BigChief’s Thoughts

Ok, now this is stupid.

I needed to do a transfer from the UK to the US and they told me it will take 2 to 3 days. I thought long and hard about it and I told myself that it was bullshit. Especially when the value was all accessible via the Internet on both sides of the pond.

I then had to send money from my “UK PayPal account” which is tied to my Natwest Debit Card and sent the money to my “US Paypal account” tied to a Mastercard.

The transfer was instant and the cost was less than what Barclays would have charged me to send money to Wells Fargo and what Wells Fargo would have also deducted for receiving a wire transfer.

Yet people keep saying that Bitcoin will not gain massive adoption? This is the type of bullshit that Bitcoin is going to eliminate.

This is not yet the PayPal post I am writing. That one is coming. Africans must not get sucked into the banking money transfer farce. Sadly our techies are not yet smart enough to work together to tame the beast.

Everyone thinks that they are the next Bill Gates or Mark Zuckerberg but they forget that there was also a Peter Thiel who is also very wealthy that helped Zuck and others be who they are today.

Now where are these Kitiwa guys?….

Cupcakes! Hmm..

Aha!!

Ouch!!

Be Like Cash, Beat Cash

The problem with current transaction models in Africa is simple; BIG business entities invest in transaction platforms built by other BIG entities and expect not only to recoup their platform investments but also to continue making a profit. The problem is that they claim they want to defeat cash but they also want to make profit everywhere and from every transaction. Cash does not obey the same rules. To beat cash, you have to imitate cash then innovate beyond current business assumptions and narratives.

Cash may seem to have no cost at lower ends of the value chain because transactions are in smaller values and there is little cost to handling or storage. When it gets higher up in the value chains, the magnitude of cash increases and so does the cost. Those who trade in high volumes daily know this and they happily pay the price to speed up transactions when things become unwieldy. Why is it hard to optimize platforms for this part of the value chain as well? It is because we have all been sold a wrong narrative.

We are trying to beat cash where cash is strongest instead of focussing on where cash is weakest. Mobile payments operators believe the money is to be made in the volume of the transactions rather than the value of the transactions. What if this is turned around? Why don’t we focus on making profit from high value transactions rather than high volume transactions?

Change The Narrative

I have seen African payments evolve over 3 decades and I believe prevalent mobile transactions models adopted by several mobile payments operators in Africa are flawed. Impact investors and their acolytes are forever trying to sell the “send money home to mama” narrative and a lot of mobile money operators seeking money from these investors get stuck with this narrative.

Person to Person (P2P) transactions are very important but it is not enough to make a scheme scale. Those flawed narratives make operators concentrate mainly on the consumer end at the lower parts of the value chain rather than automate entire value chains. The real value may not lie with the retail consumer even though they are an essential part of a scheme.

Most “non-telco operators” miss out the real opportunities for creating value with proper pricing. If we are honest enough to analyse mobile payments transactions dispassionately, we will find out that a bulk of the transactions are high value transactions happening at the higher levels of the value chains where they are mainly B2B value-chain transactions. I have only seen one operator in Nigeria who admitted this and also admitted that all what they have built will not scale.

For a telco using their existing value chain they already know this. They give all their airtime commissions at the top of the chain and the value chain spreads commissions down the hierarchy using its own internal mechanisms. For payments they adopt a similar dynamic for commissions and fees but provide the mechanism for making this happen efficiently and transparently to all parts of the value chain. Telcos are usually already at scale and efficient transaction mechanisms complement existing value chains very well. Telco mobilemoney agents are almost always airtime agents. Mobile payments for a telco is an operational efficiency game and a churn reduction game. It is NOT a transactions revenue game. Transactions revenue is a byproduct of this efficiency and it is not surprising that telco operators scale faster than non telco operators.

Someone who was at the heart of Mpesa in Kenya told me that at the time they reached scale, their largest corridor for payments was “Nairobi to Nairobi” and the average transaction value was higher than your typical P2P transaction.

If we believe the Kenyan “inside-story” above, we can test a new hypothesis and turn the current African mobile transactions model on its head. We could take fees only at the higher levels where real savings are apparent when using electronic transaction mechanisms; then make low value transactions at lower levels free.

Change The Business Model

My hypothesis is simple; it is actually at the higher levels of the value chain that change is driven from and not below. I believe that this is particularly true in economies with significant informal credit flowing down value chains. An agent model works better when there is a hierarchy that mirrors current transaction flows along existing value chains. There is really no free cash for cash-outs at the bottom of the pyramid as it still belongs to those at the top providing some sort of informal credit. If they see value in a platform or a system, they will allow their agents buy into it and use it. The “buy-in” from the top is in turn translated to the consumer.

