S3E1: Follow the Money

October 7, 2021

We hear a lot, in the African tech ecosystem, that the competition is with cash. Virtually every country in the world is on some form of a journey to move from cash to cashless. Many African markets, however, are quite far on that journey. And to understand how to accelerate this trend on the continent, we first need to understand how money moves.

[04:55] - For most Africans, the mobile money experience starts with agent networks, like TeamApt's MoniePoint, in Nigeria.

[09:47] - Though increasingly, people are getting paid by employers directly into their mobile wallets. Bulk disbursement startups like Julaya, in Cote d'Ivoire, play a role here.

[13:24] - But how does money actually move, between accounts and banks? The movement of money is powered by national payments switches. In South Africa, its payments switch is BankservAfrica.

[20:06] - So now that we know how money moves, how are fintechs building greater utility into their mobile wallets, to compel users to keep money in them?

[25:56] - How should we think about the design and extensibility of mobile wallets, in the context of physical wallets?

This season is sponsored by MFS Africa.

All this season, we're exploring value chains. And in the payments value chain, no fintech has a wider reach on the continent than MFS Africa. Through their network of over 180 partners - MNOs, banks, NGOs, fintechs, and global enterprises - MFS Africa's API hub makes connects over 320 million mobile wallets across 30+ countries in Africa.

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Justin Norman: Last season, in our conversational series of episodes, we spoke to Vahid Monadjem, the Co-founder and CEO of Nomanini, a fintech platform for merchants in cash-heavy economies. He shared this...

Vahid Monadjem: I think the way to move beyond cash is for us to be really interoperable with it.

Justin Norman: In the African tech ecosystem, we hear a lot that the competition is with cash. And fintechs, banks, and regulators alike are working to increase the prevalence of digital payments in their given markets. But everyone has their work cut out for them, especially because cash does have some redeeming qualities.

Vahid Monadjem: The first thing to consider is just the incumbent technology is pen and paper, physical cash. And while those might seem extremely limiting, they are extremely powerful. The incumbent technology keeps working whether the internet goes on or off or power goes on and off. And it's a pretty robust mechanism. Similarly with cash, you know, it's a very fast transaction. It's hard to beat the transaction time of cash. There needs to be some appreciation for the incentives and what works for informal retailers.

Justin Norman: So if cash works, and works well, why is everyone working so hard to digitize payments? And what work, what considerations are involved to replace cash with digital payments; to replace physical wallets with mobile ones? To answer these questions, we need to understand how money moves.

This season is about value chains - what's going on behind the scenes in various sectors across the continent. And this episode is the first episode of our three-part fintech series, in which we explore and unpack the financial services value chains.

So let's start by following the money.

Justin Norman: Before we start, we'd like to thank MFS Africa for their sponsorship of the entirety of this season of The Flip. As we explore value chains across sectors, throughout this season we'll hear from MFS Africa, their investees, investors, and customers on the role they're playing across the sectors and markets in question. MFS Africa's payments hub connects over 200 million mobile wallets across 34 African countries, so when we talk about building pan-African companies and building infrastructure across the continent, that should include markets in which there is currently less attention. Markets like Cameroon. Earlier this year, MFS Africa announced their $3 million investment in Maviance, a Cameroonian digital financial services platform co-founded by Jerry Cheambe. And Jerry and I sat down to talk about the mobile money landscape in Cameroon.

Jerry Cheambe: In Cameroon, we operate the largest digital financial services platform in Central Africa.

When we look at the GSMA data, we compare, for example, Kenya versus CEMAC region, what we tend to see is that money still stays within the Kenyan system fourteen times more than within the CEMAC ecosystem. And that is partially due to the fact that you have quite a lot of digital financial services that are built around to support. digital money and there is quite an acceptance from mobile money, but the service categories that are being offered are still, are what we'll call the basic services compared to other markets. It's mainly a P2P, cash-in cash-out, or even when merchants use it to collect payments it’s just collecting the payments and moving the money back to the bank account. So there is still the need to build the ecosystem, the payment infrastructure that allows customers, on the one hand, to trust the services and keep them on it, the digital money within the ecosystem, and on the other hand to provide services that they can consume and use. You can actually keep the money and use it within this ecosystem. And that's really what we are trying to do at the moment.

