Why Are Cross-Border Payments So Hard?

Benjamin Fernandes: If anybody thinks payments in Africa are not 1% built, you are lying. Like, you know you are lying.

Dan Kleinbaum: There's just so many manual processes in the loop. So a lot of this stuff just ends up getting caught up in humans and the lack of tech. All of this stuff is still just I mean, I like the 1% built. 

Justin Norman: That's Benjamin Fernandes, the co-founder and CEO of the remittance platform Nala, and Dan Kleinbaum, who first built and sold Beyonic to Onafriq and is now building the FX platform GTXN.

Benjamin Fernandes: You're building any tech company in Africa. You automatically become a Fintech company, not by choice, but by nature of the market.

Dan Kleinbaum: So many things are broken. The infrastructure in emerging markets and Africa in general that needs to be built, there will be value there, particularly on the b two b side. Trade gets done no matter what. People need to move money in and out no matter what.

Benjamin Fernandes: Why is cross border payments in Africa so hard? How long do you have?

Justin Norman: In this episode of The Flip, we interrogate why cross-border payments are so hard in Africa, and why, as Benjamin says, payments in Africa are just 1% built today. This episode of The Flip was recorded live at the Fintech in Africa summit in New York, where some of the biggest growth stage Fintechs from across the continent were brought together with global investors and strategic partners. Be sure to check out FT Partners' latest Fintech in Africa research report, which we've linked to in the show notes. Before we start, we have one small favor to ask. If you enjoy the show and want to support the content that we create, please hit that subscribe button. It only takes a second, but it will mean a lot to us if you do. 

Justin Norman: Benji, so you sort of famously say that payments are 1% built in Africa. Can we start there and maybe talk a little bit about why cross border payments are still so hard and still so underdeveloped in the region?

Benjamin Fernandes: Cool. If anybody thinks payments in Africa are 1 not 1% built, you're lying. I'm like, you know you are lying. Because every single time, as you're building a pay you're building any tech company in Africa, you automatically become a Fintech company. Not by choice, but by nature of the market.

So many things are broken. I have friends who are starting healthcare companies, like let's say, data, like reconciliation for our healthcare. And then all of a sudden, a big challenge is collection of payments there, and then they can't even get the true data of, like, the payments happening. They end up building, like, some sort of light infrastructure for healthcare payments, and then they're a FinTech company. All of a sudden, they started to be a data healthcare company but became a FinTech company over time.

So I think I do believe it's 1% build. I think there's a lot of work that needs to be done across the continent. I think a majority of the investments are gonna happen across the continent over the next 15 years. Number 1 will still be Fintech until that solve that scale. 

Justin Norman: So 1% built for a long time. And so for your purview in particular cross-border payments and remittance, why is it still so hard?

Benjamin Fernandes: Why is cross border payments in Africa so hard? How long do you have? I think many things. I think number 1, most people don't talk about the dollar shortage which is insane to me. Right?

Africa's a net import region. We import more than we export. So every country, majority of the countries in Africa have a trade deficit. So if you look at Kenya, for example, 2021 import value, 23,000,000,000 export value, 7,000,000,000. If you add remittance volume of 4,000,000,000, you have an 11 and a half $1,000,000,000 trade deficit.

So companies like Dan can really take advantage of that. And take advantage meaning, we can help, you know, people source FX better and grow their businesses more directly because so many companies lose money on FX across Africa. So I think that's one where it's really big, where it creates it makes it really hard. Banks, for example, between Tanzania and Kenya that are just doing transactions, have to convert money from Tanzania shillings to dollars, dollars wired via swift to Kenya, Kenya dollars back to Kenyan shillings. I'm like, okay, why can't we just swap or, you know, do netting directly?

I think I'm  saying it really quickly, but it's way more complicated than that. So I think there's many things in line that make it really difficult. I think a dollar shortage is a big one that keeps payments really expensive to African continent and will be that way for a very long time. People always say, well, can the other remittance companies exist? Of course.

