London — The recent purchase of Beyonic by MFS Africa has come at a time of other recent news about money transfer deals designed to provide continental reach. Russell Southwood talked to Luke Kyohere, Founder and Executive Chairman of Beyonic about what happens next.
The deal to buy Beyonic came out of its Series A fundraising round:"We were in the middle of a fundraise, when we started to talk to MFS, who we had talked to in 2016. We were already profitable and in 7 countries. The Series A round was to help us expand into more countries and roll-out more products."
"Around the middle of last year, Dare (Okoudjou, CEO, MFS) reached out. We were both going to be in New York so we had lunch. He was looking for fundraising opportunities for the Africa Frontiers Fund. He thought it made sense to consider them as investors and that our companies had been at different points of their trajectories in 2016." At that time there was little overlap but there was more now.
The heart of the deal was that MFS was beginning to think about domestic transactions and Beyonic were trying to make sense of cross-border transactions:"As MFS did the due diligence, it became interested in being a being investor and said perhaps we can take the whole round."
So they decided to merge the two companies and for Kyohere to become the CTO of the merged company:"Usually after an exit, the Founder takes a break. But I think taking on more products is exciting. Beyonics needed the cross-border piece and couldn't do it because of the different regulatory regimes. MFS allows us to do that."
It allows the joint company access to a wider range of larger and smaller customers and being able to offer Visa-related products to smaller SMEs. It also allows them to help companies and NGOs who want to bring money into a country: for example, a company wanting to bring dollars into Nigeria.
From MFS point of view, it was able to bring the money in but it couldn't offer domestic transactions in local currencies:"We're trying to reduce friction between different systems and provide interoperability between different platforms."
" One of MFS' core businesses is to help MNOs do cross-border transfer payments. There are lots of channels in ad out of the continent but not so many between different African countries. This is happening as borders are beginning to matter less with things like the East African Community passport and the Francophone common currency zones. We just need to be able to send money faster. Western Union and Moneygram have got this covered to some extent but you need the mobile piece using infrastructure players like MFS."
"You're going to see banks and cash-based services go digital more and you'll see more shops only accepting a card or some form of digital payment. Banks need compliance lite but faster transfers and are beginning to look more like Money Transfer Agencies (MTAs) and MNOs."
Interestingly on 13 August 2020, Standard Charted Bank and Airtel Africa announced a partnership. Airtel is very much one of the smaller mobile money players among the big mobile operators. Standard Chartered is looking for mobile payment functionality as it becomes widespread in more African markets.
Together they will create products aimed at improving the accessibility of financial services, including real-time online deposits and withdrawals from Standard Chartered bank accounts, receive international money transfers directly to their wallets, and access savings products amongst other services. Standard Chartered's corporate clients will also be able to make rapid and secure bulk disbursements, such as payroll payments, directly into the Airtel Money customers wallet. This reduces the risks associated with travelling long distances for cash payments and instead customers can go to any Airtel Money agent, kiosk, or branch to cash-out their funds.
The historic MNO argument has been that the MNOs own the customers but as Kyohere points out both WhatsApp and WeChat are bidding to make this just another OTT platform:"There will be a lot more "over-the-top" models that democratize the P2P space. There is lots of infrastructure that is digital that doesn't rely on MNOs. It could be a digital wallet but you need some kind of network to cash in and out. Banks and MNOs are for the cash in and out."
A great deal of mobile money transfer is simply a way of speeding up cash transfer:"You cash out because you want physical money because you trust it more. But what if you were able to deploy digitally? What if say petrol stations preferred digital transfers?
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In case you missed it... On Sunday, 26th July 2020 at 07:38 UTC, a shunt fault occurred on the EASSy subsea cable along the Somali segment of the cable, affecting all traffic originating and terminating in Mogadishu as well as some traffic passing through on the EASSy system. As a result, Somalia's internet and international voice traffic was cut off. Following the outage, Dalkom Somalia, the EASSy landing party in Somalia, immediately initiated investigations to determine the cause and location of the outage. The shunt fault was identified to be approximately 27km offshore from the Mogadishu Cable Landing Station, at a water depth of approximately 600m. This fault being on the Somalia branch meant there was no major impact on services to other countries served by the EASSy cable. Service was restored by undertaking a Branching Unit (BU) switch which required temporary re-configuration of the system power set-up, with traffic clearing from 13:52 UTC on 27th July 2020. Although this has been effective in restoring services, it is an emergency fix. EASSy has a number of ships contracted on a standby basis to undertake off-shore repairs for any faults affecting the cable. A suitable repair ship has been secured and is being mobilised to undertake permanent repair of the shunt fault off Mogadishu.
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