#75: eTranzact - How Nigeria's pioneering payments and switching platform is serving businesses and governments across Africa

[00:00:00] Welcome to Afrobility, a conversation on African Business and Technology.

[00:00:08] Today we're going to explore each transact for African payments in Switzerland platform.

[00:00:12] We'll discuss this through across the following areas. First, we'll give some context about

[00:00:15] Nigerian payments. Second, we'll discuss each transact early history, third its product

[00:00:19] and decision strategy, fourth its competitive positioning, and then fifth will end our views

[00:00:23] on his overall outlook. This episode was recorded on February 11, 2023, each transact.

[00:00:29] Or Super Bowl Sunday or Afghan Finals Sunday. It's a big day.

[00:00:34] Last year or two years, I didn't even know it was Super Bowl this time. I know because I wanted it and that it meets a party.

[00:00:39] So I'm going to Super Bowl party, very exciting.

[00:00:41] Olumide doesn't watch any sports guys but yes.

[00:00:44] I don't, and I have no interest. I don't care who wins Super Bowl. I don't care Afcon who wins.

[00:00:48] As long as no one gets angry with me, I'm fine.

[00:00:50] Thanks for leading me that on.

[00:00:52] He tried to act. He tried to act.

[00:00:55] Corporate speak. This is on the website and on the LinkedIn page.

[00:00:59] Each transact is Africa's premier e-payment solution provider delivering electronic transactions,

[00:01:05] switching payment process and solutions across POSs, the web, mobile, ATMs and cards.

[00:01:11] A mouthful a lot sort of makes sense.

[00:01:13] Ninjas leading payments and switching company power payments and collections for government and businesses

[00:01:19] licensed by the Central Bank of Nigeria.

[00:01:21] I like that one. That one sounds very official and shorter.

[00:01:25] I guess in regular English, just my own simple definition is Nigerian FinTech that offers processing and transaction switching solutions.

[00:01:34] Yeah, exactly.

[00:01:35] And I also want to read this definition from the annual reports where it says,

[00:01:39] the company's a payment technology provider principally engaged in processing all facets of electronic payment transactions using a switching platform.

[00:01:48] It provides maintenance and software development services.

[00:01:51] The switching platform processes transactions across various channels which includes mobile phones, web, points of sale, ATM,

[00:01:57] other mobile devices and bank branches.

[00:02:00] Tharo. Okay, normally we don't do this when we start but I'll take a little bit of a segue because this is particularly important to the e-transact story.

[00:02:07] So what is a switching platform? What is a switch? Very quick segue and then we'll start.

[00:02:12] Think about a switch as like a traffic controller or a middleman or a central connecting hub that connects all the different players to make sure the parent goes through.

[00:02:23] It will connect all the banks, the merchants, financial institutions, the consumers and it basically directs everything to make sure that happens fluidly and has two basic benefits, network effects and reduced costs.

[00:02:34] Normally we don't do that. It's one is to emphasize this because as the story evolves you'll see becoming a switch is actually something different for most other fintech platforms.

[00:02:42] They're more closely aligned to interswitch than they are closely aligned to flood away for a paystack.

[00:02:46] Why would you think why would talk about e-transact? It's not necessarily as popular as some of the other fintech companies in Africa.

[00:02:53] A couple of really good reasons to talk about them.

[00:02:57] Why they're not popular? We don't pick companies because they're popular, but companies because we want to talk about them.

[00:03:01] They're important. They're very important. Exactly. A couple of things to note. They are pretty early.

[00:03:07] I looked up their timeline. They said they had the first payment and processing switch in Nigeria and that they started six months before interswitch.

[00:03:13] They were like excuse me.

[00:03:17] Before interswitch.

[00:03:19] The older brothers, that doesn't make any difference.

[00:03:22] They were father in 2003 so they're quite old school.

[00:03:25] Before we started recording, thankfully said I shouldn't call them old school but I decided to go ahead anyway.

[00:03:29] Not just some fat.

[00:03:31] You always, I don't need to talk any other people to have money and I don't.

[00:03:36] I'm talking about companies. I have a respect for different things.

[00:03:39] You talk in different things like coming back again you go.

[00:03:43] Why else are we talking about... Oh, shush. Why are we talking about...

[00:03:49] The other reason we're talking about each transaction is that it's also public.

[00:03:57] For me, I always take this perspective that you have to have a point of view on what these payment companies can look like at scale.

[00:04:05] What does it look like when it works? What price will the public investors pay for it?

[00:04:09] I feel like you want to get a good benchmark of what is the exit strategy for these companies and why they are different.

[00:04:14] I have to believe that the competitors that are raising $25,000, $40 million, $100 million are different from a more profitable than a transaction.

[00:04:22] It's worth having a point of view about that whether or not you have a point of view if you invest in other companies whether or not you decide it or not because you have to decide why don't companies just buy a transaction instead of your fancy payment startup.

[00:04:36] That's the story today. Founded in 2003, they're almost 21 years old, similar in a way to enter switch of Fintech slash payment processing, switching solutions companies.

[00:04:47] It should be a good conversation.

[00:04:49] PSA, public service announcements, listeners, founders, operators, investors, we love to link up to email us in for it at Afflebuty.com.

[00:04:54] You can join our substack, Afflebuty.Supstack.com. We send weekly posts about Africa Tech and about some of our episodes.

[00:05:02] Biosies about e-transact. I'm sure you'll.

[00:05:05] I started off being not negative obviously.

[00:05:09] Not negative. I said I have been neutral about it, but I learned a lot about the business because it's public so there's a lot more information about it relatively compared to the others.

[00:05:19] So there's a lot less PR around it. So you learn a lot about the viability of some of this Fintech business models and I have really good questions when you look at the industry.

[00:05:28] We talk about that in the summary. The public part is what I find interesting.

[00:05:31] Yes and since they're public we actually know their evaluation. I think it's between $100 and $200 million.

[00:05:37] Unfortunately because of the NIRD evaluation, you could say it's 2 to 3x that but based on the actual as of recording February 2024, it's hundreds to 200.

[00:05:46] Although the NIRD is devalued by like 2x of the pasture but regardless, it's not a unicorn and the fact we have all the visible financial data because our public should lead to some interesting conversations later.

[00:05:59] But it's a profitable Fintech company.

[00:06:02] Which we don't even see in many parts of the world to be honest.

[00:06:06] It's a profitable premise processor which feels like magic but it's possible to be profitable.

[00:06:13] Although I guess as a payment processor hopefully it's easier to be profitable than a consumer Fintech trying to hustle and not charging consumers for anything.