This probably is story of Nigeria and most of Sub-Saharan Africa where mobile transaction platforms have not scaled significantly. Those who build the transaction platforms and those who buy them do not build their business cases properly. If we look at retail distribution value chains closely, It is possible for transactions to be free at lower levels when those at higher levels pay the price. It is the same way it currently operates with cash.

To change or adopt new models will take patience, skill and very good selling skills. The non-telco operator cannot beat the telcos in the agent game but they can innovate in other very creative ways. They can change the game by crashing or removing fees at the consumer end. This may create adoption faster than agent-led models.

Testing The Hypothesis

Testing any payments hypothesis requires a startup mentality and not a hustler or corporate mentality. I gave a presentation titled Mobile Money as a Startup at the MobileMoney Africa conference in Lagos last year and those sold to the “impact narrative” disagreed. I believe very much in using the narrow but deep approach to payments in Africa. It is easier to build out from a niche than spreading yourself too thin.

Experimentation and business model change requires significant testing and validated learning. Operators are much more flexible when they understand the market and can make platform changes very quickly. It gets harder when they have to wait months or years to perform basic changes and see results. It is also easier when operators don’t pretend to have altruistic motives when they are in reality running a business.

It is not surprising that African banks have not adopted this strategy at scale. They are slow to make any business model change except when faced by an existential threat. I have bank accounts in almost every continent and it is only in African countries like Nigeria that I get charged a “commission on turnover” (COT) for EVERY transaction! This “COT” is separate from card association charges and commissions or even outrageous fees by local switches and payment gateways. Can we really get a cashless society with all these costs? It is impossible. COT is the main reason why African banks don’t innovate, the profit is too easy.

In the UK or US, I can pay a monthly transaction fee in some cases but all my transactions for the period attract no charge. This could also work for African mobile payments and will probably be easier for a consumer to understand. The African mobile payments operator that adopts the zero to minimal transaction cost strategy at the consumer end will not only win cash but beat the banks.

Changing The Game

We may have a real chance at defeating cash if we adopt the same transaction dynamics early adopters of bulk payment platforms used. They penalized people for coming to their banks or agents to do large transactions but allowed all other retail/consumer transactions to happen free. They realized that unless you are a telco, Visa or Mastercard, real profit in payments was in the high value end and not in high volumes.

I believe that rapid change and scalable products for this model built by small startup teams are possible in Africa. I have had the privilege of working with developers of a product (one of them was my co-founder) called SFI, that focussed only on B2B or B2C bulk payments scale to 47 sites in 17 countries. That product has existed for over two decades now. It provides real value and processes millions of dollars monthly within some very smart banks, some as far away as Australia.

In the case of Cash vs Cashless, the BIG will not eat the small; the fast will eat the slow. This is why I am back to looking at small products again, the BIG products and entities are wasting our time.

“Observation and perception are two separate things; the observing eye is stronger, the perceiving eye is weaker” — Miyamoto Musashi, The Book of Five Rings

I have not written a blog post since my son was born last year and I haven’t mainly because everything changed. I have decided to observe more and perceive less.

You never really figure out that everything has changed until a little helpless child grips your finger firmly 20 minutes after he is born then suddenly it all becomes real. I used to perceive and act but now I observe and plan.

For me life had been an ongoing experiment and my first Facebook and Twitter Bio was “I Will Die Happy”. My sister and my mum bugged me about it endlessly until I finally changed it. In Africa we rarely speak about death but I always accepted the inevitability of it and it has been my plan to live life fully without any regrets. I believe I have done a good job of that so far.

My life has always been full of optimism and everything could be debated or tested. I lived a “lean-startup existence”. In my previous blog posts, I wrote my sometimes-extreme (but truthful) views and expected people to actually engage in debate but few did meaningfully. People actually called my views “harsh”. The truth is always harsh and sugarcoating it served no purpose.

“Unless you really understand others, you can hardly attain your own self-understanding”

I have however come to the realization that not having regrets is just not enough; having a legacy mindset is even more profound. I have had close calls and escaped death several times; I believed that surviving always meant that there was still a purpose I was yet to fulfill. I think that purpose has finally come and it is to raise a better man than I ever was or ever will be. I will teach him to observe more and perceive less. Too much perception leads to emotional judgments and my worst mistakes have been emotional calls.

