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How FinTech Companies Changed Africa

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FinTech Companies Changed Africa

Although Africa’s economies may be lagging behind its more developed counterparts, it seems that the continent is not immune to the global fintech revolution. Africa started witnessing a substantial surge in fintech startups in 2015. The total funding from venture capitalists spiked by 51 percent to $195 million between 2016 and 2017, with fintech funding accounting for a third of the amount. That’s a significant amount given that total global funding for seed-stage companies, early-stage venture capitalist rounds, and VC rounds was $851 million, $7.137 billion, and $6.9 billion respectively. 

Currently, there are well over 300 startups in operation all over the continent — 94 operate in South Africa, 74 in Nigeria, and 56 in Kenya. It’s not a surprise that these three countries are spearheading the fintech revolution in Africa as they are considered the top three investment destinations in Africa.

Regional comparisons in fintech adoption show that South Africa is in the lead with around 35 percent of fintech startups concentrated in the region. West Africa follows close behind with around 34 percent.

Africa’sfintech industry to a large extent owes its existence to the development of M-Pesa, a Kenyan-based mobile money transfer service that has given Kenyans the ability to access financial services away from banks. Currently, the platform supports over 25 million customers in over ten markets in Europe, Africa, and Asia. The number of M-Pesa users has grown by 32 percent from 17.12 million to 22.62 million as of June 2017. The massive success enjoyed by M-Pesa has influenced other FinTech companies to join the finance sector to develop financial solutions such as those offered by M-Pesa.

Fintech Implementation in Africa

Fintech companies in Africa are mostly focusing on two broad categories:

  • payments and transfers;
  • lending and finance.

Of the two categories, payments and transfers have recorded an influx of startup companies compared to the others. Reports show that a majority of these startups focus mainly on simplifying the process of sending and receiving money.

Some fintech companies in Africa that are taking major steps in revolutionising the finance sector in Africa include (aside from M-Pesa):

  • Flutterwave has operations in over 36 countries and is partnered with 10 African banks. It provides payment technologies and infrastructure to Africa’s largest financial institutions. Today, Flutterwave has processed over $1.2 billion in payments. The primary goal of Flutterwave is to provide solutions for enterprises, entrepreneurs, and banks alike. It presents its customers with no special, annual, or upfront project fees. Instead, Flutterwave bridges the digital payments gap that exists between users and banks. Their Nigerian customers can execute money transfers directly into several bank accounts without any hassle.
  • Pezesha, initially launched in Kenya, is a peer-to-business micro-lending marketplace made up of low-income borrowers. In Africa, formal credit services are hard to attain, and on top of that, they have incredibly high interest rates. Therefore, most Africans are unable to secure reliable credit facilities that they can safely payback. Users of Pezesha can acquire instant loans on their mobile phones via SMS provided that minimum criteria are met. Apart from low-income earners, Pezesha also extends its services to SMEs that make up 80 percent of Africa’s employment. It not only drives up the economies of the continent but ensures the continued existence of small businesses across the continent.
  • Cellulant, a digital commerce and payments service provider, is well established and operational in 11 countries. The company works with over 90 banks. The Cellulant ecosystem has support for over 100 million customers. As of January last year, the company served roughly 12 percent of Africa’s mobile consumers who utilise the platform to make payments. This year, Cellulant raised $47.5 million from a collection of investors that included Satya Capital, TPG Growth, Endeavour Catalyst, and the Rise Fund.
  • Tala, a mobile technology company that’s providing access to credit by putting mobile credit services into the hands of consumers, is operational in several countries in Africa and outside Africa. The company leverages an android app that collects data from each consumer, determines their credit score, and disburses a loan in <10 minutes. So far, the company has disbursed over a million dollars to individuals in East Africa and outside Africa.
  • Numida, a digital financial services company situated in Uganda, won the Kampala Seedstar World Competition in 2017. The company boasts of a 99 percent repayment rate and has since disbursed about 190 loans to 135 Ugandan SMEs. Other than providing small unsecured loans to small businesses, the firm helps these businesses digitise their financial records through the Numida app. Through the Numida app, Numida can assess a client’s creditworthiness and then issues an appropriately sized unsecured loan.

Potential of using Fintech in Africa 

FinTechAfrica is an immense continent with different economies supporting a total population of about 1 billion individuals residing in 54 sovereign countries. Surprisingly, only about 17 percent of the entire African population is banked. With nearly 80 percent of the total population still unbanked (and up to 95 million unbanked adults in Sub-Saharan Africa alone), Africa offers a unique breeding ground for the development of the fintech industry. A significant underbanked population ensures that fintech will most likely be an enabler of financial inclusion.    