And a lot of them will come. There's gonna be a lot more companies after Nala doing the exact same thing as Nala and that will do well because that market is just growing. The amount of people leaving anyway, I'll stop right there because I've been talking so much.

Justin Norman: Yeah. So, Dan, I mean, I think when we think about cross-border, for me at least, like, I initially would have always assumed that it was regulation sort of, like, customer acquisition then integrations. But I think this FX piece, this, like, cross-border currency piece is a really important part that we like, the sort of proverbial we don't talk a lot about. And you've dedicated a lot of time towards payments and then after Bionic decided to come back and to address this challenge. So can you talk a little bit about why you decided to do that and the approach that you're taking to make a dent?

Dan Kleinbaum: Yeah. So the same trade deficit that Benji mentioned which was I think $11,000,000,000 in Kenya. The revenue that banks see by controlling the FX markets is probably 7 to 10% of that total trade deficit.

Justin Norman: At least. Yeah.

Dan Kleinbaum: And, like, so it's regulatory very difficult, but the current major players in the ecosystem, which are the major banks, are extracting a ton of value from anyone trying to operate in and out. You combine that with very low levels in terms of settlement time, like, it's it takes a long time to move money in. Like, I pay a supplier in Kenya from the US. It could take 7 days for that transfer to clear. So, if I'm moving a large value transaction into or out of Kenya, it takes that much time, the banks control the FX, they take all the margin, And the question that we started asking was, if I am moving large values in and out of emerging markets that have this trade imbalance, can I buy and sell directly from the folks that are on the other side?

It's a simple question to ask. It is a very hard question to come up with an answer that is, you know, regulatory compliant that people are comfortable transacting with, but that's what we're taking on. 

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Justin Norman: Can you talk a little bit about then, in the context of that being a really hard question, how you begin to address it?

Dan Kleinbaum: Yeah. So we look at how do we create sort of a wholesale FX marketplace that, you know, if I'm buying and selling, call it a couple 100,000 up to a $1,000,000 at a time in any market in and out of, call it, dollars of local currency, how can I do it with someone directly and do it in a way that is compliant? There's no settlement risk. In other words, we take on the burden of settlement so that if you 2 are trading with each other, I don't have to necessarily introduce you two, but you trust me that when you give me money, you're gonna get money on the other end. And that's what we've built is kind of a layer to take care of that on a wholesale level.

Justin Norman: And Benji, from Nala's perspective, maybe there's a range of challenges that you have to overcome. I asked you why it's so hard. You said dollar shortage was number 1. So is that currency issue maybe the biggest challenge you have to overcome, or is there a range including currency? In the so many big buckets.

Benjamin Fernandes: So currency, so like that talks about the effects problem across Africa. The second one is payment reliability, which most people don't talk about, think that it's already resolved. I will tell you with some of the biggest partners we work with across the continent, reliability rates fluctuate between 70% to 85%.

Some more context on that. We work in 11 markets across Africa with some of the biggest payout partners who are even here at this event, and we measure everybody's success rate directly every single month. Every 5 seconds we do a test to see like, okay, what's the success and reliability? Between May 2023 to January 2024, the last 6 months, we averaged 25 partner incidences per month in the last 6 months. 25 average.

So you can imagine every morning I wake up I'm like, okay, I wonder which payout part is gonna be down today. Like that's literally the discussion and like what we think about. So infrastructure I think is, that's why I keep saying it's 1% build because there is so much more that needs to be built and that that's a whole separate thing. And then like obviously regulation is 1. You get licenses, you can go as deep as possible into the market.

You can increase your liability directly. So I think those are the big three categories I'd box it into.

Justin Norman: You raised something interesting, which is we like to talk about, in the African tech ecosystem, why is somebody going and building another cross-border payments app. Right? And it's like almost a meme at this point that so many people are going to do it. But it sounds like from your perspective, that's not really the right way to focus because maybe even there should be more, like, infrastructure payments companies because the reliability is not there and the problem is not solved. And there should be more across border maintenance companies because the scope of the problem is so wide and people haven't really solved it. So that's what you think?