Justin Norman: Later in the show, we'll hear a bit more from Jerry about investing to build the payments infrastructure in Cameroon.

VO: You’re listening to The Flip. Contextually relevant stories from entrepreneurs around Africa.

Justin Norman: Welcome back to The Flip, I'm your host Justin Norman.

Fintech is unquestionably the hottest sector in the African tech ecosystem, especially from a fundraising perspective. And I'm interested in the myriad of companies finding success in this space, and the strategies behind their approach to solving problems in the markets in which they operate. But why are companies building how they are building? It's not just a question about market demand and consumer behavior, but also about the limitation and parameters set forth by regulators, as financial services is an incredibly regulated space.

But why is fintech the hottest sector in the African tech ecosystem, in spite of the complexity and the regulation? It's in part, a function of opportunity and financial inclusion, and the incredibly wide unbanked population in Africa and across the global south.

Back to the question of why digital payments are important - if in cash first economies, there are no digital record of transactions, then these individuals or SMEs, for example, will have a difficult time accessing credit, whether it's a business loan or a home loan or a car loan. Cashless economies can lead to more financial inclusion, from a lending perspective, for example, but it can also lead to more convenient and safe ways to pay or to save.

Virtually every country in the world is on some form of a journey to move from cash to cashless. Many African markets, however, are quite far on that journey. And to understand how to accelerate this trend on the continent, we first need to understand how money moves.

Let's say I'm a merchant or trader, and my customers pay me in cash. In order to convert that cash into digital currency, I need to go to a cash-in agent. The digital payments value chain starts with taking cash, and turning it into 1s and 0s.

Tosin Eniolorunoda: My name is Tosin Eniolorunoda and I am the Founder and Chief Executive Officer of TeamApt Limited, the company behind the Moniepoint agency banking solution and Monnify payment gateway.

Justin Norman: Today, agent networks, and the physical cash-in cash-out infrastructure of the mobile money ecosystem is still an absolutely vital part - perhaps the most important part - of the digital payments equation. And the Moniepoint agency banking network is one such provider of these services in Nigeria.

Tosin Eniolorunoda: When you look at micropayments, which constitute the bulk of the volume of transactions, it's not yet easier nor faster nor cheaper to do it electronically. And the reason is because one, the infrastructure that the industry in Nigeria still provides today still has failure rates that lead to people being apprehensive about doing electronic transactions. Two, if it's cash you simply pay your cash, face value, you move on. But if it's not cash, somebody pays. Either the merchant pays the charge or the customer is charged. And it's not faster. Cash is cash, you drop your cash or you move on.

Justin Norman: But in order to have a conversation about the Nigerian payments ecosystem, we need to first talk about its infrastructure and regulation, as it's different than some of the other countries we will talk about later in this episode. And these differences manifest as different solutions for customers altogether.

Tosin Eniolorunoda: Nigeria is a card market. Nigeria's infrastructure and network has been built mostly on a card rail and instant transfer rail.

Justin Norman: And Nigeria is a card market largely due to regulation, or the lack of regulation allowing telcos to offer their USSD-based mobile money services in Nigeria.

But telco mobile money services have thrived in market segments that banks cannot or do not want to reach. Their services being too expensive, or their bank branches being too far away, or their ATMs being too scarce, telco agent networks have filled those gaps. But in Nigeria's bank-led market, third-party agency banking networks have had to fill the gaps, to extend banks' services further out into the mass market. And that's where TeamApt comes in.

Tosin Eniolorunoda: Because distribution of these financial services is still through bank branches and downloading mobile apps, it now means that some people were excluded. The solutions existed, it was a distribution problem. So the use case that not developed for these agents was to become human ATMs for cash withdrawals, cash deposits, and other additional services, like bill payments and airtime.

Justin Norman: The reality is, most small payments are still done in cash, so an accessible cash-out infrastructure is paramount.

Tosin Eniolorunoda: And because micropayments were still done mostly in cash, it means that the biggest use case where people to open an account, but they want to withdraw cash at will. And ATMs are not a lot so that led to an opportunity where you could provide mini ATM services, closer to the people.

Justin Norman: Now Moniepoint's business has grown considerably - their agent network is now up over 100,000 agents - in part due to strong execution, and the reliability of their point of sale hardware.