Innovation takes time and is often a collection of economies and nations that have the financial capability to invest, research, and develop on a broader scale. African nations, not having the same capabilities as developed nations, are provided with a unique opportunity that they can leverage. They can ‘jump’ inferior and redundant stages of technology advancement and go straight to adopting innovations. For example, currently, millions of Africans are in possession of mobile phone devices without ever going through the hassle of owning a landline at all. A phase that already-developed nations could not have skipped.

Technology is a crucial driver of businesses and entrepreneurship today. Due to this, financial procedures have been developing extremely fast, and there is an immense transformation in many aspects of financial processes. The Internet penetration rate in Africa recently stood at around 35.2 percent while the mobile penetration rate in the continent stands at 44 percent. Out of these two, Kenya emerges as the strongest African country, as it has an internet penetration rate of 85 percent and a mobile penetration rate of 95.1 percent.

According to GSMA, mobile money accounts in Africa have surpassed traditional bank accounts. Mobile money accounts have been on the rise, with statistics showing a steady growth in numbers from 0.2 million to 277 million between 2007 and 2016. The number of active bank accounts in Africa was 178 million as of December 2015. This huge difference in numbers indicates the potential that Africa offers to fintech startups focused on providing payment solutions. Technology innovation coupled with increasing Internet and mobile penetration rates have made the growth of African fintech companies a possibility. Subsequently, this has substantially increased investor interest in the sector even further.    

Africa Welcoming Innovation

The fintech revolution in Africa is not a PR stunt. Fintech companies are attracting a previously unbanked population while at the same time retaining already existing traditional bank customers. Digitisation is helping financial institutions deliver digital financial products and services to a greater number of customers across the continent.

Increased dependence on these innovative fintech companies is projected to reduce demand for bank services. Subsequently, this could lead to bank branches shut down, with only a few remaining as destinations for problem resolution, advice, etc. For example, Kenya’s M-Pesa mobile payment services have made it possible for P2P mobile payments to be made both locally and internationally.

These startups are redefining the industry’s perception of what it means to be called a bank. Not only do they offer bank-like services, but they also avail loans, process financial transactions, and innovate much faster than banks.

Africa is hopping onto the fintech bandwagon, learning from the experiences of developed economies such as Asia, America, and Europe, and even leapfrogging past unnecessary steps, straight to modern innovation. 

This guest post was contributed by Paweł Tomczyk, founder of the blockchain-focused content marketing agency Cyberius

Features

Bitcoin SV Payment Use Case: A Look at Money Button

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bitcoin sv payment use case

Money Button is a Bitcoin SV payment use case designed to emulate the Facebook like button. The product is enabling users to send money over the internet with a single swipe.

Bitcoin SV Payment Use Case, Money Button

Money Button Logo

Money Button is an API for the Bitcoin SV (BSV) blockchain that businesses can add to their apps and websites. It is also a non-custodial BSV wallet. BSV is a cryptocurrency created from a Bitcoin Cash fork in November 2018.

According to Money Button CEO Ryan X. Charles, the payment system aims to solve two challenges: high transaction fees and less-than-satisfactory user experiences. These are problems that people face when sending money over the internet.

“Money Button is a simple payment system,” he states in a case study. “The idea is to make it so that sending money over the internet is the easiest possible thing that you can do, both as an end-user, as well as for the business that uses Money Button.”

Money Button payments cost less than one cent and are near-instant. The API allows businesses to onboard a blockchain-based payment system. Additionally, consumers can send payments easily through swiping.

Besides facilitating BSV payments, Money Button features built-in currency conversion, smart contracts, and authentication. It also supports multiple outputs and the writing of files or invoices to the blockchain.

Another feature is the invisible Money Button, where apps swipe the button for you, but with your permission. The purpose of this feature is to increase convenience for users.

How It Works

To get started, users have to create an account, open a BSV wallet, and acquire a paymail address. A Paymail is an email address that allows users to send and receive money.

Money Button

With an account on Money Button, you can fund your wallet from an external wallet and conduct peer-to-peer transactions with other users.

Bitcoin SV

Also, you can make payments to Money Button-enabled businesses. If you have a business, you can click “Make a Money Button” to add the API to your website. You will get HTML code to copy and paste. Additionally, you can use the more sophisticated Javascript and React codes. The Javascript version has all the features and will allow you to update Money Button dynamically. The React version has all the features as well.

Once the Money Button API is up and running on your website, customers can pay for products or services by swiping the button. Payments are deducted directly from the user’s Money Button wallet. When customers swipe, they are signing the BSV transaction with their keys.