Benjamin Fernandes: I think so because like every day I get messages from customers directly and like whenever there's a delayed transaction, I read these personally and I send them to my team and I look at the data myself. So for example, over here I got a text message from one of my friends who have a yearly dollar for 2 years. So for context, our retention rate after a year is 61%. Compared to a lot of our competitors, that's way higher. Right?

So the number one reason customers believe Nala is because of reliability where they had one bad transaction. See, everybody thinks it's FX rates. FX rates gets the customer into the funnel. But once they start transacting, as long as you're within like 0.5% of the next best competitor, it's good enough. People will stay.

Sticky product people will send money home every single month. Now, let me read you a text message from this person right here. It says, bro, this is it. He posted a screenshot of a delayed transfer. And it was delayed for 2 days.

This is it. Unfortunately, I'm done with Nala and I'll take my small coins elsewhere. Completely unacceptable service and customer relations. Your liability is garbage. I've recommended Nala to 100 of people for the last 2 years and I'm sad this is how we part ways.

That's a text message, this person sends me. And then I looked into it and it was one of the payout partners who delayed the payment. And I looked into it, I was like, what happened? They're like, oh, our treasury person forgot to pre-fund your account on Friday so we have to wait till Monday till the payment is dispersed. Now this person has a hospital bill, he's trying to pay for an aunt.

And then Nala takes the blame for it. So I think until reliability increases, other global payments businesses will not even focus on investing in Africa.

Dan Kleinbaum: Can I actually ask a question there? It's actually really interesting that you got to get a real answer on why that payment was delayed because I think anyone operating in this space usually just spills out some bullshit on, like, you know, oh, our partner didn't come. And it's like, oh, our treasury guy actually messed up or, you know, the bank didn't clear the payment.

Benjamin Fernandes: But you know what happened until it got there? I called the CEO directly. I'm like, yo, this is the blank number of time this has happened within this month alone. Like, what's up? The CEO is right here.

Like, you know, we can bring them up. They know who they are. But I think as you look at things directly, I think operationally people assume that it's not just a tech issue. It's a whole operations ballgame that has not been nailed across a lot of large infrastructure players.

Dan Kleinbaum: There's just so many manual processes in the loop. And so this is like small value transactions where it's like you didn't prefund, but when you move more than $10,000 in, there's manual approval processes on every step along the way. So if I'm moving from the US into Kenya, it goes from the US into a correspondent bank, verified, transacted, and then from the correspondent bank, you know, wherever it needs to go. And then there's, again, humans in the loop. And, like, if the guy just doesn't wake up and go to work then and it's on a Friday Yeah.

And then, you know, Monday is a holiday, then that doesn't get cleared until Tuesday. And so a lot of this stuff just ends up getting caught up in humans and the lack of tech and sort of the and this is the infrastructure piece that, like, needs to get built from, like, you know, coordinating settlement to dealing with disbursements. Like, all of this stuff is still just I mean,I like the 1% build. Yeah. I'll tease you a little bit, but only because I love it.

Benjamin Fernandes: I really think because if we look at it, what are the major errors? There's like 11 errors that we get all the time. Like, let's say Dan was dispersing to Justin's account. Justin's account can only hold 10 dollars,000.

Dan is sending $2,000. Justin has 9,800. Payment failed. Why? We don't know why.

We call the disbursement partner. Yo, what happened? Oh, I don't know. Why? Because there's layers of the onion.

Like this partner is built on top of this partner. This partner on top of this partner finally down to Justin's bank. So who messed up the transaction? We don't know. We have to wait till this person calls all of them then we finally find out later.

Oh, by the way, Justin's account was full. I'm like, well, why didn't you tell me before Dan initiated the transaction in the 1st place. Right? So that's one of the errors. There's 11 errors before we see most common and I think if people it's easier said than done.

Dan built a payment aggregator business in Uganda before, sold it for a lot of money, he retired and then came back into the game. But you know I think I think there is so much more that needs to be built there. And we're just at the beginning stage of that.