But as we've heard throughout this episode, full-stack infrastructure and vertical integration is an important part of running a profitable fintech on the continent, and so too is TeamApt moving upstream on top of their agent network infrastructure with their payment gateway Monnify.

Tosin Eniolorunoda: While we're building Moniepoint, we were looking for a way in which we could, our agents could fund their accounts very well. And one of, like I mentioned earlier, one of the most ubiquitous ways in which P2P transfers happen in Nigeria is through direct interbank transfers. And I saw at that time, there was no way you could have people pay you, in a merchant scenario, in a bulk scenario, using transfers because confirmation of transfers into your account was manual.

So we built Monnify as a payment gateway and Moniepoint was one of the first customers for that. And it was more or less like we built oann infrastructure for Moniepoint and when we saw that this was good, others need it, then we packaged it also as a product that others could use. And that's how Monnify payment gateway was born.

Justin Norman: And this begins the journey of TeamApt's larger ambitions in Nigeria and beyond.

Tosin Eniolorunoda: Now we're evolving to become a full-fledged financial service provider. Today we have access to about 12 to 14 million customers who use our platforms daily. What we're attempting to do now is to upsell these customers to become our customers, digital banking customers.

Justin Norman: So that's one way to get your cash in your mobile wallet. Another way is to receive payments say, from an employer.

In a developed market, I might be a salaried employee who receives a direct deposit into my bank account every month. But in African markets, in which a large percentage of people don't have bank accounts, how do they get paid?

Mathias Leopoldie: Here in Cote d'Ivoire for example, you have less than 25% of people have a bank account, but it's 75% that have a mobile money account. So the financial inclusion has completely shifted towards mobile money and mobile financial inclusion.

Justin Norman: That's Mathias Leopoldie, the Co-founder & CEO of Julaya, which is...

Mathias Leopoldie: Which is a fintech operating in the business-to-business payments space in West Africa. So more precisely we have companies that want to pay workers that don't have a bank account, they have mobile money accounts. And so they use our platform to be able to pay them.

Justin Norman: What Julaya is availing in Cote d'Ivoire is called bulk disbursement. Without bulk disbursement platforms, these businesses, which span widely across different sectors, would have to pay their employees in cash.

Mathias Leopoldie: Basically it was cash and for like a large chunk of the economy, it's still cash-based. But for our customers, so just to take some examples, but we have customers in every kind of area, like security companies, we have logistic companies, even startups. We have also large companies like the national water company and they pay some fees inside the country to their staff and to their partners. And we also have public institutions that pay, you know, the teachers, for example. So it can fit any need where you have this disbursement issue.

Justin Norman: But this raises a question - why don't the telcos do this? They do, but prevalence of fragmentation is the underlying challenge and opportunity for a fintech like Julaya.

Mathias Leopoldie: So obviously it's a pain point for the beneficiaries, but what we see is that for our customer target, which is SMEs to some large companies, they don't want the hassle to say, okay, we will force you to have these kinds of accounts, et cetera. So I would say from the demand side, people tend to be with the mobile money wallet from the SIM card where they make the most phone calls.

Justin Norman: And this fragmentation piece is quite pertinent in the Francophone African context.

Mathias Leopoldie: In terms of market specificities, here you don't have payment interoperability. So it's not like in Ghana where you have a national switch between the telcos. Here you have to have every solution and that's the problem the telcos have is that since they have to pre-pay everything, you know, there is no interoperability and no settlement between the telcos, for example, here in Cote d'Ivoire, so they have to pre-pay all the electronic money, any it takes a lot of cash to pre-pay the operations. So the next step would be interoperability switch.

Justin Norman: Now, in Cote d'Ivoire, there is a switch for credit and debit cards - called the… here, I’ll let Google Translate pronounce this for me Groupement Interbancaire Monetique de l'Union Economique et Monetaire Ouest-Africaine, or the Interbank Electronic Banking Group of the Economic and Monetary Union of West Africa, but that switch only handles credit and debit cards. There is no switch for mobile money and mobile banking services for the countries that use the West African countries that use the CFA Franc.

That makes the movement of money more cumbersome and limits the use cases for transacting digitally.

A national payments switch is a big part of not only making digital payments happen, but making payments interoperable, and therefore widening their use cases across an economy. So what is a payments switch?