[00:06:25] That's a separate business model. V versus B2C, very different business models.

[00:06:28] My biases before I did any research, I didn't really know that much about the company.

[00:06:31] I had heard about them. I knew they were old school but I didn't know a lot about what they did in specifics so I had no point of view on the fence.

[00:06:39] After I did research similar, I still have minimal biases.

[00:06:43] I like longevity. I like companies to survive and show they've been in it for a long time. On the other hand, it's hard to find anything to get excited about.

[00:06:51] Minimal biases, I just don't care. I'm on the fence, whatever we'll do this story.

[00:06:55] What? What do you think you need to find anything to get excited about? They're profitable.

[00:06:59] They're basically...

[00:07:00] That doesn't make any difference to me.

[00:07:02] You can't even have money already.

[00:07:05] Because this is a bit of an expensive cash. You're telling me because it makes me feel different to you.

[00:07:12] It was that I'm going to take crunch. That's not making any money. It was that I made a difference to you.

[00:07:17] Wow.

[00:07:19] Should we start or any other?

[00:07:21] Let's get started. I'm excited to get into this. I'm clearly more positive about each result than you are.

[00:07:26] This is amazing.

[00:07:27] Very clear. I'm not just on the fence. They're just one of the male old school companies.

[00:07:31] What?

[00:07:32] Yes.

[00:07:33] Maybe my position will change as we have the discussion.

[00:07:35] I will kick us off with some information about the global tech scene around this time. A lot of things were happening.

[00:07:41] The most little Firefox 1.0 release. I can't believe Firefox 1 was in 2000. I feel like Firefox has been around forever.

[00:07:49] That was a big deal. After the launch iTunes for Windows, iTunes revolutionized the industry, came out iPod blah blah.

[00:07:56] Microsoft introduced Windows Server 2003.

[00:07:59] Importantly if you know stuff about Windows Server, I grew acquired Applied Semantics to expand its presence of the online ad space.

[00:08:06] I really wanted to talk about that. That's a different episode, different podcasts. We're going to focus on Africa Tech.

[00:08:11] What's that in Africa Tech? 2001, 2002, 2003.

[00:08:14] Explosion in SIM card subscriptions. There was between 103-100% increase in SIM card subscriptions across the continent.

[00:08:21] Relatedly, MtN starts to get more aggressive in planning Pan-African growth.

[00:08:26] They established themselves in Nigeria, Ghana, Uganda and South Africa, obviously their home base.

[00:08:30] They began a plan to grow across the continent and the Middle East. You could listen to our episode 10 at www.fruby.com slash MtN about that.

[00:08:37] Also, this one is the best. The rise of internet cafes. Oh my God, we're not as young as you guys go to a bunch of internet cafes.

[00:08:43] A bunch of calls a lot of people who didn't have internet at home. People would go to office buildings.

[00:08:47] I'm going to the internet and you would pay per 30 minutes per hour whatever and then eventually you'd have to pay again.

[00:08:53] That will kick us off with the context of the Nigerian payment sector. Luckily for us, we actually spoke a little bit about this on our episode about InterSwitch, our episode 17.

[00:09:02] We can only listen to that episode and here's a clip of what we said the last time about how the Nigerian payment sector was before 2002-2003.

[00:09:10] And basically before InterSwitch and before you transact came into the scene.

[00:09:13] You need to put it in context of what was happening at the time. Like, Nigeria had 90 banks.

[00:09:17] Jesus. You took maybe three days to settle your payments.

[00:09:21] I saw this survey of banks that was carried out in September 2002. Basically, the American investors just founded.

[00:09:27] Of the 90 banks at the time, just listen to this. Only seven had ATM services in 2002.

[00:09:33] The entire country had 68 ATMs and 1800 P.S. machines. And it was a country stop laughing on the middle.

[00:09:40] A very country of 130 million people at the time.

[00:09:43] We're holding about all that.

[00:09:44] We're talking 68 ATMs for 130 million people. 680 ATMs for 130 million people.

[00:09:50] We're turning them in on today. GDP per capita at the time was $740, this is $2,200 a day.

[00:09:55] What I wanted to pick out of this is not so much that things were bad. Things were bad many countries at the time.

[00:09:59] It was more the idea that how do you look at all of this data and say, hey, I'm going to build technology to connect this 68 ATMs to this 1800 P.S. machines.

[00:10:09] To this 90 disparate unhealthy banks, much fraud in the system at the time.

[00:10:14] All the clearing was Mano, the several clearing house. The national automated clearing system came up a year before.

[00:10:21] Or just a year before about the same time that you just founded where it became automated to clear checks.

[00:10:26] And there was so much check fraud and bounce check for things that as we move forward, you don't see as much anymore.

[00:10:32] Because of the system and the way things were where you could take advantage of how long things took to clear, to get money out for you actually cleared.

[00:10:38] And to come in and say there's an opportunity here, and we can build this. It does help to have the banks and Accenture and tell net tech invests the wooden company of tenets behind you.

[00:10:49] But it's not trivial. This is the kind of data that consultants look at and say don't bother.

[00:10:56] That we look at in some of our other episodes and say it's not going to work to be honest.

[00:11:01] The difference here is I feel like even though all the numbers were bad,

[00:11:06] I've ended day. All these banks still had money. They were processing money and they were in the middle of a bunch of flow.

[00:11:12] Now obviously the cash flow was paper based. It wasn't efficient. There was some inefficiencies. But there's actually money to be made versus a BDC place where you actually would look at stuff like the GZB per capita.

[00:11:22] That's actually representative people's actual income. So yeah, I give a lot of credit to Mitchell and the team. It was great.

[00:11:28] But I still think looking at a B2B business and trying to make it efficient is very different than trying to sell customer stuff when customers don't have money.

[00:11:35] Interstitials like, hey, instead of GZBarring can access bank or whatever meeting to guarantee trust at the time,

[00:11:40] meeting to settle or go into a national clearing house, interstitials, we will do your digital payments.

[00:11:45] If you stop back and think for a second there was no real time payments when interstitials around because you deposit things like fuel,

[00:11:52] petrol, tankers and things like that. It just took a long time for people to see payments. And you have to see payment for your transfers.

[00:11:58] Business was slower. Imagine if you had to pay for something even electronically because they had some internet banking of sorts but it would not be real time.

[00:12:06] Okay, so let's give an example for the audience. They understand.

[00:12:10] I want to buy something online and I do. I go to a website, I put in my card. Yeah, today in 2020. I go online, I go to a website, I put in my card.