Justin Norman: It raises a question about, like, we talk about API infrastructure that is the building blocks on top of which other stuff gets built. Right? And then, the sort of inverse of that is, well, you can't rely on these third parties and therefore, you have to build infrastructure yourselves. There are some people who we heard here who were talking about we had to build a lot of our own infrastructure either because it didn't exist or because it wasn't good enough.

How do you think about that? Like, you're more of like a plug-in to help other people, but are you thinking about like we have to build more ourselves because we don't want to have to rely on everyone else? Yeah.

Benjamin Fernandes: I think the challenge is how do you scale the business over time. Right? So for its context, when you're starting on most people work with a large aggregator that has in multiple markets. Now getting an 85% success rate is fine at the beginning when you're doing 10 transactions a day, then you're doing 100 transactions a day, then you're doing 1000 transactions a day, then you're doing 10,000 transactions a day and you have 1500 people calling you saying you suck. That's where the scaling problem begins to really become a massive cost.

Dan Kleinbaum: It would help if you didn't give people your personal phone number, but that's, you know, I love that you handle your customers that way.

Benjamin Fernandes: Dan knows.

Justin Norman: It doesn't have to be that way though.

Benjamin Fernandes: Like, people call me. Yo. Some of y'all call me and I get it. You know, sometimes I'm like, okay. Why how many unread messages do I have there on WhatsApp?

Dan Kleinbaum: 1,378.

Benjamin Fernandes: 1,378. It's because one person will have my number and they'll just send it to oh yeah, Oh, here's the CEO's number. Just like ping him. I'm like, yeah. I'm gonna solve the problem tomorrow.

Justin Norman: Say something about that though. It's like, I often tweet about the cross-border payments issues that I have. Right? Every time I do, I get the CEOs DMing me or message me. Oh, my thing can solve that, but it shouldn't have to be that way. Like, you shouldn't have to also know the CEO to be able to, like, have your cross border payments needs met. Right? 

Dan Kleinbaum: So yeah. You can build tech, but I also think we approach it in terms of also thinking about ways to build redundancy. Like you can build APIs that'll give you payment integrations, but then we'll also figure out, you know, if I get a email from my bank saying a payment has been processed, I'll also then process that email in a way that I will get a secondary confirmation on any payment.

And if I don't receive it or they'll send a payment confirmation, but they won't attach the SWIFT confirmation, which means that the bank hasn't processed it. And so it's building these pieces together in a way that it's not gonna be us going all the way down to whatever the bottom layer is. It's like piecing together where we can get information across what does exist and figuring out how to make things more reliable.

Benjamin Fernandes: There's one player we both know really well that at some point was giving us a callback that the payment was successful. So we would tell all our customers, yeah, Justin sent money. It's successful. It's delivered. They call obviously like, hey, did you receive the money?

No. Now all of a sudden we had this huge influx of a bunch of people calling us because their callback API was telling us the payment was dispersed. So then all of a sudden, the payments weren't dispersed. Customers are mad at us and then they double pays. So I'm like great.

We just lost $60,000 in one day. Thanks to this partner. Now imagine trying to call all those people like hey, yo, listen. I know we messed up. No.

But can you refund this money really quickly? Because my bank account is not looking great right now. But that's the problem then. And nothing, not even Nala's fault. Like, that would that's what happened, and then that was the cause for us directly as a business.

Dan Kleinbaum: Can I actually ask a question? Because this is something I've been thinking about, which is, like, regulators are always something we have to navigate. But the answer to that in some ways is, like, a consumer protection regulator that enforces certain standards and reliability. I go back and forth on whether or not I want more regulation that's sort of consumer-friendly or less regulation that I have to then go and tackle when I wanna get up and running.

Benjamin Fernandes: Yeah. I know it's hard because, for example, even with consumer protection data, like, we are applying for license in one of the countries in Africa, And our customers don't live in Africa. Nala's customers live in the US, UK, Europe who send money to Africa. And this regulator said, okay. If you have this country's customers, we expect your primary data to be in that country.

