowing records, lenders now review transaction histories, recurring payments and cash flow. For startups, sales through a POS terminal, mobile wallet or online payment platform help demonstrate how the business operates. The additional information does not replace affordability checks or existing credit records. Instead, it gives banks another way to assess businesses with limited credit histories.

Banks Expand Their Assessment Methods

Banks are also reviewing POS transactions to understand sales patterns. Digital platforms also provide income records that help lenders verify earnings for freelancers and independent contractors. Nako Bolote, Group Head of Cross Border Payments and Remittances for Africa at Access Bank, said telecom data also helps banks assess customers whose income does not come from a regular monthly salary. “Telecom data does not necessarily show salary income, but it does show customers’ financial activity and usage patterns,” he said. “That helps us understand cash flow for customers working in the informal economy and make better lending decisions.”

What It Means for Startups

For startups, the biggest change is not how they accept payments but how banks assess those payments. Every digital transaction creates a record. Over time, those records help demonstrate sales, income and cash flow when a business applies for finance. Businesses that still operate mainly in cash may find it harder to provide the same level of evidence. Banks still consider affordability, existing debt and repayment history where that information is available. As more lenders include digital transaction data in their assessments, startups with consistent electronic payment records have more information to support a loan application than they did a few years ago.