[00:12:20] I wait three days a thing comes to my house. What's an analogous example of 2001-2002 about how things worked that were very different than today?

[00:12:27] They would go to the bank, wait with drone money and cash, take the cash home, keep it under their bed.

[00:12:34] They would go to the market, go under their bed, take the cash, go to the market, give the person cash, get the goods in return.

[00:12:39] Even the example you gave of the phone and calling, I think that's for rich people. Most people would just use cash because it was inefficient.

[00:12:44] I was even thinking if you're a large business, you're all in gas supply.

[00:12:48] Yes, yes.

[00:12:49] You're a funding station supplier and you want to pay for your regular payments of petrol.

[00:12:52] Now you've got to wait three days for them to see the money and then send the tankers to you.

[00:12:55] So this is a good nuance point.

[00:12:57] Even for regular consumers, there were some inefficiencies and hoarding cash.

[00:13:00] And then even for businesses, things were just slow because of the lack of trust.

[00:13:04] And the fact there was no instantaneous way to see payments.

[00:13:06] Okay, got it.

[00:13:07] What inter-switch did? What inter-switch did? It made it real time.

[00:13:10] It was like we're going to be a central place where you can call electronically and all the different banks connected to all the banks

[00:13:15] because they had a lot of biggest banks as shareholders, connected to all the banks.

[00:13:18] And they could process payments for the banks. For the banks, it was cheaper, especially in risk and cost.

[00:13:23] And they've had this switch where they processed payments.

[00:13:26] Now what happened is there are not the only ones at the time.

[00:13:29] I think people told us inter-switch story as inter-switch being the only ones.

[00:13:33] 2003, Iktransack started another clearinghouse of sorts.

[00:13:37] There was a value card which has become unified payments systems limited, which is basically there were visas, primary, processor, partner and engineer.

[00:13:46] But what happened at the time is we had a central switch, which was mostly dominant,

[00:13:51] which is Nigerian inter-bank settlement systems, nips.

[00:13:54] And you had these different switches that would process different kinds of payments and there was really no central place.

[00:14:00] Inter-switch was, as you can imagine, green gang buses at that time.

[00:14:04] I found that whole context of now in the Nigerian at least take care of one of the central switch where everybody has to connect to legally.

[00:14:12] Which is what has led to, which is made it easy for companies like Paystack or Flotteray to set up.

[00:14:17] Because now, you can build your own payments company by connecting to nips.

[00:14:22] It's up to you to figure out how you get the payments, the process to follow.

[00:14:26] There's a people on the website, it was supposed to be about Fintech, which is one reason why there was a massive Fintech explosion in 2016.

[00:14:32] In general, I find infrastructure companies to be quite fascinating because on one hand in retrospect, it always looks like a good idea.

[00:14:41] Oh, they're now the foundational layer. Everyone is dependent on them. They just extract revenue and profits from the ecosystem.

[00:14:47] But at the time when they do it, it requires a lot more ecosystem buy-in than other types of businesses.

[00:14:55] Because by definition of sensory, the infrastructure player, you have to get everyone bought in simultaneously.

[00:14:59] And I guess in this case, they just give up a lot of equity, which is one way to do it.

[00:15:03] But without doing that, it requires a lot of partnerships, trust, reliance.

[00:15:08] It's actually potentially difficult unless you have the government backing you.

[00:15:12] Yeah. And the other piece, even highlight from Fintech, before we come back to InterSwitches,

[00:15:17] a lot of the Fintech of buttons in Nigeria is really about regulatory dislocation.

[00:15:22] Right. Which is how I just made up.

[00:15:24] Because of the mandate that everybody must connect to nips, it made it super easy.

[00:15:30] And they reduced what InterSwitches' previous advantage was versus transact of UPSL in systems.

[00:15:37] Easy for company like Flotterable or VoguePay or any of these OOP to honestly come in and start processing payments immediately once you can get the volume.

[00:15:46] So that was part of the OOP play. You set up all these businesses that are maybe breaking up or not, but at very least generally generates a lot of transaction volume.

[00:15:54] Whatever happens to their competitors, InterSwitches competitors over time.

[00:15:58] I guess there's nothing wrong with them.

[00:16:00] There's still a lot of things.

[00:16:01] So they're their PCSPs and PSSPs.

[00:16:05] Each transaction is still alive, UPSL is still alive. They're all still there.

[00:16:08] I think that's the thing about payments in general.

[00:16:11] You have to really think through any kind of boot thesis is incomplete without looking at the competition.

[00:16:17] And there's this competition here.

[00:16:18] Coming back from that clip, other context about the time is,

[00:16:23] I'm part of the reason why I'm positive about InterSwitches is they're one of the three major partners that really built an Azure spamming system.

[00:16:31] Value card, InterSwitches and of course InterSwitches are transact.

[00:16:34] In 2000, Value Card Unified Payment Services Limited UPS created the first electronic wallet card.

[00:16:39] They had value card points of sales and you might vaguely remember the ads about loading up your Value Card using this to do something else.

[00:16:44] I remember them. InterSwitch created the first switching infrastructure for ATMs 2002.

[00:16:51] They all transact, created WebConnect for WebConnect 2004.

[00:16:55] And they all created independent card schemes, Value Card, Verve, InterSwitches Act had genesis to talk about that later on.

[00:17:03] But this was pretty early and we were just doing the whole cards, availability of cards in Nigeria at the time.

[00:17:13] And InterSwitch is one of the major ones.

[00:17:15] So this was the time of cards would just become anything but it was still very expensive.

[00:17:19] But phones would also become anything.

[00:17:21] And yeah, that's pretty much some other context about them.

[00:17:27] I'll talk about the Founder's story in a second.

[00:17:30] Anything else to add about context before I get into the Founder's story?

[00:17:33] No, I like the context of the Google view, what's going on in the US, Europe and then Africa,

[00:17:38] and the confluence of financial needs, lack of people getting financial services rendered to them, cards and the whole payment ecosystem.

[00:17:49] It just makes sense.

[00:17:50] Fones are getting bigger, bones potentially can do some financial stuff, people don't have financial services.

[00:17:56] And it seems like cards may be the way to go. There's a bunch of different things. It makes sense.

[00:18:00] Yeah, there's a really nice, interesting paper called History of WebConnect in Nigeria by Ifrunaya Eziani that I will link to in the show notes.

[00:18:07] African-Final line, just very helpful old school context.

[00:18:11] Just putting together some of those reports in a coherent readable way.

[00:18:15] Fatta Kananari who can find it, E-Transact.

