The founders of Kenyan fintech FlexPay have been arrested over the alleged diversion of KES 31.2 million ($242,000) belonging to a major retail chain, adding another layer of scrutiny to the company after months of complaints from customers about delayed withdrawals and refunds.

The Directorate of Criminal Investigations (DCI) said on Wednesday that Martin Kariuki Maina and Johnson Gituma Mwangi were arrested in Roysambu, Nairobi, by detectives investigating the alleged theft.

According to the DCI, the two were acting as agents of an unnamed retailer and had been entrusted with collecting money from customers who purchased goods and collected them from several of the retailer's branches.

The money was supposed to be remitted to the retailer.

Instead, investigators allege that the funds were diverted for personal use.

The DCI said the two allegedly acted together with other suspects who remain at large.

They are expected to be arraigned at the Milimani Law Courts and face a charge of stealing by agent under Section 283(b) of Kenya's Penal Code.

The investigation remains ongoing.

The case is separate from FlexPay's customer complaints

The arrests come at a particularly sensitive time for FlexPay.

For months, customers have publicly complained about difficulties accessing money saved through the platform, delayed refunds and problems receiving products they had already paid for.

Recent reviews of the FlexPay application on Google Play include complaints from users who say withdrawals have taken significantly longer than expected and that they have struggled to receive responses from customer support.

One customer reportedly said a KES 15,000 ($116) refund requested in June had still not been processed by July.

Other users have similarly complained about withdrawals taking longer than they expected, including customers who said they had completed their savings targets but were left waiting for their money.

However, an important distinction remains.

The DCI's current investigation concerns KES 31.2 million allegedly collected on behalf of a retailer. It has not said that the alleged theft is connected to the customer withdrawal complaints.

That distinction is important because the existence of customer complaints does not, by itself, establish a connection between those complaints and the criminal investigation.

How FlexPay's business model works

FlexPay was built around an alternative to traditional buy-now-pay-later services.

Instead of giving consumers credit to purchase goods immediately and repay a lender later, the company adopted a digital version of the traditional lay-by model.

Customers can select products from participating merchants and gradually pay for them through the platform.

Once the required amount has been paid, the customer can collect the product.

The model is designed around saving before taking possession rather than borrowing before repayment.

FlexPay has also expanded into savings products, including FlexPay Goals, which allows users to save towards specific targets, and FlexPay Chama, which supports group savings.

The company describes itself as a payment facilitation and savings platform rather than a lender or financial institution.

That distinction makes the handling of customer funds and payments particularly important to the company's relationship with users.

A fintech built around saving instead of borrowing

Founded in 2017, FlexPay attracted attention by positioning itself as an alternative to the increasingly popular buy-now-pay-later model.

Its founders argued that consumers did not always need additional credit to afford expensive goods.

Instead, many could benefit from a digital platform that allowed them to save towards purchases over time.

The idea essentially took an established African retail practice and moved it onto a smartphone.

As FlexPay co-founder Richard Muchomba explained in 2023, the company had essentially digitised the traditional lay-by model.

By September 2023, FlexPay said it had more than 600 merchant partners and had served over 200,000 customers.

The company generated revenue by charging commissions on products and services sold through its platform.

At the time, it said it had raised approximately $785,000 from investors including Acacia Group, LoftyInc, Expert Dojo, Google Black Founders Fund and Renew Capital.

FlexPay was also selected for TechCrunch's Startup Battlefield 200 cohort in 2023 and had outlined plans to expand into Uganda and Nigeria.

One of the arrested founders was FlexPay's COO

Johnson Gituma Mwangi, one of the two people arrested, was identified by FlexPay in 2023 as the company's co-founder and chief operating officer.

His arrest therefore puts one of the company's senior executives at the centre of a criminal investigation involving funds allegedly belonging to a retail partner.

The DCI has not said how the alleged diversion was carried out or identified the retailer involved.

It also said other suspects are still being pursued.

The case will now move through Kenya's legal system, where the allegations will have to be tested through due process.

An arrest or charge does not constitute a finding of guilt.

Why the customer complaints matter

Although the DCI has not linked the customer complaints to the alleged KES 31.2 million theft, the timing creates additional pressure for FlexPay.

Customers using savings platforms are placing a significant amount of trust in the company.

They expect money deposited towards a goal to remain properly accounted for and accessible when they need it.

When withdrawals or refunds are delayed, that trust can quickly deteriorate.

The problem can become even more serious for fintechs because their relationship with customers is primarily digital.

A customer who cannot access their funds may have limited options beyond an in-app support channel, email or social media.

Repeated complaints about delayed withdrawals can therefore become a reputational problem long before regulators or law-enforcement agencies become involved.

The bigger issue: trust in fintech

The FlexPay case highlights one of the most important challenges facing Africa's fintech sector.

Fintechs often grow by convincing customers to move financial activities onto digital platforms.

That requires trust.

Users must trust the technology, the company operating it and the systems responsible for handling their money.

For savings platforms in particular, the trust relationship is even more direct.

The fundamental promise is simple: save your money with us today and it will be available when you reach your goal.

Any prolonged uncertainty around withdrawals can undermine that promise.

This is why customer complaints about delayed access to funds can be significant even when there is no proven connection to a separate criminal investigation.

FlexPay's model also raises a broader industry question

The case comes as African fintech companies continue experimenting with alternatives to traditional banking and consumer lending.

Buy-now-pay-later companies, digital savings platforms, payment providers and mobile wallets are increasingly occupying spaces that were once dominated by banks and other traditional financial institutions.

That expansion creates opportunities for financial inclusion, but it also raises questions around consumer protection, safeguarding of funds, transparency and accountability.

The more financial activity that moves onto fintech platforms, the more important those safeguards become.

For companies managing customer savings or facilitating payments between consumers and merchants, operational failures can quickly become trust failures.

What happens next?

The DCI said Maina and Gituma remain in custody while investigators continue pursuing other people allegedly involved in the KES 31.2 million case.

The two are expected to appear before the Milimani Law Courts.

It remains unclear whether additional suspects will be arrested or whether the investigation will uncover further allegations.

It is also not yet established whether the ongoing customer complaints about delayed withdrawals and refunds have any connection to the criminal investigation.

For FlexPay, the immediate challenge is therefore twofold: respond to the criminal allegations through the legal process while maintaining confidence among customers and merchant partners.

The company built its business around a relatively simple proposition—help consumers save towards purchases rather than borrow for them.

But as the platform has expanded into broader savings and payment services, the expectations placed on it have also grown.

The latest developments show just how quickly trust, money and technology can collide in Africa's fintech ecosystem.

For now, the allegations remain allegations, and the legal process will determine what happened to the KES 31.2 million.

But regardless of the outcome, the episode highlights a lesson that applies across the fintech industry: when a platform handles people's money, transparency and timely access to funds are not optional—they are fundamental to the business.

FlexPay's story is worth watching beyond the arrests themselves.

The company represents an interesting evolution of African fintech: taking an old financial behaviour—saving before purchasing—and turning it into a digital product.

But the more a fintech expands into savings and payments, the greater the responsibility that comes with handling people's money.

The DCI's allegations must now go through the legal process, and there is currently no established link between the alleged retailer-fund diversion and customer complaints about delayed withdrawals.

Still, the combination of a criminal investigation and mounting customer frustration puts the spotlight firmly on trust, financial controls and consumer protection.

For African fintechs, innovation may attract customers, but it is strong execution and financial accountability that ultimately keep them.