If there's one thing you should take away from what you're about to read, it's this: always separate transactions from operations.

I've reviewed a few fintech financials, and it's frankly astonishing that in 2024, some practises appear reminiscent of those from 2012. Seun and I spend a lot of our time together trying to understand why many fintechs still make these mistakes with the wealth of knowledge out there.

Before I continue, keep in mind that this is an overly simplistic view of things to consider when building a fintech. But for many of you, it's a very important base. Plus I'm not trying to write an academic paper here.

Let me explain this as I used to at Wallets to my colleagues. Imagine a customer deposits 100 naira into their account, and you claim the deposit is free. In reality, we know there's a cost to you, let's say 10 naira. So the actual value you have is 90 naira, but the customer sees 100 naira in their wallet. If you were a bank, you might invest 40 naira of that 90 to earn some interest, potentially increasing the total to 110 naira, covering the deposit cost. But as a non-bank, you're left with a deficit. Now, scale this scenario up to thousands of customers, and the picture gets grim.

The immediate question to most people is: why absorb this cost? It's a strategy to attract customers in a price-sensitive market, hoping to upsell later. However, the crux of the matter is recognizing this as a cost, a debt to your ledger. Unfortunately, many don't even maintain a proper ledger, leaving them unprepared when a surge of withdrawals happens, not to mention potential fraud attacks. All you wanted was to offer a better banking experience, but now you're in debt over money you didn't actually spend.

Here's my advice: