Paystack, a leading African payment service provider, has permanently terminated Fansted, citing a “heightened risk profile” just a month after the startup launched. The move triggered concern among early-stage startups that rely on seamless payment processing to survive.
Despite initial panic, the termination is not due to technical issues. Fansted, a startup in the creator and fan economy, operates as intended. The challenge lies in legal, regulatory, and compliance risk, which Paystack determined it could not continue to bear.
Understanding Paystack’s Decision
Payment service providers (PSPs) such as Paystack adopt conservative risk policies, absorbing chargebacks, fraud claims, and regulatory scrutiny. If a startup’s model introduces excessive exposure, the PSP must manage the potential downside.
According to Fansted CEO Michael Asiedu, the decision was financial and regulatory, not a reflection on the company’s legitimacy. Paystack carried all compliance risk without a shared-risk arrangement, making termination a rational business decision rather than a judgment on Fansted’s product or vision.
This reflects a common scenario in African fintech, where innovation often outpaces the compliance framework, prompting PSPs to prioritise predictability and mitigate potential losses.
Fansted’s Preparedness and Agility
Fansted anticipated such challenges and built a provider-agnostic payments infrastructure, allowing it to switch PSPs quickly. Asiedu stated that integrating a new provider could take less than an hour, demonstrating foresight and resilience.
The startup must now find a PSP willing to share compliance risk or manage it collaboratively. Such providers exist but often require more extensive due diligence, higher fees, and longer onboarding processes.
Reputational Implications
Being labelled a “high-risk” startup carries a reputational shadow. Other PSPs may scrutinise the business, and some could decline service outright. Fansted must navigate this challenge while proving its business model is robust, compliant, and scalable.
Despite the setback, Fansted maintains a resilient outlook. Asiedu cited his wife’s words: “God is the lifter of men, not Paystack,” reflecting a human response to a corporate risk decision.