I'm like, but my customers are not here. So I was like, whose law do I comply by? Do I comply by my UK GDPR law or your European GDPR law or do I comply by this country's data rights? And we wasted 6 months just debating with them on whose law to follow. Before you could get a license to cover.

Before even the discussion for the license. Oh. Like, you know, oh, well Nala is not agreeing to use our local data centers. I'm like, and so I think there's a lot of things where there is consumer protection laws like that that are created, but then they also limit innovation and creativity for businesses that are trying to operate there. 

Justin Norman: So let me ask you that. This has become a conversation mostly like lamenting about the difficulties of this space. Right? Yet you guys are both still building businesses that are trying to solve problems in the cross-border payment space. So you must see what you're doing.

Like, the fact that payments are 1% built is a massive opportunity. Right? It's just a lot of hard work. Is that how you guys see it?

Benjamin Fernandes: Yeah, you wanna take that one? 

Dan Kleinbaum: Like I have a high tolerance for pain, but no. There's definitely 

Benjamin Fernandes: Dude, you definitely do. This guy's been through a lot. So I have so much respect for this guy over here.

Dan Kleinbaum: Like I think that part of it is, like, I see you care very deeply and I share that. Right? It's, like, one of the things that motivates us is the fact that we can lament about all the problems, but the problems are visible to us and trying to solve them is hard and it's worthwhile.

Justin Norman: So, but what attracted you to this problem in particular that you decided after you sold your business and took some time off, you want to go back to doing something like this?

Dan Kleinbaum: For me, it was one of the problems that we had deeply at Vionic, which is trying to manage payments moving in and out wasn't I mean, it's literally what kept me up at night. I think I've told you this before, but I had control over, I think, 17 or 20 different, you know, bank and mobile money accounts at any given time. And the day that I handed the bank tokens over to Luke, it was that scene from Lord of the Rings where Frodo gives a ring to Bilbo and, like, Frodo just starts to, like, see colors and hear birds sing. Like, that's what it felt like. It was a weight lifted up.

So, like, if we could figure out how to manage, you know, like, treasury and liquidity and port payments moving in and out in a way that was sane, like, it's something that was worth solving for me, and everyone has this problem. So that's the motivation there.

Justin Norman: And for you? 

Benjamin Fernandes: So for me, why I'm working on it? So I don't know. I think the African continent has a lot of potential. It's the most expensive in the world to trade with.

And the way I look at it and think about Nala is how do we build payments for the next billion? Like people population growth is gonna be 1,300,000,000 to 2,500,000,000 by 2050. Like, there's a huge wave of new people. There's huge wave of new businesses that are gonna come trade with the region. Are we enabling that to be cheaper, faster, more reliable?

Do it affordably. I The challenge which we heard here all today was you end up building so much even while you're just trying to service one part of your business and I think that's what's challenging with building across Africa. 

Justin Norman: And you guys though are now thinking about both, like, geographic expansion, but also product expansion. Right? Like, you started to do some business to business. Right? And is that part of it also is that if you want to have the sort of impact that you want, like, there's opportunity, not just from a consumer was maybe an entry point for you, but there's a lot of opportunity from a business perspective when it comes to cross-quarter too.

Benjamin Fernandes: Yeah. I think see, this is what happened. We would discuss failure rates with other companies. I was like, hey, are you guys also getting these failures? Is it also costing you this much money to like disperse into these markets? They're one of their big remittance companies was recently fined $1.5 million by the CFPB here in the United States because of being incorrect about delivery times.

And if you read that article, it says telling customers the payments would happen instantly when they would take much longer than normal, like over an hour plus or whatever to get delivered. And they were fine at $1,500,000. So you see these things happen more frequently. It's not a problem that affects you, but many people in the industry. So you're like, okay.

Hey, if we solve this directly and the decision we made as Nala was like, this problem is only gonna get solved at the source. And so for the last 2 years, we've applied for 9 licenses. We've received 3 of them so far.

And because it's been a big focus for this because they're not ultimately going down to the root and solving the true problem will make you a long-term sustainable business by building reliably.

