Naija Cowry: Digital Payments Reimagined
If you travel back 1000 years to any community that is now within the borders of Nigeria, you will notice that everybody operated a subsistence economy. Value was held in livestock such as fowls and cows, harvest such as yams, and occasionally art and jewelry. The subsequent rise of commerce prompted the use of money as a unit of account. Eventually, money became a means of exchange and a store of value. The influence of money ensured that cash became the definitive source of individual and financial empowerment.
Today, the landscape has changed. The introduction of the Shillings and Pence in 1880 and eventually the Naira and Kobo in 1973 moved Nigerians into the the global, complex, and formal financial system. Access to financial tools like savings, credit, insurance, and electronic payments has displaced cash as the leading source of financial empowerment. A farmer can now get a loan to buy seeds, insure their crops against unfavorable weather, and save some of the proceeds for future expenses. Unfortunately, 60 million Nigerians do not have access any of these tools. They are financially excluded, existing in a cash economy that is not different from when people still used Cowry shells as currency. Operating in the cash economy promotes a cycle of poverty and economic inequality, which is why financial inclusion is included as a target in eight of seventeen UN developmental goals.
How can we make it reasonable for the average Nigerian to pay for everyday items worth between N200 — N1000 (~$.50 — $4) without cash?
Digital payments have the most potential to foster financial inclusion. With digital payments, transactions that are already performed using cash will become safer and more efficient. Despite the straightforward benefits of digital payments and various attempts to attract the unbanked to the formal financial system, only 40% of Nigerians have a bank or mobile money account. At Naija Cowry, we decided to take a more nuanced and empathic design approach to understand the customers, most of whom are extremely poor, and spend little on each transaction. We wondered, “how can we make it reasonable for the average Nigerian to pay for everyday items worth between N200 — N1000 (~$.50 — $4) without cash?” From conducting surveys and focus study groups, it turns out that the unbanked are not the only population segment who need an answer to that question. The digital youth are a largely untapped market.
This demographic are heavy users of technology, well-educated, and tend to have high income volatility. After extensive interviews with university students and young graduates, it is clear that their microtransaction needs are not adequately served by the Nigerian financial system.
Meet Tope, a student at the University of Lagos. She buys lunch for around N600 ($2) everyday. Although she carries an ATM card around, her favorite restaurants on campus do not have POS machines. She does not use bank transfers for amounts below N1500 ($5) because of the flat fee charged per transaction. Sometimes, when the POS machine is available, network issues persist. She continues to carry cash around to cover all of her micropayments and often, the merchant struggles to find change. The other item she compulsorily carries around is her mobile phone.
Cowry allows Tope to make micropayments worth below N3000 (~$10) within 5 seconds to anybody for free using her phone. Cowry is a blockchain token that can be bought, sold or transferred to any phone number. Users may buy and sell Cowry using either their bank accounts or for cash. Cowry is uniquely positioned to meet the microtransaction needs of digital youth across dimensions of convenience, cost and trust. For convenience, we ensure that Tope can create a Cowry account quickly and make a payment in the same time it usually takes to pull out her wallet, count her cash, pay, and receive change. To minimize cost, we ensure that Tope is not charged a disproportionately high fee to pay for low-value items like food and supplies. To build trust, we ensure that every Cowry token in circulation is backed by corresponding fiat in a financial institution, hedging the value of 1 Cowry to 1 Naira.
By focusing on the easily accessible digital youth, we are able to solve an important pain-point for them while gaining leverage and positioning ourselves to replicate the same solution for the unbanked and other segments of society. We are bridging the gap between the cash economy and the financial system, using emerging technology to empower people to reach their financial potential. Our biggest strength is our willingness and ability to understand our customers intimately and adapt rapidly to meet their needs.
We will launch softly with a Messenger bot by the end of March 2019, followed by an Android app by September 2019. As we roll-out, the key questions at the top of our minds include: (1) How do potential customers react to what we have built? (2) What learnings can we apply to improve customer utility and experience? and (3) What level of impact can we generate?
Society reaps the benefits when individuals and families thrive and are able to meaningfully contribute to the growth of the nation. The diversity of identity, talents, and beliefs in Nigeria will be fully catalyzed only when everybody can reach their individual and financial potential. Naija Cowry will be a part of that journey by enabling digital payments for everyday Nigerians.
Originally published at www.linkedin.com.
