Decode Fintech Logo
Issue 115
Nov 13 - Nov 19, 2021

Hi there,

This week has been full of many sorrows for Arsenal FC and ManU FC fans, so as a Liverpool FC supporter - this means I have had a fabulous week - please accept my insincere condolences.

Now to fintech. This week, we dig into something truly unique brewing at Paga, who have partnered with LISNR [pronounced "listener"] to enable payments with ultrasonic sound. Imagine beaming discounts to your customers who use your app as they walk into your store, or confirming tickets at events from up to six feet away, or using sound to make payments at stadiums during major sporting events.

We also highlight a conversation on the possibilities of telco-led banking, as telecom behemoths, MTN and Airtel, were issued Payment Service Bank licenses in principle last week. The big question is - what does this mean for the financial services space in general?

In all, we've curated some great news in this edition and we hope you find this issue interesting.

As always, stay jiggy.

Ejiro Esigbone
Product Specialist, Paystack
NigeriaPaga has entered a partnership with LISNR to enable ultrasonic authentication for contactless payments. The purpose of this partnership is to provide sound-based contactless payment options in the Nigerian market. Paga has stated that this in line with their goal to increase the number of its merchants from 33,000 to 120,000 over the next two years by providing merchants with complementary solutions. Paga will integrate LISNR's solution into its Paga and Doroki apps. TechEconomy

In Africa, contactless payment channels e.g. NFC, QR have had limited success in comparison to other payment channels like debit cards, wallet services, and mobile money. However, in reaction to COVID, there is an increased appetite for contactless payments. In Middle East and Africa, 70% of respondents in a Mastercard study say they are exploring some form of contactless payments citing health and cleanliness as the major reasons.

LISNR's solution which leverages ultrasonic sound that is too high pitched for the human ear provides a unique proposition in the contactless space and is already in use in India (Shuttl), the US (Grape ID), and Europe (BusUp). The use cases so far include ticketing, shopping, sporting events, and more. In the shopping use case, a user scans items at a mall, those same items are added to the merchant's POS, and once the customer is done - the LISNR system broadcasts a unique smart tone to the customer which prompts the customer to confirm the order and transfers payment information to the POS. The entire process is offline and uses single-use tones which are tied to metadata tokenisation.

The use cases are interesting and there are clear advantages, which includes the fact that the technology works from as little as six feet away. However, for mass adoption some investment is required by potential merchants in the hardware/software that is required for the technology to work, as well as training and change management for their organisations. Paga will also need to make significant investments in user education, engagement, and marketing. It will be interesting to see how Paga deploys this technology with their apps and how they scale the challenges.
TwitterWill PSBs threaten the market share of Nigerian banks for mobile banking services? Against the backdrop of the news that MTN and Airtel have both received regulatory approval to operate Payment Service Banks in Nigeria, Adewale Adetugbo (Chief Technology Officer at Telnet Nigeria) started a conversation on Twitter about how Nigeria's mobile payment market could potentially evolve from one that is bank-led to telco-led as a result of this development.
PodcastAfrica Stack? The concluding series of Justin's 3-part fintech series of The Flip Africa podcast explores the other layers of the financial services stack – identity verification, credit scoring, etc in parallel with the India Stack. Listen to the podcast here
GhanaGhana has announced a 1.75% e-levy for electronic transactions. The finance minister in Ghana announced that the government will introduce an electronic transfer levy (e-levy) with the aim of collecting more tax from the informal sector. The proposed charge will be 1.75% of transaction value and will apply to mobile money payments, bank transfers, merchant payments, and inward remittances. Quartz Africa