[00:18:17] I was trying to figure out the Founder of E-Transact is Valentine Obi who because of the nature of the Internet in Nigeria in 1999...

[00:18:28] It's incredibly limited information about him.

[00:18:34] Basically, he was born as a 30-year-old at the time.

[00:18:38] It's incredibly limited information.

[00:18:41] What school did it go to?

[00:18:42] It doesn't exist.

[00:18:43] What did it go to?

[00:18:44] I'm like, do you just magically form as an adult?

[00:18:46] Which is...

[00:18:47] And I was thinking about the fact that that would not be possible and with anybody in this generation.

[00:18:52] Like, it's going to be...

[00:18:53] You have to leave some crumbs on the Internet about who you are.

[00:18:56] Your college is going to post a picture of you on the lawn.

[00:18:59] Who would have liked it or not?

[00:19:00] He was going to be like, a list of deptos.

[00:19:02] Welcome to my college.

[00:19:03] People are not pretty.

[00:19:04] First semester's school fees.

[00:19:06] Your transaction, your transcripts or whatever.

[00:19:09] They will post your...

[00:19:10] Because the Nigerian public institutions are very wild with data privacy.

[00:19:13] They will just post everything including your Nigerian address.

[00:19:17] Because it was verified your address with CUDA bank.

[00:19:20] Anyways.

[00:19:24] So funny.

[00:19:25] Valentine Obi.

[00:19:26] I found some US...

[00:19:28] State Manassais was born March 1964.

[00:19:31] I don't even know if that's accurate, but somebody is going to tell me if he's true or not.

[00:19:35] But that was a lot of ability.

[00:19:36] We just see he was born in the 60s, 70s.

[00:19:39] Yeah, he was born.

[00:19:40] He was definitely born.

[00:19:42] What a difference.

[00:19:43] We haven't found humans that were made a new that way.

[00:19:45] Definitely born.

[00:19:47] He was a CEO of something called Cybase from 1999 to 2003.

[00:19:50] Cybase is...

[00:19:52] Was...

[00:19:53] seemed to be some kind of IT consulting firm.

[00:19:56] And if you look at some of the staff, early staff in E-Transact,

[00:20:00] they all had Cybase as like...

[00:20:02] System Engineering Cybase, CTO, E-Transact or something as a previous role.

[00:20:06] So he seemed to be like a company that did IT for some of these banks

[00:20:09] and then evolved into what became E-Transact by building solutions.

[00:20:15] When you hear him tell the founding story, this is how he tells it.

[00:20:19] He does it to his way he says, this was at the time mobile phones were exploding.

[00:20:23] And as mobile phones were exploding, he had an idea to decide to build something

[00:20:27] to help these companies accept payments online.

[00:20:30] And one important context about this period that is...

[00:20:35] that is crazy if you...

[00:20:37] Even think...

[00:20:38] As I was researching and thinking about it now is...

[00:20:40] At the time in Nigeria, if you wanted to make a payment,

[00:20:43] you had to go to the bank physically to make it.

[00:20:45] But what I didn't remember accurately about this time is

[00:20:48] you had to go to the exact bank branch where they accounted for it.

[00:20:51] So, in 2009...

[00:20:52] If you go to another branch, they don't recognize the cost of the bank.

[00:20:54] They don't recognize it. I'm so sorry.

[00:20:56] You just go to your bank branch.

[00:20:58] You know bank would you rank? Is it one right?

[00:21:00] So you have to go and pay your school fees in your own bank,

[00:21:02] you look for your branch.

[00:21:04] Because even for the banks, they're interconnected with a real-time payment infrastructure

[00:21:07] was not common.

[00:21:09] They're talking to Hamilton and two.

[00:21:11] No, we have to say, if we forget about this podcast,

[00:21:13] let's talk about American history.

[00:21:15] Did you know previously in America,

[00:21:17] you committed a crime in a state.

[00:21:19] All you had to do was go to another state,

[00:21:21] I year-free.

[00:21:23] So they history behind the creation of the FBI.

[00:21:25] Was it how to sub-sort of like a nationalistic view where you would just say,

[00:21:28] I'm innocent because I moved to Florida.

[00:21:31] What?

[00:21:32] It's because of what you said just for...

[00:21:34] So sorry, let's talk about Africa.

[00:21:35] It was just for me, was so mind-blowing.

[00:21:37] Because it makes sense.

[00:21:39] The states are independent entities.

[00:21:41] They're not interconnected. There's no internet.

[00:21:42] There's no database. You just move your free.

[00:21:44] But there was so insane to learn that a few years ago.

[00:21:46] America is what happens when you just...

[00:21:49] You build a country by like, you know.

[00:21:51] Let's figure it out.

[00:21:53] Let's figure it out.

[00:21:54] Like we'll figure it out.

[00:21:55] Anyways, back to each transaction.

[00:21:57] You had to go make payment in the actual physical branch.

[00:22:00] So there's an interview with the CEO of the Echrans Act PLC

[00:22:04] which is not an integral part about the difference in a second.

[00:22:06] We're talking about like yeah, you have to go to the...

[00:22:08] If you want to pay a university school fees,

[00:22:10] you have to go to... I remember that vaguely.

[00:22:12] Because you have to go to the actual bank branch.

[00:22:14] You know back, I paid you.

[00:22:15] You have to go to the actual bank branch.

[00:22:17] And it wasn't really connected.

[00:22:19] So that's how we worked before Echrans Act pretty much.

[00:22:24] One of the first products that they built was to connect...

[00:22:28] Build something called...

[00:22:29] As a peer outlet for...

[00:22:31] I connect wireless and legal support operation.

[00:22:33] Basically making it easy for people to pay in different branches.

[00:22:38] So the basic problem.

[00:22:41] Which sounds more like a service contract business than a full product tech business.

[00:22:47] But I guess it evolved later on.

[00:22:49] So to summarize that part,

[00:22:53] company like Echrans Act,

[00:22:55] an inter-switch had their own web service and a kind of web service.

[00:22:58] It's not unique to them.

[00:22:59] But you cannot engage...

[00:23:01] At the time you cannot engage digitally with any bank.

[00:23:03] I'm not really interested.

[00:23:04] Just come to the branch, join the line.

[00:23:06] You understand?

[00:23:07] And leave it in the nylon bag of cash.

[00:23:09] Or don't you?

[00:23:10] Don't care.

[00:23:11] People will wait for you.

[00:23:12] I'll start to give you a problem.

[00:23:14] You have to leave it in the bag.

[00:23:15] Remember to go into the bag.

[00:23:16] Remember security of the bag.

[00:23:18] So do you leave your euros?