Let's take a step back for a moment. In our hypothetical example, when my employer wants to pay me - if they are a customer of one bank and I am the customer of another bank - those payments are routed through a national payments switch, in the markets in which there is one. In South Africa, the national payments switch is called BankServ Africa.

Bishnen Kumalo: My name is Bishnen Kumalo. I work as the Head of Modernization at an institution called BankservAfrica.

Justin Norman: So what does a payments switch do?

Bishnen Kumalo: What a switch does is that it facilitates payments, in the South African contex,t between banking institutions. There's a concept called settlements and clearing, and you need to then ensure that the message moves from Bank A to bank B. That's what the switch does. We don't hold funds, we're not a deposit-taking institution. We're just the facilitator of the message, a message broker effectively for payments facilitation

Justin Norman: Here's a simple example.

Bishnen Kumalo: You're a customer of Bank A, so you've been onboarded, you've been KYC’d, they know who you are, and you now have a transactional banking account on which you can make payments. You then say you want to pay me. And I'm sitting on another platform, Bank B's, and when you want to pay me, you send a message through the switch. That's an EFT payment.

Justin Norman: So if I pay Bishnen via an EFT payment, the message sent between my bank and her bank contains the transaction information, which effectively are a set of instructions. Debit my bank account this amount, and credit her bank account that amount. Now, credit card payments are a bit more complex because they involve point of sale machines or payment gateways and the card network that sits in between the merchant and the customers banks. And in mobile money transactions, on the other hand, it's mobile credits that are being sent back and forth between wallets, whereas the actual cash deposits are held by deposit-taking institutions, which are typically the banks. And if money moves between different banks in mobile money transactions - if say, you send money from M-Pesa to MTN - then those payments move across the payments switch, as well.

Now, when we send money digitally, that money actually has to move, from one bank's treasury account to another. That process is called settlement.

Bishnen Kumalo: At certain intervals during the day, depending on the payment, we then go and settle with, they call it SAMOS, which is sitting at the South African Reserve Bank. All registered banks have an account with the South African Reserve Bank. And then that's where the actual physical movement of funds occurs.

Justin Norman: It might seem quite simple - moving money digitally is just sending messages back and forth between banks across a payment switch's rails. But to ensure the payments switches can handle adequate volumes, while improving speed, and maintaining a high level of security, is a substantial undertaking. And it's Bishnen's responsible, as the head of modernisation for BankServ, for modernising the underlying infrastructure that moves messages and money around South Africa.

Bishnen Kumalo: So there's technical innovation that is, cloud, use of cloud and getting away from, you know, the big mainframes use to do all this message brokering I spoke about earlier. Microservices is another, APIs as well. There's also the message types that we're going to be using, like ISO 20022, which is also a standard that we're looking to adhere to and that in the South African ecosystem, financial ecosystem, that we're all going to be talking what is the global standard in terms of how we broker, put together the message types. It's like the difference between French and English, if we're using the same language, it's easier for us to take payments internationally and to standardize the way that we send and receive different messages.

Justin Norman: And the goal, ultimately, is to go cashless - and for BankServ it's their mandate to provide the rails that enable instant digital payments, while also ensuring the same level of security and risk-protection that, today, means payments are less than instant.

Bishnen Kumalo: Instant payments in South Africa is somewhat problematic. There's different timings associated with it. In some places, in some institutions, it may be quicker and then some institutions it might take slightly longer, for various different reasons.

Justin Norman: And those reasons are?

Bishnen Kumalo: It's generally around risk. It’s can you validate that this is going to the person that is intended? They're doing checks, they are validating that this is an authentic payment, that it was indeed you who sent the instruction to push money from your account to that corresponding account, and all of those checks, and there could be multitudes of checks. And so risk or the protection of the payments, banks are held liable for those payments. If some of those payments are false or they've been penetrated, et cetera. And so holding a payment to validate and to check is what causes the delay in the instance of that payment.

Justin Norman: When we come back in just a moment, now that we know how money moves, how are the fintechs building and innovating to ensure that digital money and mobile wallets have the greatest impact and utility for its users.

All that and more, after this word from our sponsor MFS Africa.