The Money Button wallet serves as a sign-in credential on apps and websites using this API. “What we are doing is creating a method that can eliminate every possible barrier to onboarding users to this technology. That means reducing the number of steps required to sign up to Money Button, acquire BSV and then use it in an application, as close to zero as possible – that has always been a key focus for our business,” Charles explains.

Paymail

Paymail is an identity protocol that eliminates alphanumerical wallet addresses. The product is a collaborative effort of Handcash, Money Button, Centbee, Electrum SV, and nChain. Paymail uses readable names that look like email addresses to improve user experience. As a result, users do not have to use long unreadable addresses to send BSV.

When using Paymail, users do not see the Bitcoin SV address. They will only see the Paymail address. However, the software will use the BSV address to send the transaction. This address is invisible to the user unless they choose to view the transaction’s technical details.

Money Button users can create a Paymail by going to their profile and clicking “create New Paymail.”

Bitcoin SV Payment

Why Bitcoin SV?

Bitcoin SVMoney Button emerged from a different project called Yours. Yours was a social network that enabled users to tip, vote, buy content, and comment via a “money button.” Yours was launched in 2017, and a year later, the network switched from BCH to BSV.

Yours was created with the idea of a “money button.” Therefore, the owners borrowed this idea and created Money Button.

Money Button uses BSV for the following reasons:

  • The Bitcoin SV blockchain has large block sizes. As a result, blocks can process more transactions which results in faster and cheaper transactions
  • BSV targets businesses, which means that the developers are working to make it more suitable for these users
  • BSV is appropriate for payments

Future Plans

To date, Money Button has facilitated more than $10 million in payments. Going forward, Money Button plans to add more features to make the product “more useful to businesses,” while remaining the same for end-users.

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Features

4 Reasons Why Black Lives Matter Should Start Accepting Bitcoin

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Black Lives Matter

Systemic anti-black racism is prevalent across the globe. A series of events in the US have catalysed countrywide protests, bringing more eyes to one of the biggest movements against racism, the Black Lives Matter (BLM) movement.

In this piece, we explore the reasons Black Lives Matter would benefit from adopting bitcoin as a method of accepting donations.

Bitcoin Is A Peaceful Protest

black lives matter bitcoinAttempting to resist a system that oppresses you, while leveraging the tools employed by the same system, can be counterproductive and undermine. For movements like Black Lives Matter, it is imperative to utilise systems outside of traditional resources that are not tainted with the prejudice that disenfranchises BIPOC.

In the United States, the black community has long complained of unsatisfactory access to traditional financial services. While there is no shortage of research papers and statistics on race issues, given the current climate, it is important for us to contextualise and understand how traditional financial systems underserve black people in the US.

A study by McKinsey & Co published shows a direct link between weaker financial power and a lack of access to financial services like banking. For instance, predominantly white counties have an average of 41 financial service providers, while black ones have 27 of these financial firms. Further, banking in these black counties is mostly more expensive as compared to white-counties.

Moreover, despite being underserved, black people are overcharged by banks in the very few situations where services are available. 

There are several other examples mentioned in the report that paints a vivid picture of the extent to which black people are unbanked. Other examples cited in the report include requiring higher account balances and difficulty in accessing loans.

This is where bitcoin can come in.

Bitcoin knows no race and does not discriminate. Everyone anywhere can get a bitcoin wallet and purchase bitcoin online. 

By leveraging bitcoin, progressive movements like Black Lives Matter can send a powerful message, addressing the underlying racism prevalent in traditional financial services. With enough steam, it may eventually aid to break down the archaic financial systems that continue to aid in the oppression of minority groups all over the world.

If there is any single reason for Black Lives Mater to accept bitcoin donations, it is because using bitcoin is another form of protest.

Bitcoin Is Censorship-Resistant

Black Lives Matter may find favour in the eyes of regulators and payment processes like Paypal. At this point, it will be almost suicidal for anyone to consider cutting payment channels to the movement. However, if historical precedence is anything to learn from, it is all fun and games till it is not.

WikiLeaks, the famous, was banned by PayPal in 2010 for violating its policies and terms of service.

Before then, over $1 million of donations towards WikiLeaks had come through PayPal. Black Lives Matter may be different from WikiLeaks. However, any loophole that provides an avenue for censorship must be sealed moving forward to secure the future financial backing of the movement. 

Accepting bitcoin as donations would provide a viable alternative, especially given its censorship-resistant nature.

Private Donations 

Sometimes people prefer to give privately without revealing their identity.

Between bitcoin and traditional online payment methods, bitcoin allows for more private transactions. To factor in the privacy-conscious crowd who could be interested in donating to the movement, Black Lives Matter is likely to benefit from accepting bitcoin.