[00:23:20] I remember going to the bags.

[00:23:22] And they give you the distinct...

[00:23:24] And I enjoy everything going to the bank and get a lot of cash.

[00:23:26] Which I have out to do recently.

[00:23:28] But you get like a black nylon bag.

[00:23:30] Only the bank gives you.

[00:23:33] Like...

[00:23:34] I'm going to the bank and I'm going to the school bag to collect my stuff.

[00:23:38] Oh man.

[00:23:39] I'm going to the bank to pay my school fees.

[00:23:41] You got to disguise the bag and some other bag.

[00:23:44] Right.

[00:23:45] You know what, you know what, Bakler?

[00:23:46] Say this off as a joke.

[00:23:47] Even to today right now, 2024 February.

[00:23:49] When I log into my GTP accounts, I can see it's designated me to GTP duke-dru.

[00:23:54] I'm sure they do have better centralized management.

[00:23:57] But it knows my original branch.

[00:23:59] And it prefers for me to do things in my original branch.

[00:24:01] When I was going to go to NIDR for years ago, my debit card expired.

[00:24:05] So I was like, well send it to the GTP in equal.

[00:24:08] You know what I'm saying?

[00:24:09] I was like, oh no, sorry.

[00:24:10] So you're part of the GTP duke.

[00:24:11] But you were insane.

[00:24:12] You wanted me to drive and track.

[00:24:13] Eventually they figured it out.

[00:24:14] But the situation is better.

[00:24:15] But I'll say it's still not fully solved.

[00:24:17] Quote unquote solved.

[00:24:18] Yeah.

[00:24:19] So Interest Act built a platform that allowed you to pay.

[00:24:20] So it's a legacy water corporation, electricity, water, Internet, all of that stuff.

[00:24:26] And that's pretty much how it started.

[00:24:28] The CEO of Interest Act Global Valentine will be found to say,

[00:24:32] look, the idea initially was to use the mobile phone to replace the bank accounts

[00:24:37] and offer access to banking services.

[00:24:39] And all of this was before in PESA, which is tonight's own night.

[00:24:44] Valentine will be had a bunch of these ideas pretty early.

[00:24:47] And they also had their mobile money competitive on much later.

[00:24:50] It transact themselves the way they talk about their history

[00:24:55] and the way they talk about where they sit in an Android ecosystem is.

[00:25:00] And to be fair to them, they wanted the first to do a lot of things

[00:25:04] that we take for granted in Nigeria.

[00:25:06] So after I talked about how they were the first switching platform,

[00:25:09] if you'd like, go ahead and argue with your congressman or congressperson

[00:25:13] or your house of reps specifically.

[00:25:15] You're arguing right at the left side if you don't like it.

[00:25:17] Or right at the Valentine's OBS for all the kids.

[00:25:19] They're all the first to launch SMS based banking

[00:25:23] where you get SMS alerts pretty much.

[00:25:25] I shot code banking, USSD as well.

[00:25:28] They were the first to launch all of those things.

[00:25:30] And so they're pretty big in that entire space.

[00:25:34] That's kind of where they started just to summarize wrap around helping companies

[00:25:39] like Econnet, Wireless and Legacy Water Corporation collect payments

[00:25:42] and then connecting to all the banks

[00:25:44] so that they can fast-state payments across different platforms.

[00:25:47] So you go to the bank to use each transact platform to deposit

[00:25:49] and then they'll route into the actual bank.

[00:25:51] The bank under their operations, however they want to be their operations,

[00:25:55] let it transact makes that possible with the power of the internet and their payment platform.

[00:25:59] Yeah, in set another way, they were basically trying to provide alternatives

[00:26:04] to cash transactions because the whole economy was so cash heavy.

[00:26:08] But the only way to provide those alternatives to cash transactions

[00:26:10] is to partner with financial institutions that have to cash, aka the banks.

[00:26:14] So in a sort of make sense, it's just like when they tell the story now

[00:26:18] it almost seems like it started with consumer to consumer sending money

[00:26:23] but actually started with bank partnerships to reduce cash transactions

[00:26:27] and to offer ATM transactions.

[00:26:29] So eventually they evolved to consumer to consumer sending money with phones

[00:26:32] but the actual initial starting point was enterprise solutions

[00:26:35] to reduce cash transactions and to offer solutions for ATM transactions and cards.

[00:26:39] Yeah, and this refers to we'll use this term later on as collections.

[00:26:43] That's kind of a big chunk.

[00:26:45] This is collections, collecting money for people that are away money

[00:26:48] and they'll get it collected whatever you agree with the people

[00:26:50] and use their platform to collect money.

[00:26:52] This is collections.

[00:26:53] Instead of doing collections, they're doing business and they do a bunch of other things as well.

[00:26:57] Let me talk about fundraising.

[00:26:59] As you can imagine, 2001 we were not making announcements in the event

[00:27:02] and I just like to check in touch.

[00:27:04] But they did raise some money, they must have raised some money.

[00:27:08] Access banks was definitely invested.

[00:27:10] I couldn't find information on how much at the beginning

[00:27:12] but you don't connect to bugs.

[00:27:15] You don't build a company or collect bugs without having...

[00:27:18] It's still in the game.

[00:27:20] I have this skin in the game or having back, like somebody is going to have support you, right?

[00:27:24] I will say that I saw an investment that Africa capital alliance made in them in 2007.

[00:27:30] Africa capital alliance is Nigerian African, private equity firm

[00:27:35] and it's one of their reports or related to that where they talk about PAs.

[00:27:39] That's a research that we go through for you guys or not for ability.

[00:27:42] Right.

[00:27:43] I saw something as well.

[00:27:44] It said either 2007 or 2008, there was an undisclosed transaction.

[00:27:49] Maybe that's probably it but they didn't get some money from somewhere.

[00:27:52] It's close.

[00:27:53] Seven and a half million dollars for 32%.

[00:27:55] And the same about $107?

[00:27:57] That's some interest switch.

[00:27:59] One third.

[00:28:00] One third.

[00:28:01] So I have a couple of last investment.

[00:28:02] I don't know, they probably have left them since last 10 years.

[00:28:05] That's how much.

[00:28:06] They're gone and they collected the money and converted it back to dollars.

[00:28:09] But 2007, to be valued at upwards of 22, 23 million, definitely.

[00:28:15] It's all a chance for a thought of it.

[00:28:17] Right.

[00:28:18] That was literally the only funders in New Zealand can find.

[00:28:21] Otherwise, they clearly, they seem to have been profitable from the jump.

[00:28:25] Like, do I service this business?