Justin Norman: Earlier in the show, we heard from MFS Africa investee Jerry Cheambe, of the Cameroonian fintech Maviance. He spoke of how much there is to build in Cameroon. While for some, that might be a deterrent, for Maviance as the builder, and MFS Africa as a strategic partner and investor, the lack of infrastructure is a huge opportunity.

Jerry Cheambe: The truth, as you say, somebody needs to build the infrastructure, because the opportunities are huge. The informal sector is over 90%. Moving money around is pretty hard. And we know it can be simplified. We know it's simple. We know transfer of value, it can be seamless. And we see what happens in other markets where this problem is solved, just how the economy picks up. Energy comes into the market and things evolve in ways you cannot imagine. And somebody needs to do the job.

And the good thing is we've done quite a lot of the work already. We've established quite a footprint and there's still a lot to do, but we are lucky to have a young, dynamic and energetic team that believes in this mission, believes in the vision, and still wants to do this for the CEMAC region.

I know it's pretty difficult in the market, but at the time we actually had someone we're talking to with intent. and then guess who shows up? MFS Africa. And things were pretty much aligned. What we are doing, how we want to do it, the opportunities for both parties, the strategic partnership, building the infrastructure to enable payments. They're doing across Africa, we're doing within Cameroon. So there's quite a lot of commonality. And at the same time, there is quite a lot of integration in terms of services and products that is going on between both companies to enable new services in the market. And this is something that money alone wouldn't have been able to provide.

Justin Norman: Now the thing about instant payments is that they're not so instant at the moment, when paid between bank accounts. Amongst the unbanked, that's not necessarily a problem, because this is where mobile wallets come into play. Even if the money hasn't instantly moved between a fintechs bank accounts - the deposit-taking institutions - if a transaction is reflected instantly on a mobile wallet, for all intents and purposes, from a user perspective, it's an instant payment.

And as we continue our hypothetical example of how money moves - I have money in my mobile wallet, either from cashing in at an agent or receiving my paycheck via bulk disbursement. The question now is, what do I do with that money?

The reason why mobile wallets are important, and the reason why creating a payments ecosystem and extensibility for payments with a given mobile wallet is important, is that it creates more utility and use cases for digital payments.

If you can't buy your groceries or pay for your transportation with your mobile wallet, you're going to just cash out and transact in cash. And that's still prevailing behavior in many markets today.

Jacques Marco: So Egypt is predominantly cash-based at the moment. So people are still trusting cash, carrying cash around to pay anything from a small top-up of the telco data or just doing purchases, buying a car in cash, right? But that's understandable. It was around 60% of the population being unbanked, without a bank account.

Justin Norman: That's Jacques Marco, formerly the Co-founder of Raeseedy, Egypt's first non-bank, non-telco mobile money wallet, and currently the Founder and CEO of a new mobile money platform called Axis Pay.

So if the primary reasons why Egyptians, and indeed the majority of Africans, still use cash are cost to transact, speed to transact, and the extensibility of mobile wallets - these are all problems Axis Pay is trying to solve for.

Jacques Marco: The idea is to use that wallet or that open-loop wallet as a primary account. The advantage of the wallet is that if they have a merchant wallet or if they have a wallet and people are paying, so peer-to-peer by scanning a QR code, they instantly see the money. It's not money that's going through card rails and then just going into a bank and then coming back to a bank account or another sort of settlement. Wallets, they have full control and transparency of their payments, right? They can see money flowing in and out immediately. So it avoids all the settlement of all the card rails that are anything between three to seven business days, and they get their money. As opposed to cards or to cash agents where the money just stays stuck in between for a few days until the institution gets it. So I think that accessibility to the money they've earned is quite an important advantage here and which will, I think, drive adoption higher in the next few years.

Justin Norman: And you just heard Jacques use a term - open-loop wallets. What's that?

Jacques Marco: So the advantage of, and what we call an open-loop wallet here in Egypt is mostly a couple of things. And one of them is interoperability. So it's through the wallet, you get to send money to any other wallet in the ecosystem.

Justin Norman: Open-loop wallets - as their name suggests, are open, which allows for interoperability within the mobile wallet ecosystem.

If the competition is with cash, then digital payments need to be interoperable and accepted everywhere, just like how cash is interoperable and accepted everywhere.

