Mazzuma and FlexID are Web3 solutions

• African fintech startups are focusing on blockchain use cases rather than speculative investments.
• Entrepreneurs have already solved problems with cross-border payments and identity verification.
• This article is part of “Master your crypto,“a series of Insiders helping investors improve their cryptocurrency skills and knowledge.
  

Blockchain is sometimes synonymous with speculative investments and cryptographic failures.

But in Africa, startups are scrambling to deploy Web3 use cases, like bringing the underbanked online and into a more centralized financial system.

Data from 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 increase of 1,668% compared to the same time last year.

“There is a very clear difference between the startups we invest in in Africa and those in Europe and other developed markets,” said Gideon Greaves, CV VC’s managing director for Africa, in a recent interview with Insider. “In Africa and similar emerging markets, we’re kind of teaching the rest of the world about the real use cases of blockchain.”

By using blockchain and automation to reduce the costs of traditionally expensive processes, African startups have already begun to address issues such as accessibility and fraud – with more use cases in the pipeline.

Growing use cases in fintech

World Bank data shows that in sub-Saharan Africa, the growing number of adults with a bank account can largely attributable to the adoption of mobile money, or digital currencies and assets offered outside of a traditional banking network. For Greaves, Africa’s “poor financial infrastructure” has contributed to a growing number of blockchain use cases in the fintech space as people seek stronger financial systems online.

One such startup that CV VC has invested in is Mazzuma from Ghana, which uses blockchain infrastructure to enable peer-to-peer payments. While the platform started as a simple payment system for local e-commerce stores, Kofi Genfi, one of its co-founders, told Insider that it has since ballooned to offer users a full suite of money transfer products.

“We used to have local payment systems like mobile money, which gave access to people in the most remote parts of the country, but now someone can send money from Tokyo to Ghana and then we settle it at someone from the village,” Genfi said. said.

Over the past two years, Genfi said, Mazzuma processed more than $140 million in transactions for its user base of 365,000 customers and 10,000 stores. He initially chose to use blockchain to reduce costs through automation, for its ease in implementing the same infrastructure on a larger scale of platforms and developers, and for its potential to one day fight against hyperinflation by transferring globally regulated digital assets such as USD coin.

Tola Adesanmi, a Nigerian tech entrepreneur, told Insider that rival blockchain-based fintech startup Eversend, headquartered in Paris, has dramatically increased the convenience and efficiency of its cross-border payments. . On his previous trips outside Nigeria, he had to exchange his naira for US dollars before converting it back into the currency of his destination country – but now all he has to do before traveling is finance its Eversend wallet for automatic money transfers.

Stone Atwine, the founder of Eversend, built the platform for this very purpose, he told Bitcoin.com in June – to solve the huge hurdles of cross-border trade payments across Africa, which he called the best use case for blockchain.

“Traditional banking systems are not optimized to serve 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 monthly rent instead of a year, the norm in Nigeria – does not use blockchain technology, he is excited about the prospects of blockchain platforms like Eversend. to transform business and invest in Africa.

Identity Verification: Another Major Use Case

Blockchain data logs could also verify a person’s identity, as well as other personal identifying information such as education history, vaccination records and medical certificates, Greaves said.

This is what Victor Mapunga set out to do when he founded FlexID, a Zimbabwean startup supported by the Algorand Foundation which aims to provide proof of identity to the roughly 400 million people in Africa who lack formal identification, he told Insider.

“You can’t verify individuals’ credentials centrally because it’s very difficult to trust the origin of those credentials, it creates a central point of failure and makes it very difficult to get out there. ‘scale,’ Mapunga said, adding that taking a decentralized approach with blockchain would be ‘fundamental’ to solving Africa’s problems with identity verification.

Mapunga pondered his business idea after personally encountering the debilitating hurdles of opening a bank account and has since created FlexID on WhatsApp, which he called “the most ubiquitous platforms” for people. Internet access in Africa. Having verified 1.2 million banking credentials in Zimbabwe over the past three years, FlexID is now focused on scaling user integration 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 see in Africa,” Greaves said. . “I think he really has the power to transform the continent and stop long-term corruption.”

This article is intended to provide general information designed to educate a broad segment of the public; it does not provide personalized investment, legal or other business and professional advice. Before taking any action, you should always consult your own financial, legal, tax, investment or other professional for advice on matters affecting you and/or your business.