[00:28:27] Yes.

[00:28:28] And then they seem to have profitable from the jump.

[00:28:29] What is the transaction?

[00:28:30] Strangely, counter-intuitively, it's easier to be profitable with the services business.

[00:28:35] The problem is like the scale.

[00:28:37] With a product business, you're initially not profitable but then eventually can scale

[00:28:42] because it's built on a technological platform.

[00:28:44] But services business is literally people for time.

[00:28:46] So like, Banco and I could start a services business today for Boogie Services.

[00:28:50] And we charge people X million dollars and our cost is X thousand dollars.

[00:28:54] Which basically means we're profitable.

[00:28:56] How are we going to scale it?

[00:28:57] We need to find other Bancoes impossible.

[00:28:59] But as well, so it's kind of intuitive actually.

[00:29:03] One of the profitable, the hardest to scale.

[00:29:05] One of the things about what they do is...

[00:29:08] What did for the most part is collections.

[00:29:11] Which is important.

[00:29:13] I don't know if collections exist as a concept in the US.

[00:29:17] It would be like if I was trying to pay one can take it.

[00:29:20] No, no, no, no, no, no.

[00:29:22] I'm not saying that in Nigeria, I feel like almost everybody had a different collection service

[00:29:28] or such web-premise processing.

[00:29:31] I need to go to the Unilock portal.

[00:29:33] I'm putting my trick number and putting my pay there.

[00:29:36] I can't just pay, however I want to pay.

[00:29:39] I need to pay on their own tool and their own service.

[00:29:43] Traffic tickets.

[00:29:45] And ask me why that's the example.

[00:29:46] I might not win too.

[00:29:47] You know you did.

[00:29:48] You did.

[00:29:49] Parking tickets in the US for example, you have to go to...

[00:29:51] Basically it would be like if everything you paid for in the US was the way you paid for parking tickets.

[00:29:55] So you have to go to the...

[00:29:56] If I don't have to turn on the website.

[00:29:58] I put it in the parking detail information and then putting your card on the pay.

[00:30:01] But you have to pay through that portal.

[00:30:02] And some of them would be like,

[00:30:03] we don't accept American Express.

[00:30:05] Like we take visa.

[00:30:06] And if you don't like it.

[00:30:07] We don't like it.

[00:30:08] We see it caught.

[00:30:09] So that's a call of their business for the big telcos.

[00:30:13] And we have a lot of service like that.

[00:30:16] So cable works that way.

[00:30:17] For a long time mobile phone, telephone works that way.

[00:30:22] Bills work that with electricity, water.

[00:30:26] Almost everything works that way.

[00:30:28] Even till now, different levels of degree which is I find is not intuitive if you didn't grow up in that market where...

[00:30:34] You go to the specific companies place to pay.

[00:30:37] And if you don't have the details you need to pay.

[00:30:39] Like people used to take that.

[00:30:40] I remember you take the smart card out of the DSTV to the DSTV place.

[00:30:44] Because if you don't take a smart card with you, you are going to go back and bring this smart card.

[00:30:47] Just do.

[00:30:49] There's no story.

[00:30:51] But that's kind of what they have done.

[00:30:56] Should I talk about ownership a little bit?

[00:30:58] I think this is probably right.

[00:30:59] Yes, yes.

[00:31:00] Let's do ownership.

[00:31:01] So right now, Access Bank is the majority shareholder with 37-38%.

[00:31:09] And that just went up in 2022.

[00:31:13] Yeah.

[00:31:14] Each transact global has, let's call it 23%, which is basically the founder.

[00:31:19] No, represent the founder and holding the interest at PLC which is a business.

[00:31:23] And there's another company called Cybase and I joined the business solutions which is what the founder was doing before.

[00:31:28] I don't know, anyways, if you know...

[00:31:30] Good for that.

[00:31:31] Email bank.org.

[00:31:33] Email Mew.

[00:31:34] See me talking.

[00:31:35] But it's a word I know publicly.

[00:31:37] And then there's a bunch of other small shareholders.

[00:31:40] I think the only thing to highlight here is Access Bank has been a majority shareholder.

[00:31:44] 38% and increasing it's take recently.

[00:31:47] Yes.

[00:31:48] And 40%.

[00:31:49] Some of the websites I think specifically was Techabal said,

[00:31:53] based on Access Bank's recent acquisition and aggressive acquisition strategy.

[00:31:59] Maybe something they're looking into because it's quite strange to raise your stake so significantly in just a year.

[00:32:04] Unless you had either a partnership or acquisition in mind.

[00:32:07] We shall see how that goes in treating.

[00:32:09] Something to talk about later.

[00:32:10] All right.

[00:32:11] Maybe use it as a springboard for some Access Bank fintech play.

[00:32:16] There is no money in fintech.

[00:32:18] I've got to work.

[00:32:19] Wow.

[00:32:20] When I was...

[00:32:21] No, no, no.

[00:32:22] I say that intentionally to be controversial.

[00:32:24] But when I was researching this and one of the interviewers,

[00:32:27] this was even in 2012.

[00:32:29] I remember one of the bank CEOs, this is very early old interview,

[00:32:32] was like, look, if you look at the entire Pim and Floes, how profitability is?

[00:32:36] But people...

[00:32:37] They don't want to say old school.

[00:32:39] Traditional business people think about the intents of basically margins on unit economics.

[00:32:43] Like common sense business people.

[00:32:44] And some people think about volume and size.

[00:32:47] And the perspective was, look, if you look at a narrow definition of the current Pim and volume

[00:32:52] and you get a vague of that, you can look at the entire profit pool of a Pim and Flo.

[00:32:56] But they don't like what they don't account for enough is the fact that it's grown exponentially

[00:33:00] and therefore the profit pool is changing rapidly.

[00:33:02] But the perspective was much more at the time, let's call it 10-15 years ago.

[00:33:06] Like who cares about...

[00:33:08] Like why do I want to win each transaction business?

[00:33:10] So assuming I become each transaction, I become 3x, then money, NERIS competitor.

[00:33:14] That's like $3 million of profit.

[00:33:15] And you're actually selling government bonds at a high rate.

[00:33:18] So you're going to argue and say, that's a short side.

[00:33:21] You can say that's a short... definitely a short side point of view.

[00:33:23] But that would be the...

[00:33:24] No, it makes sense.

[00:33:26] It's just what you said at the jump.

[00:33:28] The growth rate and the untapped potential of simplicity and the developer angle

[00:33:33] makes it so much...

[00:33:34] Like, strike became so big how?

[00:33:36] Because there's actually...