Even though the anonymous nature of bitcoin has been at the centre of debates, Bitcoin’s pseudonymity makes it undisputedly a more privacy-conscious financial tool than PayPal or bank payments. 

Access to a Wider Audience

Black Lives Matter

PayPal may seem like the ultimate financial tool for many, but that is not the case in many places. In some parts of the world, people are unable to use PayPal due to the unavailability of service in their region.

Bitcoin is a universal payment method that is accessible by anyone, anywhere in the world. In every corner where there is connectivity, people can use bitcoin as money. BLM will open up donations to people from all parts of the world.

While there still are people in the Bitcoin community who hold ideologies that belong to past centuries, there are also a lot of people in Bitcoin who support BLM and other movements around the world that fight against oppression. By allowing people to send donations via bitcoin, BLM opens up to bitcoiners around the world who support Black Lives Matter.

In a world where tools that aid human sovereignty have evolved to the point where there is revolutionary money, free from traditional systems, movements like BLM can harness innovations like Bitcoin to further their cause.

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Zimbabwe’s New Foreign Currency Regulations Could Affect Bitcoin Trading

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Zimbabwe’s New Foreign Currency Regulations

Zimbabwe’s newly introduced foreign currency regulations threaten peer-to-peer bitcoin trading via messaging apps.

New Foreign Currency Regulations

The Zimbabwean economy – which has been hit by hyperinflation – endures an ongoing shortage of foreign currencies. Authorities blame illegal foreign currency dealers for exacerbating the situation thus hastening the fall of the local currency. Several regulations have been introduced in the past few months to arrest the situation.

A recent directive by a unit within Zimbabwe’s central bank to outlaw advertisements relating to foreign currency trading has sparked off a panic within Bitcoin trading communities.

The latest decision comes in the wake of a sharp depreciation of the Zimbabwean dollar against the US dollar. Economists blame the country’s biting foreign currency shortages for the local currency’s free fall.

The central bank has pegged the exchange rate at 1 USD for every 25 Zimbabwean dollars towards the end of March. However, the black market rate is now 1:80 or higher.

Financial Intelligence Unit Onslaught

On June 15, the Financial Intelligence Unit (FIU) of the Reserve Bank of Zimbabwe circulated a document that is threatening to freeze bank and mobile money accounts of those caught putting up any advertisements relating to foreign currency trading in social media chat groups.

The FIU alleges it is aware that some WhatsApp groups have mushroomed for the specific purpose of promoting and facilitating ‘illegal’ foreign currency dealings.

Parts of the statement reads:

“The FIU, in collaboration with the police, banks, mobile money/mobile money service providers and relevant regulatory agencies, has embarked on an exercise to identify and take action against individuals who create, advertise on or participate (actively or passively) in WhatsApp groups or other platforms for illegal foreign currency trading.”

The statement goes on to list the steps authorities will take against those caught on the wrong side of these regulations.

Panic in Crypto-Related Chat Groups

ICE3X Launches Debit Card

Some within the cryptocurrency trading communities have suggested that this directive encompasses bitcoin trading as well. Bitcoin trades, just like with the so-called foreign currency black-market trades, are often initiated in social media chat groups.

Moreover, bitcoin-to-fiat trading is typically conducted in foreign currencies like US dollars. Although, there are trades where local mobile money is the preferred method of payment.

Consequently, some traders are now taking precautions by replacing their local WhatsApp phone numbers with foreign ones. The use of foreign phone numbers helps to masks the real identity of traders and their bank accounts from being targeted.

Yet others are adamant that bitcoin—which the central bank has not recognised as currency—is, in fact, a digital asset. As such, it is exempt from the FIU directive. However, the broad terms used in the FIU statement suggest authorities are trying to go after all platforms where foreign currency is exchanged.

Still, others are not overly worried insisting that FIU lacks the capacity to achieve this kind of surveillance and policing. In any case, they say Whatsapp messages are protected with end-to-end encryption. 

BitcoinAfrica.io reached out to FIU to get clarification on the some of the issues raised by bitcoin traders. However, we did not receive a response at the time of publishing.

No Crypto-Specific Regulation

Zimbabwe, just like many of its counterparts on the African continent, does not have regulations that specifically govern cryptocurrency trading. The country’s central bank has in the past issued press statements advising the public against dealing in cryptocurrencies.

At the same time, it banned financial institutions from facilitating the movement of funds between fiat to crypto and vice versa. These decisions culminated in the shutdown of Golix, a cryptocurrency exchange in 2018.

However, since then there has been an apparent rapprochement by the central bank concerning its blockchain technology. For instance, in its last monetary policy statement, monetary authorities again touted the potential of blockchain technology. They even encouraged financial institutions to adopt this.

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