The truth and experimentation will still be a part of me but now there is more accountability. Gone are the days of stoking the beast just to get a reaction, it is not enough. I would much rather play chess with the beast now and ensure it is soundly beaten.

“Do not do anything useless.”

A lot more has changed beyond the birth of “Small Chief”. I have lost friends to death and to lies. I have made less enemies and made more friends as well. I will continue to write about all these and more.

I now study more Bushido and retracing my steps back to the martial arts. I realize that the most progress I ever made in my life was when I was a student of the ways of war. Progress was not made during the act of war itself. A lot of what I write will now be influenced by the Japanese way of the warrior.

I have always loved the Japanese and they share a lot in common with my Edo tribe. Even Tokyo was known as Edo and there are many similarities in culture and beliefs. The author James Clavell’s books have also been my all time favorites.

The science of martial arts can be distilled in the immortal words of Samurai Miyamoto Mushashi as follows.

1.Think of what is right and true.

2.Practice and cultivate the science.

3.Become acquainted with the arts.

4.Know the principles of the crafts.

5.Understand the harm and benefit in everything.

6.Learn to see everything accurately.

7.Become aware of what is not obvious.

8.Be careful even in small matters.

9.Do not do anything useless.

The last point is now my creed; “leave all useless things behind”. Everything I say or do has always had a purpose but now I am even more conscious of that purpose.

Friends And Followers

My wife hates social media. She may have Facebook, Twitter and Google+ accounts but she hardly uses them and does not engage there as much as I do. She keeps taunting me about my interactions with “imaginary friends” and “imaginary followers”. The only reason she goes on Facebook at all is probably to see me clown around. I try to prove her wrong and defend myself but really, how many of my 800+ Facebook friends have I met in person? How many of the cumulative 2000+ Twitter and Google followers have I had real life interactions with in the physical world?

If I am honest, less than 10% of those connections are actual relationships where we know enough about each other enough to interact in a meaningful way. Social media has a lot of positives as it allows us to indirectly hear and relate with more diverse opinions and viewpoints but it also has a lot of negatives. The negatives probably outweigh the positive benefits.It allows for healthy debate but also can be used for personal and corporate spin. A recent article (sent to me by my wife) is damning of a majority of social media posts especially Facebook and their motives.

As the Westgate attack in Nairobi was in progress, I never thought to call my cousin or friends living in Nairobi to find out if they were OK and even if they weren't I could not have done much on the plane from London to Accra. I only waited to see them post something on social media to confirm proof of life. Social media has gradually replaced actual connections with people we know.

Yesterday I saw a sad post here on Medium titled “A friend died nearly 2 years ago. I had no idea”. The title is self explanatory.

Community

I remember the time I was actively pushing for information technology security in Nigeria early in the last decade. We set up a local chapter of the Information Systems Security Association (ISSA) and I was the communications officer. We met physically monthly at various locations in Lagos and it was at one of those meetings that I complained to Emeka Okoye about my headache searching for an office space near my client MTN in Lagos.

Emeka introduced me to a gentleman who allowed us to share and get our first proper office. He probably would not have taken me seriously or known the extent of my pain if we had not met physically at those meetings. I am sure there were many other problems that were solved professionally by complete strangers at those events. Sadly the physical meet-ups started giving way to texts and e-mails and finally it all stopped. Social Media killed the Social Meetup. I was very happy when the Nigeria tech community decided recently that it was best to have actual meetings instead of having “beer parlour” type discussions in social media.

One other sad story from Nairobi, which ironically I also found out from social media, was the death of Idd Salim a member of the tech community there. Most people did not even know he was ill until he had passed away. Rest in peace Idd Salim.

Gradually the virtual perception of community has replaced actual community and social contact. We may seem to share common interests with people online but community is much more than common interests and objectives. It is about caring for each other. It is the reason why religious communities remain stronger than political or social arrangements. Meeting each other once a week in church, synagogue or mosque helped build a support system that social media has almost completely eroded.

Customers

Mark Zuckerberg is not just the lucky founder of a platform with over a Billion people; he is a true visionary. His original vision was to facilitate more connections and not to eliminate those we already have. While we may use his platform in ways he may not have intended, he realizes that meeting real people in person everyday is actually a healthy social habit.