[00:33:38] Like if you enable things to be done faster, the whole market and the whole PIC and group.

[00:33:42] But this is a slightly different angle.

[00:33:44] You can't make a market than Africa.

[00:33:46] You can bet that it's been on top for a long time.

[00:33:48] You said that it's been on top for a long time man, there's no top thing you know

[00:33:51] that maybe the one that is making a mistake.

[00:33:53] But I'm being intentional and controversial but if you think about it,

[00:33:56] it's not a crazy idea to be like...

[00:33:58] No, it makes sense.

[00:33:59] Like we could, but why would we?

[00:34:01] It makes a lot of sense.

[00:34:02] Like I always use the multiple of like 100x to compare the GDP of like Niger to America.

[00:34:08] So if you say Stripe is worth 100 billion, it means they're equivalent to Stripe and Niger worth 1 billion.

[00:34:12] But then what about to count for the rest of the economic distress?

[00:34:15] Which means the equivalent is actually worth like 200 or 300 million.

[00:34:18] Unfortunately because even after you account for GDP in size,

[00:34:20] you also have to account for market factors, inflation, instability.

[00:34:24] So if that's where we are, then it just shows it's actually a hard market to penetrate.

[00:34:28] Fine, growth and due expansion, are you ready?

[00:34:30] Yeah I'm ready let's go.

[00:34:31] This section is a little bit long but before we even get into it,

[00:34:33] let's just be very clear from the jump.

[00:34:35] Let's emphasize this is very very Nigeria-centric business.

[00:34:38] It's basically when Van Collie said on the inter-switch episode

[00:34:41] 90 to 99% of the revenues were from Nigeria.

[00:34:44] Regardless of what they tell you on their website, don't worry about it.

[00:34:46] Almost all their business and focus is in Nigeria.

[00:34:48] Right? Let's get into some of the detail.

[00:34:50] After they launched in 2003, they started to do some expansion across Western Africa

[00:34:55] and francophone Africa and then they also taught South Africa.

[00:34:58] As of 2008, they were in Nigeria, Zimbabwe, South Africa, Ghana, Kodervorn, UK.

[00:35:04] Now when I say they were in, it's unclear how much was a direct presence

[00:35:08] versus indirect presence through partnerships and different things

[00:35:12] but they were supposedly in those five or six countries.

[00:35:15] Basically Western and South Africa plus a little bit of the UK

[00:35:19] was probably to service the diaspora or to do some partnership with the banks there.

[00:35:23] However, as a collection.

[00:35:26] Wow.

[00:35:27] I've been reading a sniper pop up from the US before.

[00:35:30] You don't have to go out and pay their part out.

[00:35:32] You don't have to go out and pay their part out anyways.

[00:35:34] I'm telling you, give me your defense.

[00:35:37] Buckley is a good point.

[00:35:39] As of 2023, actually as of 2024, as of today,

[00:35:44] it seems like almost all their conversations and details have again focused on Nigeria.

[00:35:50] On clear what happened in the initial view of what they wanted to do

[00:35:53] or what they actually did.

[00:35:54] Right now, whenever they're in any country,

[00:35:56] they seem to just be doing Nigeria-centric things in those countries.

[00:35:59] So to summarize that section, primarily Nigeria,

[00:36:01] they had an initial wider growth plan across more geos,

[00:36:05] especially in France.

[00:36:06] You can see interviews from 2007, 2000, 2010,

[00:36:08] where the founders talk about francophone Africa,

[00:36:10] code devore, but it seems to never materialize.

[00:36:12] So it looks like they had plans,

[00:36:14] but they eventually just decided to focus on their home country.

[00:36:17] Luckily for them, their home country, Nigeria is the largest market

[00:36:20] but it ended up being much more submits and inter-switch than what other companies.

[00:36:23] But you thought also on Geo before I do the expansion of it?

[00:36:26] I think because the nature of their business being B2B,

[00:36:31] I'm being focused on collections and switching for telcos as well.

[00:36:35] It makes sense for it to be like Nigeria-focused.

[00:36:39] Right, unless the one is doing acquisition of another company

[00:36:42] but then they don't have that much money for an acquisition.

[00:36:44] Something I'll talk about later.

[00:36:46] Partnership strategies.

[00:36:47] They focus on partnering with three broad groups

[00:36:50] and then some other smaller groups,

[00:36:51] first banks and other financial institutions.

[00:36:53] Of course since their payments switch,

[00:36:55] it's particularly important that they partner with all the different banks

[00:36:58] to offer the switching capability and also to offer a wider range of services

[00:37:02] like accounts opening, cash out loans,

[00:37:05] basic financial services.

[00:37:07] They also partner heavily with telcos.

[00:37:09] As you heard, bankers called it Econo Wireless is not called AirTel Nigeria.

[00:37:12] Right from the jump, they were already partnering with telcos

[00:37:15] and obviously partnering with telcos

[00:37:17] enabled them to get into mobile money ecosystem

[00:37:19] and access to millions of users because most of the telcos,

[00:37:22] well the biggest telcos in Nigeria have hundreds of millions

[00:37:24] or tens of millions of customers.

[00:37:25] So that's a way to mobile money ecosystem

[00:37:27] and get access to users.

[00:37:29] Even more importantly than those two,

[00:37:31] the partner with government agencies and utilities

[00:37:33] and over time actually their businesses evolved much more to B2B and B2G

[00:37:39] than B2C.

[00:37:40] What they actually do with governments and utility providers,

[00:37:42] they allow them collect tax payments, utility payments,

[00:37:45] governments allowances, government subsidies

[00:37:48] and supposedly this is better than the government doing it themselves

[00:37:52] because obviously the government is not going to be a tech company doing this.

[00:37:55] That, this partnership has slowly become the biggest part of their business.

[00:37:59] Lastly they also partnered with merchants and retailers of course

[00:38:03] because since your payment network they need to make sure

[00:38:05] the merchants accept the payments.

[00:38:07] So those are the big partnerships.

[00:38:08] There are a few other smaller ones but we'll get into them for now.

[00:38:11] I'll see those are the ones.

[00:38:12] Banklaying ether also on their partners.

[00:38:14] Yeah, they've also tried to build some things themselves.

[00:38:17] I think to refer to them they've worked with banks,

[00:38:20] they've worked with telcos.

[00:38:22] As I read this, I thought slightly as a shame that I,

[00:38:25] as I researched it, that they did not have more

[00:38:28] mine share for me.

[00:38:30] That's kind of like the thing.

