June 2019

My slow-clap recognition of the current dominance of Mobile Money has been quite clear, especially MTN Mobile Money. I mean, there is an exact point in time where an MTN showrunner thought “ok, we’ve conquered telecommunications, now let’s get into money transfers”. A man briefly wonders about these things, because there is an answer out there, as to the exact when. The exact why though I am fairly sure of; BECAUSE THEY CAN. When a brand gets so big, and so good at being so big, it can successfully cross business sectors utilising the right strategy. Such moves aren’t new. What happens when a waste management company like Zoomlion lingers into banking? Wait. Jospong did that, with OmniBank, now OmniBSIC. I can cite other examples, like the disrupting emergence of the largely successful Royal Drinks and Awake Mineral Water by Kasapreko, a formerly solely alcoholic beverage-producing company. These new ventures had already existing and tough competition. Success therefore depends on STRATEGY. It is generally concluded that Coca Cola, a company not known to make mistakes, at all, eventually failed at maintaining the bold entry of its Dasani Mineral Water into the bottled water market as a result of bad strategy. Strategy is therefore everything when it comes to big moves like what Facebook is attempting. Facebook launches Libra. On 18th June, 2019, Facebook, the American social media conglomerate, launched Libra, a cryptocurrency. It’s still a pretty bold step to venture into virtual currency for a company that got the world addicted to virtual likes. Fun fact The name Libra is also the seventh astrological sign in the Zodiac. The sign of Libra is illustrated by the scales; it represents justice. Libra is an old Roman unit of weight. And though Libra is spelt as “libre” in French, it translates to “free”. The Libra Association. In Geneva, Switzerland, Facebook co-founded the Libra Association. The Libra Association is a group of powerful companies from different business sectors that will serve as the de-facto monetary authority of the Libra currency. It was founded with 28 members, aiming at 100 members as time goes by. Each member contributes $10 million to the project. Facebook still wants to “maintain a leadership role through 2019″. It’s only logical that it does. Yet, after 2019, Facebook will not have a clear leadership role. The Libra Association awards an equal vote to each member. So eventually, Facebook will have as much a say as any other founding member. Facebook’s membership of the Association is through Calibra, a subsidiary of Facebook. The Libra Association will also manage technical aspects of the currency and work with regulators to make sure they are abiding by and complying with existing laws and policies. They plan on adopting real-life techniques and safeguards that will make sure the value of Libra remains stable. Who are The Libra Association? I did mention “right strategy.” Facebook’s strategy for the rollout of Libra seems to be centred around a system of harmonious integrations from very powerful inlets into our lives right from the go. This seems more obvious when you analyse the breakdown of The Libra Association’s founding 28 members. Here’s the exact list of companies grouped by their business sectors: Payments: PayPal, Visa Inc., Mastercard, Stripe, PayU. Telecommunications: Vodafone, Iliad SA. Technology & Marketplaces: Uber, Spotify, eBay, Lyft, Calibra, Booking Holdings, MercadoPago, Farfetch. Venture capital: Andreessen Horowitz, Ribbit Capital, Thrive Capital, Union Square Ventures, Breakthrough Initiatives. Blockchain: Coinbase, Xapo, Anchorage, Bison Trails. Nonprofit & Multilateral Organizations, and Academic Institutions: Women’s World Banking, Mercy Corps, Kiva, Creative Destruction Lab. These companies add up to 28. With a roster like that, it’s easy to see how Libra will catch on pretty fast. Why have a Cryptocurrency. With the proper rollout and implementation strategy, why not. The case for Libra was made back in 2009 when the social media company launched Facebook Credits, a virtual currency. At that time, Facebook Credits was designed to take on a life of its own and turn into a micropayment system that is open to any Facebook application. It was often used in games, but other applications utilised the currency as well. It was even sold in physical store outlets like Walmart, Target and Best Buy. Facebook Credits was retired after 4 years in 2013. These waters are therefore not new territory for Facebook, though they are adopting a much bigger, more inclusive method of approach. The Libra Association says the purpose of Libra is to “empower billions of people”, pointing out that there are 1.7 billion people in the world without traditional bank accounts who could use the currency, Libra. The Case for Libra in Ghana. The World Bank’s Economic Update Report on Ghana has stated that the main driver of financial inclusion in our country is not traditional banks, but rather Mobile Money. It estimates than within 5 years, more people would be accessing financial services using Mobile Money and other FinTechs. The report put particular emphasis on the government’s role in the integration of Mobile Money and modern financial technology in broadening the access of formal financial services to Ghanaians, using collection and payment of utility bills. The report stated, “Current approaches remain piece-meal, and clear direction from government is needed to further push existing projects in these areas. To do so, financial and technical support to the Ministries, Departments, and Agencies (MDAs) and utilities is required to update their internal accounting systems. This would allow full integration via open application programme interfaces (APIs) into institutions such as GhIPSS, allowing for individuals to use their bank account or mobile wallets to pay for government services or utility bills.” The introduction of Libra into the mix is very timely and presents many opportunities for local innovation, considering the popularity and increasing use of Facebook, Whatsapp, Instagram, Uber and others like it. These apps will be the first to integrate Libra in its normal use. Where’s Africa in the Libra Association. During the launch of this report, the World Bank Country Director, Dr. Henry Kerali,

