- African fintech startups focus on blockchain’s use cases rather than speculative investments.
- Entrepreneurs have already solved issues in cross-border payments and ID verification.
- This article is part of “Master Your Crypto,” a series from Insider helping investors improve their skills in and knowledge of cryptocurrency.
Blockchain is sometimes a byword for speculative investments and crypto crashes.
But in Africa, startups are working to deploy Web3 use cases, like bringing underbanked people online and into a more centralized financial system.
Data from the Swiss Crypto Valley Venture Capital, or CV VC, shows that while African blockchain startups raised $127 million in 2021, funding for the first quarter of 2022 alone has already totaled $91 million — a 1,668% increase from this time last year.
“There’s a very clear difference between the startups that we invest in from Africa versus those from Europe and other developed markets,” Gideon Greaves, a managing director at CV VC for Africa, said in a recent interview with Insider. “In Africa and similar emerging markets, we’re kind of teaching the rest of the world about the true use cases of blockchain.”
By using blockchain and automation to lower the costs of traditionally expensive processes, African startups have already begun to address issues like accessibility and fraud — with more use cases in the works.
Growing use cases in fintech
Data from the World Bank shows that in Sub-Saharan Africa, the growing number of adults with a bank account can largely be attributed to the adoption of mobile money, or digital currencies and assets offered outside a traditional banking network. To Greaves, Africa’s “poor financial infrastructure” has contributed to a rising number of use cases for blockchain across the fintech space as people seek out stronger financial systems online.
One such startup that CV VC has invested in is Ghana’s Mazzuma, which uses blockchain infrastructure to enable peer-to-peer payments. While the platform started off as a simple payment system for local e-commerce shops, Kofi Genfi, one of its cofounders, told Insider it had since ballooned to offer users a full suite of remittance products.
“We had some local payment systems like mobile money, which were giving accessibility to people in the most remote parts of the country, but now somebody can send money from Tokyo to Ghana, and then we settle it to somebody in the village,” Genfi said.
In the past two years, Genfi said, Mazzuma processed over $140 million in transactions for its user base of 365,000 customers and 10,000 stores. He initially chose to use blockchain to cut costs via automation, for its ease in implementing the same infrastructure across a wider scale of platforms and developers, and for its potential to one day fight hyperinflation by remitting into globally regulated digital assets such as USD Coin.
Tola Adesanmi, a Nigerian tech entrepreneur, told Insider that the competing blockchain-based fintech startup Eversend’s platform, headquartered in Paris, had significantly increased the convenience and efficiency of his cross-border payments. In his previous travels outside Nigeria, he’d have to exchange his naira for US dollars before converting it again to the currency of his destination country — but now all he needs to do before traveling is fund his Eversend wallet for automatic money transfers.
Stone Atwine, Eversend’s founder, built the platform for that exact purpose, he told Bitcoin.com in June — to solve the massive obstacles with cross-border business payments across Africa, which he called blockchain’s best use case.
“Traditional banking systems are not optimized for serving people without massive incomes. Branch networks, compliance systems, and limited efficiency do not allow them to serve the unbanked,” he said in the interview.
While Adesanmi’s startup, Spleet — which helps users pay rent monthly instead of annually, the norm in Nigeria — doesn’t use blockchain technology, he’s excited about the prospects of blockchain platforms like Eversend to transform business and invest in Africa.
Identity verification: another major use case
Blockchain data ledgers could also verify a person’s identity, alongside other personal credentials like educational history, vaccination records, and medical certificates, Greaves said.
That’s what Victor Mapunga set out to do when he founded FlexID, a Zimbabwean startup backed by the Algorand Foundation that aims to provide proof of identification to the estimated 400 million people in Africa who lack formal identification, he told Insider.
“You can’t verify credentials about individuals in a centralized fashion because it’s very hard to trust the origin of those credentials, it creates a central point of failure, and it makes it very hard to scale,” Mapunga said, adding that taking a Decentralized approach with blockchain would be “fundamental” in solving Africa’s problems with identification verification.
Mapunga brainstormed his business idea after personally experiencing the debilitating obstacles around opening a bank account and has since built FlexID on WhatsApp, which he called one of the “most ubiquitous platforms” for internet access in Africa. Having verified 1.2 million bank credentials in Zimbabwe over the past three years, FlexID now focuses on scaling user onboarding into the formal economy without compromising privacy.
“When you think of blockchain, you always think of traceability and transparency — that’s what was promoted a lot in the early days of blockchain, and that’s exactly what we’re seeing in Africa,” Greaves said. “I think it really has the power to transform the continent and to stop corruption long term.”
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