Can We Kill Cash in Africa?
No, we can’t, but we’re doing our part to reduce reliance on it!
SureBids started out in 2014 with primary motive of improving the gifting experience for Nigerians. On an ordinary weekend in Lagos, we thought about all the weddings going on in the city, and how couples will be overwhelmed with mostly useless and unwanted gifts. We looked at more sophisticated markets and studied how gift vouchers solved the problem for givers and recipients. We felt that at >$200bn in annual purchases in US, the niche could be big enough as a percentage of total retail sales anywhere. We agreed that the product was market-agnostic and culture-blind, so we built a product for Nigeria.
Of course, introducing a completely novel product into a market is difficult. There were two critical pieces to making it all work: A robust network of merchants willing to accept your vouchers as payment, and people willing to substitute the idea of gifting a product with idea gifting an shopping experience at a merchant. After multiple iterations of redemption system designs and processes, we were able to develop unique technology that works well with the simplicity of the Nigerian retail market. Over time we were able to enable dozens of top-class merchants in Nigeria, Kenya, and now Rwanda to accept our vouchers as payment.
We have now delivered thousands of vouchers and seen thousands more in redemptions, but the most spectacular outcome of our experience so far is how much we’ve been able to learn. There is especially one lesson that has influenced our evolution as we move into the next phase of the company however: Vouchers can be almost as valuable in utility as cash, and it can be cheaper, safer, and fully digital.
The larger our (very closed) network of merchants, the closer our vouchers approach money in utility, and we observed user behavior to validate this. Businesses traditionally reward their employees and customers with either cash or physical gifts. Physical gifts like rice, oil and hampers for employees are popular in Nigeria because companies want to offer rewards that are a little more tangible and tasteful than cash. HR departments then have to go through procurement, warehousing and disbursement nightmares to facilitate this transfer of gifts that might not be of ultimate value to their employees. In 2015, over 100 companies replaced this habit with vouchers instead. They either purchased physical branded gift cards, or sent fully-customized e-vouchers to their employees’ e-mails. The employees then redeemed these vouchers, for rice, oil or whatever they want from our merchants, whenever they want (our vouchers are reusable). Interestingly, not many employees purchased rice and oil with their vouchers. The corporate customer segment now accounts for over half of our inventory of vouchers.
Armed with our experience dealing with HR, Procurement and Marketing teams, we are now a few weeks away from launching SureGifts Business, a DIY corporate rewards platform, where companies can fund their rewards wallet, upload delivery lists for bulk orders, create delivery templates and other customizations, schedule delivery events, view employee redemption analytics, monitor redemptions in a real-time feed (who spent what, where, when), receive notifications and reminders, among other exciting features. We are stoked about this product.
On the consumer retail side, where we originally intended to play solely, we realized that a lot of the voucher purchases were not coming from Africa. Friends and family members abroad purchase these vouchers as some cheap form of remittance. For example, a young lady in the US wants to buy $50 worth of groceries for her family members in Nigeria. She can visit a money transfer organization in the US, give them $50 (+8–12% in fees), receive a voucher (reference number) which she sends to her recipient who visits the MTO’s agent to receive the cash (after filling forms with IDs), then use the cash to buy groceries. Alternatively, the young lady can purchase a Spar voucher directly, have it sent instantly to her recipients’ e-mail or phone as SMS, then the recipient spends the voucher directly for groceries. This achieves a few things for the sender: it’s cheaper, instant, and she has a little more control on the use of funds. Of course, the recipient can purchase other non-grocery items at Spar, but the chances are reduced if Spar is primarily a grocery merchant. We also have several bills as a redemption option for our vouchers, so ‘diasporans’ use SureGifts to pay their loved ones’ internet, phone, power, cable, toll, water etc. bills.
With that knowledge, we have now completed our remittance product, which we built to optimize the user experience around value transfers to Africa. With SureRemit, Africans can send instant vouchers for virtually anything, or directly pay for over 100 bills from electricity to church tithes to flight tickets and insurance (without having to purchase a voucher first). SureRemit launches in a few days.
People also want to buy expensive things like home appliances, or pay for honeymoon tickets, but they don’t have the money to do it. We received quite a lot of request from fairly stable, middle class people who shouldn’t have any problems accessing credit (like payday loans) in a normal environment. We knew a lot of these people and the companies they work for, so we decided to honor their requests for voucher loans. We wanted to make the access and repayment as painless as possible for both parties, so we worked with the HR departments at the companies to agree to deduct repayments from salaries at source from us. In exchange, their employees can access vouchers instantly and pay back over 6 months as a company perk. We launched SureCredit for this purpose, and it’s limit is only the number of voucher loans our balance sheet can take. SureCredit is so popular we’ve only approved <5% of loan requests (the 95% are from individuals that are not working with any partner company, but most of them would have been ideal candidates for the loans), without marketing it.
We also want people who shop generally for everyday goods to pay for those goods with vouchers, to drive usage and acceptance of the payment method, and we wanted to incentivize them to do so. We wanted the incentives to have more impact than the typical cash-back schemes, so we decided to aggregate all the ‘cash-back’ and donate it to a cause of the buyers’ choice. We built SureAid for that purpose, and we intend to invest some effort into developing that later in the future.
The overall theme you will observe is how every product is centered around our core voucher system and our merchant network, towards the single goal of expanding our inventory of vouchers by dis-intermediating cash. We believe cash is ineffective at achieving a lot of things, and because of its universal acceptance, it is heavily-controlled, expensive/difficult to move around and relatively unsafe to transact with. By letting go the value of cash’s universal acceptance (where a merchant network serves the purpose) in exchange for speed, security, cost-efficiency, attributes control and enhanced fungibility, Africans can enjoy better access and experience around financial services. The diagram below visualizes our current thinking around vouchers in Africa. We’re also very open to developers and innovators that want to use our APIs to leverage on our merchant network and offer a financial service using our vouchers.
Originally published at surebids.co on July 27, 2016.