Financial Technology, often shortened as “fintech”, is the term used to describe the business of utilising innovative technology in improving and automating the use and delivery of financial services like banking services, insurance services, trading, etc. Simply, it combines anything finance with some form of technology. The world went digital a long time ago. What fintech companies realised was that more and more people are becoming tech savvy and more sophisticated, creating a growing need for a growing population to integrate technology in all aspects of their lives, including their finances. Why was PayPal such a hit? Because it seemed so easy to use compared to inputting your credit card details on websites whenever you want to make a purchase. That hassle-free life appeals to the modern man and woman and fintech companies realised that a long time ago. Those that got in early and did it well, like PayPal, made it big. Those that are big, like MTN, invest properly and massively into the tech delivery system, then they make it earlier than most would. One could argue that MTN’s Mobile Money can stand shoulder-to-shoulder with any bank any day. When a fintech has 10 million active users, with over 115,000 active agents as well as over 67,000 merchant points across the country, that’s not just like a bank; it’s more efficient too. Banking regulations and the typical oversight from the Central Bank (or the lack of these) are a distinguishing feature of fintechs from financial institutions. What makes fintechs special. An important characteristic of fintechs is that they all seem to be designed to be a threat to the established order of conventional business in the sector they are in. But that’s only market evolution taking its course. When the masses and even rivals flock to use fintech, it makes the best fintechs look to go toe-to-toe or even seem to hijack traditional financial service providers, by being flashier, more proficient, and also by providing a faster and better service. Mobile Money (affectionately now called “Momo”) is the perfect example I give when I try to explain how I feel fintech companies are outmanoeuvring the banks. Why do you go the bank? To deposit money into your account. To withdraw money from your account. To earn interest on your money you have deposited at the bank. To transfer your money to another person or institution elsewhere. Now Momo does all of these. Momo even pays interest on our Momo accounts. The banks got adaptive and told us to pay our water bills and ECG bills and DSTV bills and school fees and whatever else at the banking hall. Convenient, right? All at one place. Thing is, now I can also do all of that from my couch at home through Momo too. I am merely stating the situation as it is. As it stands now, we all know very well that now even the Mobile Money services offer loans and a very attractive and easily integrable array of other services. Gone are the days when such financial services were exclusive to banks. I say all these only to make apparent the extent of disruption fintech companies can have on any sector in the economy, even the big and powerful banks. Let us stick to the facts. This still remains an opinion piece. Other kinds of fintech aside Payment Systems. Money Payment Systems are just one example of fintech. Cryptocurrency and blockchain are typical examples of fintechs doing what fintechs do best: DISRUPTION. And it’s good (or bad) depending on which side of the evolution you currently are, or if you can change fast enough with the times. We all saw the confusion BitCoin provoked with its entry into the mainstream. The only reason why I didn’t lose my marbles was because Warren Buffet was so adamantly against Bitcoin and when the Oracle of Omaha calls something “an asset that creates nothing… has no value at all”, people tend to listen. Still, he and you and I all know crypto is here and it’s here to stay. There are also Crowdfunding apps like Kickstarter and GoFundMe. Crowdfunding apps are a great illustration of the different kinds of fintechs that dabble in a lot more that the traditional financial services activities. Insurtech. Now there is “insurtech”, as it’s being called. These are fintechs in the insurance sector. And it’s a fast-growing thing too. No industry is safe from Financial Technology disruption, not even the Insurance Industry. Insurtechs now provide easy car insurance to home insurance to anything insurance. This year, Forbes valued the popular personal finance company Credit Karma at $4 billion. And these fintechs are attracting huge funding too. An insurtech company called Oscar Health Insurance, a health insurance startup that is technology-focussed, raised $165 million in funding last year at a $3.2 billion valuation. You need the fin in your tech to be a fintech. All fintech companies are tech companies. But not all tech companies are fintech companies. You need the fin in your tech to be a fintech. Is Uber a fintech company? Ride hailing services are not financial services. So, going by that, Uber is not a fintech. Paying for the rides is a financial act. If I pay with my Visa, the Visa is the fintech that Uber then utilises, but Uber is not the fintech. If Uber handles that financial transaction themselves, then yes Uber becomes a fintech. The last time I took an Uber I paid the driver myself, in cash, not through any app. But last year Uber applied for an e-money licence. If Uber gets this licence then yes, it qualifies as a fintech because then it would be directly handling the financial transaction actions of the business. I hope I explained this clearly enough. Fintech optimises another tech use. Another thing about technology is that I find it being easily integrable with other technologies. Tech thrives on tech. Fintechs are using other technologies like machine learning and even