Justin Norman: So we're here in New York at a Fintech in Africa conference.
There's a lot of global investors. You guys have both raised from global investors. So I'm curious to get your perspective on, like, what is the story that you're telling with respect to cross-border payments and remittance and payments infrastructure? What is the story that you're telling to your investors to the world about why you guys are back building backable companies and why you should invest, especially considering, like, the range of, you know, investment opportunities that global investors have?

Dan Kleinbaum: For us, the story is that the infrastructure in emerging markets and Africa in general that needs to be built, like there will be value there particularly on the b2b side you know the trade gets done no matter what people need to move money in and out no matter what and when you look at sort of the geography and the territory of where companies are going to expand the African continent is clearly at the top of the list for many many people And so there's gonna be opportunities for more funding. There's gonna be more just it's gonna be easier to do trade. And that's the story we're telling. Right? Is that it's just gonna like, this is where it's going to go and even in a world that is not the easiest fundraising environment, like, okay. We have to keep building. 

Benjamin Fernandes: So I mean, for us, it's a few a few tailwinds to keep in mind. 1 that I talked about earlier. So if you look at the data for even remittances, just take for remittances, not even cross-border payments. Remittances alone as a category to Africa. Official World Bank data says a 111 billion.

FT Partners data says 333 billion to 500 billion if you include informal market. And nobody realizes how big the informal market is. For example, at Nala, 26% of our customer base first time using a digital service was Nala, which is crazy. You know, a quarter of our customers, first time using this. So when we meet these customers, I was like, how are you sending before?

Like, oh, P2P. I was, you know, I had my person. My barber in London, East London, if I go to my barber, we go get a haircut together, we should we probably both need a haircut right now. And we go get a haircut right now. My barber is like hey, I wanna send money to Ghana.

My barber will pull up WhatsApp and show me like 8 groups and ask me what rate do you want? And if I hand him cash or send him money in the UK to peer-to-peer transfer, that money will arrive in Ghana in 3 hours guaranteed. I've tried it twice. So I even took one of our investors and I was like, yo, come check this out. Because they didn't believe me.

I'm like, yo, cool. Let's go. Let's. So I think a large part of those transactions, if 300 billion let's take the lower amount of Epti Partners prediction. In 2022 year-end, they said 333 billion was the amount that was sent to Africa. How is that sent from 18 million people if that's the true amount of Africans that live in Europe and the United States?

Surely, there's a lot more people that live in Europe. So I think the numbers for the African region even just for the category of remittances is totally uncounted for. You know, at some point, there's a company that we all know really well. It's a big remittance company. They're doing a $1 billion to Kenya alone in 2020.

This one company for remittances. Kenya's data last year in 2023 was $4 billion total of remittances. So how in the world in 2023 years before that was one company doing $1 billion to Kenya alone when the total volume was are they doing 25% of Kenya? Sorry. First piece to keep in mind is all the data about Africa's remittance is incorrect.

Second thing to keep in mind is the market is growing, you know, massively in a very rapid pace because, you know, the famous Nigerian saying go in Japa, which means leave, you know, and go abroad, or go somewhere else and basically leave Nigeria. That's not just a Nigeria theme. That's an all Africa thing. So if you look at as the population grows in the African region from 1.3 billion to 2.5 billion, there's gonna be a large exodus of people leaving the continent. And therefore, the market side that's actually just getting set in the remittance carrier alone is only going to increase.

And the pace it's increasing is faster than any other region in the world. From July 2022 to July 2023, registered Nigerians in the UK that left Nigeria to move to the UK was 142,000. Like, that's registered. That's not even including migrants who just came in however they came in. You know?

So that's just one country. So anyway, I I think the market is growing. That's what I tell people. You would have to believe that this market's gonna grow over time. And as you're building that, you have to also believe that global businesses are gonna come straight to the African region as our rising middle class grows, as more income to spend on, you know, commercers like Netflix for collections directly there. That's gonna grow over time. So that's what I'm telling you have to believe. And there's a lot of global trade happening too. I think that that's another thing that's overlooked. That's interesting to it. 