Jacques Marco: P2P interoperability is very big for open-loop wallet. And the other is around the cash-in cash-out aspect. By being an open wallet, you get access to all of the different ATMs in Egypt with your mobile number. You can go deposit money or withdraw money from any ATMs. So it just then, it makes you feel that this money is accessible at any point in time. It's not stuck on the phone or stuck in an ecosystem, and that's really the main edge of being an open-loop wallet, and you get to transfer money from bank accounts and wallets and vice versa. So that money is not trapped into a specific ecosystem.

Justin Norman: Now in Egypt specifically, the Central Bank is trying to compel Egyptians to use digital payments more. And, just like how I, in our hypothetical example, receive my salary payment via mobile money, so too is Egypt making a push in that direction.

Jacques Marco: So in 2019, actually the government issued, a less cash law. And its executive regulations were issued last year, mandating the digitalization of a lot of cash movements. Whether it's government payments, rent, all sorts of financing, salaries and payroll, insurance premiums, et cetera. So that has been a strong catalyst for the adoption of digital channels across the board.

Justin Norman: Now it's one thing to receive money into a wallet - but it's another to keep money in their wallet. And Egypt's regulators are trying to help with that too.

Jacques Marco: Once the money's on the wallet initially people will cash it out, right, because if they don't have a use case, then they just want the cash to purchase whatever they want. But one of the biggest advantages of being an open-loop wallet, by regulation, we're allowed to give interest on savings. The Central Bank issued in May of this year the third regulation around mobile money. So it allowed the mobile money or open-loop wallets specifically to issue interest on savings, something that no other products can do other than banks. We can also get to do fully digital loans now. So that's also something that's new. Besides all the other payments and transfers and et cetera, that are core to a wallet platform now adding the savings and credit component has really made it almost like a small neobank.

Justin Norman: But here's the thing, not all mobile wallets are created equal. Or actually in Egypt - at least before Axis Pay came along - maybe they are all created equal.

Jacques Marco: All wallets in Egypt are, there's no open-loop that has built its own tech stack in-house. They're all using either MasterCard or Fawry. And ultimately if you open their apps, they're all the same solutions, just different colors and branding. So they all have the same use cases. Same placement even of the buttons.

Justin Norman: And this is where fintechs are taking advantage - to build their own tech stack, to provide a superior experience for their customers, and most importantly, to build wallets with the utility and extensibility to rival cash.

Nicholas Kamanzi: I think the fundamentals are broken. And by fundamentals I mean, I think the existing primary or wallets are broken in a way that they actually incentivize people to remove money from their wallet.

Justin Norman: That's Nicholas Kamanzi, the Country Launcher at Wave, and formerly the Head of Payments at SafeBoda.

What Nick is talking about here is a primary wallet - in the context of banks vs. telcos vs. fintechs, and fintechs vs. superapps, they're all after the same opportunity, to become a user's primary wallet.

The question becomes, which mobile wallet should I use? Let's think of mobile wallets in the context of physical wallets, because remember, the competition is with cash.

Nicholas Kamanzi: If you think about your physical wallet, maybe it has a credit card or debit card. In our parts of the world it has like a ton of cash that you go to the bank, you cash out that money, put it in your wallet, and then go out to our store and spend it. That wallet works so well for you because one, if you put money in that wallet, you're going to have the same amount of money at the end. And then it has a fixed cost. Like you pay maybe 1000 shillings and you have it for life. Whenever it gets old, you have to replace it.

Justin Norman: So how should we be thinking about a digital wallet, in the context of how we use a physical wallet?

Nicholas Kamanzi: So my idea of like a primary wallet kind of comes from that. It's useful for me, it's like a utility. I can, I can use it and it works. And so, in a realm where we are trying to digitize that piece, which is you can move money from your bank or you can move money from another source, maybe like even mobile money, you can move money from there and put it in this wallet and use it, it means like there's something that is fundamentally hasn't been solved for for the digital realm, because if people are still willing to do that, then either like the existing rails are very expensive, that they don't trust them to literally leave money the same way they would leave it in that wallet. Or, they have not evolved so much in a world where technology has evolved much. And so you're going to find that we are entering a world where we are going to see a lot of fintechs kind of extending that value and significantly lowering the price to make as in a way similar to what you have in your pocket.