Policies like the e-levy make electronic transactions less attractive to consumers (the majority of whom are price sensitive) and push them back to doing more cash transactions. This outcome may not be in line with the Central Bank of Ghana's digital roadmap towards a Cashlite Ghana.
NigeriaKippa raises $3.2m pre-seed funding as it pivots. Kippa, a Nigerian finance management app that allows its users record transactions, send receipts, and generate invoices, has secured pre-seed funding of $3.2m. The round was led by Target Global, a Berlin-based venture capital firm. Other participating VCs are Entrée Capital, Alter Global, and Rally Cap Ventures. Kippa intends to pivot into the lending business as it seeks to solve the problem of lack of access to credit facilities for small businesses. Afrikan Heroes

SMEs are the backbone of the Nigerian economy. They make up 96% of businesses and 84% of employers of labor, they also contribute 48% of the national GDP which was 152 trillion Naira (~$400B) in 2020. There is an obvious market for fintechs that can provide value and solve problems for this sector. To this end, we are seeing more solutions being built for SMEs and they seem to follow a certain model:
Step 1. Create a product that solves a problem along the SME value chain. In Kippa's case, it was a finance management app that enabled SMEs to record transactions, generate invoices, and send receipts.
Step 2. Leverage the insights and customer base gathered from Step 1 and follow the money. More often than not, they tackle another major problem that SMEs have i.e. inadequate access to credit facilities.
Step 3. Create an ecosystem around SMEs that solves for multiple challenges. 
South AfricaOzow raises $48m in Series B funding. Ozow, a leading payments processor in South Africa, has raised $48 million in Series B funding. The funding round was led by Tencent and also included Endeavor Catalyst and Endeavor Harvest Fund. Ozow will use the funding for product expansion and strategic acquisitions. Disrupt Africa
AfricaFour African blockchain start-ups secure funding, participate in incubation program. CV VC, a Swiss venture capital firm, has selected four African blockchain start-ups to participate in its incubation program (CV Labs Incubator). The start-ups selected are Ghana's Mazzuma, an international remittance and mobile money platform, Nigeria’s HouseAfrica, a digital property validation system, Egypt’s Pravica, a decentralised communication suite for enterprises, and Nigeria’s CARMA, a P2P data marketplace for the unbanked. The start-ups will receive $125,000 in funding and 3 months of training. Disrupt Africa
EgyptKIWE secures first round of funding. KIWE, an Egyptian peer-to-peer money exchange application, has secured its first round of funding. The amount raised is undisclosed but the round was led by dfin Holding with participation from EFG Hermes, Marakez for Development, and a group of angel investors. KIWE intends to use the funds raised to drive growth. Disrupt Africa
RwandaPesachoice secures funding from Norssken Foundation. Pesachoice, a Rwandan financial services company that provides credit facilities to people with limited access to institutional credit, has secured an undisclosed amount as seed funding from the Norssken Foundation based in Kigali. Disrupt Africa
NigeriaLazerPay goes live with investment from Nestcoin. Nestcoin, a Nigerian cryptocurrency investment firm, has invested in LazerPay, a cryptocurrency payment platform. Lazerpay's value proposition is that they have built a platform for Africa that makes it possible for businesses to accept payments in crypto securely and without dealing with the current complexities. Nairametrics
Did You Know?

Nigeria's POS Transactions grew 44% from January to September 2021 vs 2020.

Nigeria has processed N4.6tn in POS transactions this year between January and September. This is a 43.9% increase from the same period last year (N3.2tn) and almost equal to the total value processed last year, which was N4.7tn. This year's value was processed across 707 million transactions, a 60% increase from 440 million, for the same period in 2020

Nigerians are fast adopting digital payments, using more cards and mobile wallets in recent years. This impressive growth in the volume of POS transactions are potentially driven by COVID-led change in consumer behaviour and more interestingly, the rise of agency banking.

By relying on agents with POS devices as a means for cash in/cash out vs the less available ATMs, agency banking has seen a very rapid adoption across this country. Consequently, through these POS devices a fair bit of previously cash-only money movements are now being processed digitally. Given the low cost of operation and extant opportunity, we expect both agency banking and hence POS volumes to continue to rise in the coming years. 

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