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Benjamin Fernandes: Actually, we had to ask him questions given he's always asking us questions.

Justin Norman: What do you want to ask me?

Benjamin Fernandes: What scares you the most about the African continent?

Justin Norman: With respect to, like, tech in particular? 

Benjamin Fernandes: Yeah. With tech. 

Justin Norman: The longer you're around, the more jaded you and other people get. Right?

The more realistic you are about the challenges. Right? And you see a lot of business fail. You see a lot of people leave just, like, kinda give up. Right?

And so for me, it's like, well, you're making a bet on a region that's very unproven. And I'm generally of the opinion that that is exactly why you want to be in the place. But then sometimes it's like, well, what if all these things are true? What if, like, the macro environment can't be overcome? Right?

I don't necessarily believe it, but it's worrisome. Right? Like, if you're a Nigerian business dealing with devaluation in Nigeria, that's scary. And, like, the extent to which, like, the Nigerian situation then gets extrapolated to the rest of the continent, it's worrisome sometimes. You know?

Benjamin Fernandes: What... I have a bunch more questions. Do you have any for him? As you look at the continent, specifically in tech, we're here in Fintech specifically. What are three patterns or themes within Fintech you're bullish on?

Justin Norman: Cross-border trade. I think we so often think about, like, global North or, like, West to Africa. Right? I'm fascinated by, like, Nigeria to China trade routes, for example. Right? And, like, Nigerian merchants who have payment needs, who are buying stuff from exporters in China.

Right? And I think that what the rest of the world is doing is interesting. Right? Less so than, like, the US, its relationship with the region. Right?

The extent to which, like, trade can increase if it's easier, trade can increase across the continent. Right? And there's just a lot of payments needs to be met in that respect. I'm interested in asset financing. I think that we always talk about there's huge credit gaps and how is that gonna be filled.

I don't think that, like, uncollateralized consumer lending is the way, but I think people are really figuring out how to collateralize, how to sort of make repayment happen, like, they shut off the motorcycle or the cell phone. You know? And I think thinking about, like, collateral and the assets that you can use and lending towards productivity is really interesting. Or, like, verticalization. Right?

Like, these companies that just know their customer really well or doing some other thing and then embedding finance as part of that. That's really interesting to me. And then just like in general, those who can figure out the interplay between like an offline ground game and digital payments. Right? Again, this idea of like the informal economy is whatever, you know, 60, 70, 80 percent of a given market.

And how much things are happening cash-based and what does it look like to take those users on a journey? And those who are really good at, like, ground bait like, ground game, like, agent networks distribution that are figuring it out really well. That's interesting to me because I think the story about the content in general is nonconsumption. Right?

If technology can be used to increase productivity or to make things easier. Right? Taking in mind where users are in this sort of digital journey, I think a lot of growth is gonna come from nonconsumption. You know. And that's gonna involve a lot of like offline stuff bringing people online or figuring out that relationship between offline and digital payments.

Benjamin Fernandes: And if you were to tell all the investors here just one sentence about Africa, what would you tell them?

Justin Norman: You're investing in nonconsumption. The metrics that you see today don't tell the story if the market's gonna continue to grow. Right? And the extent to which enabling infrastructure gets better and unlocks opportunities and can turn this sort of, like, all of the business and value that's happening in plain sight, turn that into something that can be captured, that's the opportunity that they're betting on, I think.

Dan Kleinbaum: Do you think we're telling those stories well enough?

Justin Norman: No. It's like everyone should be giving prosperity paradox to their investors. I think it's, that's the other thing. Like, everyone's talking about their specific companies. Right?

So to what extent do you have a role to tell a macro story when you're speaking about your specific company. Right? I ask a lot of people like when you're talking to investors, are you telling your story? Are you telling like an African story? And they say, well, like, my story is an African story, but, like, you kinda have to, you know, I don't know. You have to take it on a journey.