Justin Norman: This is, in part, where Wave's story starts. The company this month - September 2021 - announced their $200 million Series A, valuing the company at $1.7 billion after a couple of incredibly successful years operating in Senegal and Cote d'Ivoire. The startup exploded in popularity when it launched Senegal for one large reason, in particular. They offered a service that was 70% cheaper than alternatives. For Wave, that means free deposits and withdrawals, free bill pay - in which the costs are passed on to the businesses, and peer-to-peer transfer fees of just 1%. And in an environment in which not a lot has changed in the service offering of telco mobile money, it's this radical change in value proposition that's the impetus behind Wave garnering the largest market share in Senegal, overtaking popular incumbents like Orange.

Now Wave's ability to offer what they call radically affordable services is a function of its building its own infrastructure - including agent and consumer apps, an agent network, and QR cards enabling payments for non-smartphone users. And so it's interesting to hear how Wave defines itself.

Nicholas Kamanzi: the best way to define Wave is actually our mission, which is, we are trying to build a financial infrastructure that just works. And what that really means is like it's instant, it's reliable, and accessible to everyone.

Justin Norman: Wave isn't just a payments app, it's a financial ecosystem. Their value is that they are creating and maintaining the infrastructure for financial transactions as well as the network of users conducting those transactions.

And this allows Wave to have a radically different relationship with its users. Or rather, for users to have a radically different relationship with their mobile wallet.

Nicholas Kamanzi: Actually cost plays a very big role in changing the behavior. You can withdraw your money any time, for free. And if you think about the ecosystem, maybe the people receiving the money cannot really afford the cost of paying those withdrawal fees. And so removing the costs is actually the thing that is going to cause them to have a very positive relationship with your wallet. But I think the cost has to go down because if the cost doesn't go down, the relationship people are going to have with your wallet is going to be different. It's not going to be like, hey, this is something very similar to your physical wallet.

Justin Norman: And here is perhaps where fintechs have the greatest opportunity in comparison to incumbents.

Nicholas Kamanzi: I think we need a lot more companies that are trying to do good by the customer because I have used some of our money for like the last 10 years and I'll tell you, like the cost has not come down. The cost keeps going up actually. And of course, we see some improvements, there's been improvements. I can use it to pay for things, but those things are still very expensive. Like paying for my bills is very, very expensive.

Justin Norman: So to build the cashless future we wish to see takes a considerable investment in infrastructure. And all of the entrepreneurs and operators we've talked to in this episode are building the so-called full-stack. TeamApt has built the agent network and software for their agents, and is building a payment gateway for its merchants or third parties to send payments in bulk. Axis Pay and Wave are building or have built full-stack solutions from the mobile wallets on up.

So when we say that fintech in Africa is complex, this is what we mean. But there's more - all of these companies are also regulated entities because they are dealing with the movement of money. The regulation and licensing requirements are different depending on the services and also vary on a country-by-country basis. So while the market opportunity is massive, building a full-stack payments platform involves not just building an app, but obtaining licenses and bank partners, building and maintaining an agent network, and doing all of that all over again in the next country.

Now, this is normally where my b-mic Sayo Folawiyo and I would have our retrospective conversation - which is meant to be a meta, transparent view into what we thought about and how we approached the topics in question, and what our main takeaways were after speaking to and learning from our interviewees. But after this episode, we found ourselves talking a lot about the same things we talked a lot about in prior episodes of The Flip. About market size, and complexity, and strategy. So rather than rehash those topics, we encourage you, if you haven’t previously listened, to go back and listen to those episodes. And as Jay-Z says, if you want his old stuff, buy his old albums.

So in this 3 part fintech series, we will not have a retrospective, but we promise to be back for episode 4.

And we’re sorry to disappoint - trust me, no one is as disappointed in me in not including our conversations after we upgraded our audio equipment these seasons.

So, with that said, roll the outro….

VO: That’s it for this episode of The Flip. Thanks so much for listening - and as always, if you liked this episode please do consider leaving us a review on your favorite podcast app and sharing with a friend or two. Or ten.

Don’t forget, you can find us on social media @theflipafrica, or join our newsletter on our website theflip.africa. We send out full-episode show notes and write-ups, as well as our weekly newsletter The Flip Notes, sent every Sunday.

In the next episode, part two of our three-part fintech series, we talk cross-border payments. We’ll see you then.