His two goals for 2013 are very interesting. The first is to meet one real person outside Facebook everyday; that is at least 365 people in one year. An almost invisible fraction of Facebook’s user base but it is a great start. The numbers may seem small but the implications in terms of new learning for Zuckerberg are far reaching. The second goal is to teach at Middle school. Doing that alone made him more aware of the plight of migrant children and led to his recent activism on US immigration reform.

I visited Nigeria sometime last year and in an attempt to avoid Lagos traffic on 3rd Mainland Bridge while coming back from the airport, we ended up in a high population density area called Iwaya. I had worked very near Iwaya before but never really gone in there so I was not really prepared for what I encountered. “Social media” could not have revealed any of it to me.

I decided to meet the airtime dealers and agents as I always did and it seemed to me that all the presumptions we sometimes made and the way we look at agent and dealer hierarchy and structure was very different from the reality on the ground. It made me appreciate the work sales and distribution people do more and realize that technology was the easy part. These agents and dealers don’t care if you are using the best or worst platform; they just want things to work. If it doesn't work they will switch quickly because all they want to do is make money. In my opinion the power these street people have over consumer preference is grossly underestimated.

People ask me why I use an MTN prepaid phone in Nigeria but have all other lines for other operators on postpaid plans? I tell them that it I use it because it lets me buy prepaid airtime regularly via VTU and gives me a better understanding of the actual issues subscribers and dealers face. I can’t be a good service provider without knowing how well my service is performing. VTU also works on contract phones but a majority of the users are prepaid. Using the service myself also gives me a chance to interact with the prepaid dealerships and vendors. The first thing I do at the airport when I arrive is to goto the MTN dealer and top-up using VTU. If there is an issue I notify our support team and it keeps them on their toes. I do this at every country where we have active implementations for Mobile Money as well. If there is no agent at an airport it worries me.

In Ghana, last year I decided to stop driving on Sundays, for most of the year I only took local taxicabs to church and always did my best to have conversations with the drivers. It was from those conversations that I found out that the drivers found a way to use much cheaper LPG (liquefied petroleum gas) instead of gasoline to power their cars when fuel prices increased. Probably the reason why they Ghana did not have their own version of “Occupy Nigeria Riots” when fuel subsidies were removed. The prices of LPG powered generators actually tripled when there was a power crisis earlier this year.

Music

There are actual opportunities waiting to be revealed in Africa just by moving around, observing and meeting people. I do not think a lot of investors actually understand the African streets and the entrepreneurs rarely know how to convey the message to them. Those entrepreneurs selling the same old “social impact” narrative and the non-commercial investors buying them may be in for a rude shock in the near future. It is hard to get out of air-conditioned offices and bulletproofed cars to listen to the actual music from the streets. I came from those streets and the music is very different from that being played in social media. Vanity metrics mean nothing.

I was fortunate to be asked by ccHub recently to mentor a team developing a location based point of interest search app. I saw that they did not put the option of airtime dealers or mobile money agents in their interface. I asked them why? They told me honestly that they had not actually seen any mobile money agents around them but the airtime agents are very easy to spot. Maybe it is time the regulators providing Nigeria’s new found “glowing” mobile money statistics actually visit the streets to see the reality for themselves. I sometimes wonder why banks and mobile money operators invest so much time and effort in getting social media feedback when the real battle is on the streets. 68% of Fortune 500 CEOs don’t use Social Media and I think I am beginning to see their logic.

Agent statistics provided by Gates Foundation in their portal“www.fspmaps.com” vary wildly from those being reported by the various operators. While it is probably easier to believe an independent survey instead of operator claims, we really don’t care about those numbers, we just want to actually see agents on the streets and use them. Agent locations should be published for people to see and be informed. I worked with an investor as part of the founding team of Econet Nigeria and the first thing we did even before we launched then was let people know where the actual Econet shops and agents were. This education was big boost for GSM adoption in Nigeria. Mobile Money Agents are not terrorist sleeper cells waiting to be activated, they are meant to be an integral part of a robust communications and product awareness strategy.

As entrepreneurs, we really need payments to work in Nigeria because a lot depends on it. I don’t care who does it best, I just want it done well. We want to hear the music from the streets and not the noise from social media.

To help with agent discovery and actual statistics, I have asked Emeka Okoye and the guys at ccHub to join in an OpenData project to map actual agent locations in Nigeria. They have accepted.We will be complementing and not replicating the excellent work already done by Gates Foundation and also give the operators a chance to showcase their “brick and mortar” (or umbrella) agents. Financial inclusion should be driven by actual connections and not imaginary ones.