Benjamin Fernandes: I 100% agree because you have a 30-minute call with an investor. They've never invested in the African region. For us, it's even different because all our customers live in the US, UK, Europe. We have no customers in Africa. So it's very different.

But still, like, of the 30 minutes, like, I think 17 minutes explaining Africa and then I don't even get to talk about what we're building until like the last 14 days.

Justin Norman: There was a podcast you could send to them like in advance. 

Benjamin Fernandes: Yeah. I'm like hey, Can you watch this really quickly? Yeah.

Dan Kleinbaum: No. It's a mandatory requirement, and there will be a pre quiz before you actually go in with a meeting.

Benjamin Fernandes: Do you know what I do now? Like, the article I wrote recently about our Africa in a minute, that's helped me the most. That's probably my most. It's like 1,000 reads a week.

Benjamin Fernandes: I was like, yo, that's my by far my most read thing I've ever read. It's an article. Oh, I know, but like now I just send it to people. I'm like, yo, before we meet, I think you should read this. Yeah. I try to make it digestible but yeah.

Justin Norman: But I do think that there are themes. Right? Nonconsumption. Right? So like the population growth story is a bit derivative.

Right? And, like, it's it's we've it's been heard before. But inside of that story is, like, how are you gonna increase the productivity of the informal sector and how are you gonna turn these guys into consumers? Right?

Dan Kleinbaum: And how do you capture that value? And I think we're talking a lot about customer dynamics and not necessarily about market dynamics. And there is a piece of this which is, you know, I have this controversial take which is I think everyone that's raising money on the continent should be tooling themselves for a $50 to $250,000,000 exit and nothing more and that doesn't necessarily jive with what you know power law returns need a $1,000,000,000 business because I don't know that like I really hope a lot of those folks will get there but I think a lot of people are gonna see you know down rounds because of those aspirations took them to get someplace that isn't realistic in the market. 

Justin Norman: I agree right it's how big of a business can you build when you're trying to convert Benjie's Barber to a digital Yeah.

Dan Kleinbaum: From running his hawala network out of it. Yeah.

Benjamin Fernandes: Our hawala networks are undefeated. I don't care what

Dan Kleinbaum: No one's no one's ever gonna beat them.

Justin Norman: That's the story though, is how much of this stuff is happening already. Right? So you look at the McKinsey or UN stats or whatever. Right? And it's not taking into account the way that money moves in reality.

Right? That's the story that I think is quite interesting.

Dan Kleinbaum: Yeah. I mean, I would guess that in any given market, I bet the 2 largest inflows and outflows are, like, hawalas and then crypto.

Benjamin Fernandes: Yeah. I'm mostly not even convinced about crypto though. I think people who talk about crypto with Africa yeah. I mean, you know what I'm talking about. And it's I don't I'm not, you know, I'm a big personal believer in crypto but I just I just don't see the op like when you get license, it's a different ballgame with crypto.

Dan Kleinbaum: You can't.  You can't do it. You can't at all.

Benjamin Fernandes: I'm saying that they're doing it with a license. I don't believe you at all And I've challenged you guys into my meetings with you and you couldn't answer me. So I don't believe anybody was doing it with crypto.

Dan Kleinbaum: Not so subtle shade.

Benjamin Fernandes: I know. But like you know it's true.

Dan Kleinbaum: I agree with you.

Justin Norman: You know it's true.

Benjamin Fernandes: I'll keep it 100 here. The other thing, Justin, I was gonna say is I honestly I'm excited about the builders. I think there's gonna be a lot of cool companies that are coming beyond us that have built amazing businesses because there's so many things that are need to be solved. And so if somebody's watching the Flip podcast, they should think about, hey. Look.

Actually, payments really are 1% built. We need a lot of you guys to take that to 9 to 2% before even getting to 99%. So please go and build great companies. Dan will help you. I will help you where I can. Right? Yeah, Dan said he will. Dan will be an angel investor. I don't have that type of money right now. So, you know, find Dan. Email him if you need that extra check.

Justin Norman: Dan@theflip.africa. Yeah.

Dan Kleinbaum: Perfect.