[00:38:31] Given that the relative size scale and how many things they do,

[00:38:35] I felt like man, I should know more about this stuff but...

[00:38:37] Yeah, it's because most of the stuff they did was before

[00:38:43] the tech sector became more plug into the global new cycle.

[00:38:48] And the stuff they're doing now is the same stuff they were doing seven years ago.

[00:38:51] Seven years ago, they were doing government agencies,

[00:38:53] they were doing teleco.

[00:38:54] If nothing has changed, are you missed initial cycle?

[00:38:56] You just plateaued.

[00:38:57] That would have happened to interswitch.

[00:38:58] Except the interswitch started to raise more money and got the visa investments.

[00:39:02] When they got into a new cycle, they had the same...

[00:39:04] Helios.

[00:39:05] Helios was 2009 that Helios invested in the interswitch or something earlier.

[00:39:08] Yes, very, very.

[00:39:09] But the visa one was what got them on the map in like 2018-2019.

[00:39:13] Helios also a third by the way.

[00:39:15] This goes to show, back then, the venture landscape took a lot more equity in companies.

[00:39:20] 30-34% for...

[00:39:23] It's a wild state to take.

[00:39:25] People's strategy.

[00:39:27] I went and had a look at their org.

[00:39:31] At first, I was a little bit confused.

[00:39:32] I was like, oh, the org chart is different than what I expected because the CEO is not who I expected the CEO to be.

[00:39:36] So let's give some context.

[00:39:37] And you know what I mean?

[00:39:38] Contacts.

[00:39:39] 2018, they had a massive fraud case.

[00:39:42] What happened is they lost around 11.49 billion NARA, which at the time was about $30 million.

[00:39:49] And the way they lost it is.

[00:39:51] I saw what it's all about.

[00:39:52] But let me just give a summary.

[00:39:54] Emergence got on their platform.

[00:39:57] Did some fraudulent transactions.

[00:39:59] Took all the money.

[00:40:00] And eventually the aftermath of this was the CBN, the Central Bank of Nigeria forced the CEO and the founder of Valentine will be...

[00:40:07] And some other executives to resign.

[00:40:10] We've said great about by the way.

[00:40:12] The company says that they resigned.

[00:40:13] Of their own generation.

[00:40:14] That's not what I saw in third party sites.

[00:40:17] But the weird thing about that is, how can a central authority force you to resign when they did not commit the fraud?

[00:40:23] They said because the fraud happened under their leadership.

[00:40:25] What's...

[00:40:26] Anyway, the argument would be they didn't do KYC for their customers now.

[00:40:30] Of course, but that's a fine now.

[00:40:32] That's the machine resign now.

[00:40:34] Normally that's a fine right?

[00:40:35] Typically in other developed countries.

[00:40:36] No really.

[00:40:38] We can give you a plan about you don't address.

[00:40:42] You don't work in the financial industry.

[00:40:43] When we're rabbit-hoaling, go ahead.

[00:40:45] Yes, yes, yes. We're rabbit-hoaling.

[00:40:47] Anyway, so interesting tidbits about the aftermath.

[00:40:49] The loss was shared between first bank and e-transact.

[00:40:53] And they both talk about half of the loss.

[00:40:55] So around 5.5 billion NARA for e-transact.

[00:40:59] 5.5 billion NARA for first bank.

[00:41:01] And as a result, the CFO at the time, NEE, then became the CEO.

[00:41:05] And he's currently the CEO today.

[00:41:07] Yeah, he and he's been there for a very long time.

[00:41:10] The structure of e-transact is as a parent company, if you will, called e-transact global,

[00:41:15] which is Valentine obese, the founder and CEO of the chairman of the company.

[00:41:20] And what is listed is e-transact PLC, which is kind of like the company that has...

[00:41:24] Because where access bank is invested and a bunch of other things.

[00:41:27] So I don't think there's more in your org structure that is publicly available on that.

[00:41:33] A few things from the orgs.

[00:41:36] Everything is standard is what we'd expect from a large public facing, banking institution.

[00:41:42] A few interesting notes.

[00:41:44] They have a person, Sunday, I did by who reports directly to CEO

[00:41:49] and it's head of public sector collections and payments.

[00:41:52] So it goes to show what we're saying again.

[00:41:54] Public sector collections and payments are very important.

[00:41:56] Why has it directly lines to the CEO?

[00:41:58] And they also have a head of switch implementation operations on what Tyo, who also reports the CEO.

[00:42:03] As we expect, they have executives report to the CEOs to show the importance of the relative groups to the org.

[00:42:09] Okay.

[00:42:10] Yeah, that's that is it for the people strategy, group strategy and geo strategy, fascinating and intriguing.

[00:42:17] I will talk about that product strategy, how they make money.

[00:42:20] And we can go through some of that now.

[00:42:23] Yes, but one could add a question for you.

[00:42:25] The holding company above the public bill is a company.

[00:42:28] So then the whole code doesn't do stuff apart from just owned equity, right?

[00:42:32] I couldn't find out.

[00:42:34] Somebody you don't know when it was born.

[00:42:36] I couldn't find any information that what the whole code does.

[00:42:41] It's like investment entity, not enough.

[00:42:43] It's just an investment entity.

[00:42:44] Yeah, it's like an investment entity into the thing that allows the man to keep the name.

[00:42:48] Basically creates a new level for people to invest in and to be public.

[00:42:51] So the entity is removed, all those good stuff.

[00:42:53] It seems like a financial play than that operational play.

[00:42:56] The CEO, we didn't talk about this in his bio, but it seems to be running another factory and platform as well now.

[00:43:02] And for factoring is basically if somebody's own you money, you tell them I will give you 80-2000 money.

[00:43:09] You take this and go out, assume your debt and cover it roughly, that's what factoring is.

[00:43:14] It usually happens for business transactions or shipments where you help people with

[00:43:20] time value of money problems or payment terms problems.

[00:43:22] So depending on that fact, a very different percentage.

[00:43:25] Also very popular in the gambling industry if you have gambling problems.

[00:43:30] You factor that debt.

[00:43:32] If you're a factoring gambling debt, that's not what I'm talking about, it's a loo-dee.

[00:43:38] That's a level.

[00:43:40] Oh, you factor in gambling debt.

[00:43:43] It's like, I knew somebody's, oh no, okay moving on.

[00:43:47] Product strategy.

[00:43:49] I'm monetization on how they make money.

[00:43:51] How do you learn to this?

[00:43:52] I'll talk about their current business, what they do now and I'll talk about some of the things that they've tried.

[00:43:56] They are trying less now even if it didn't quite pan out or maybe I try less now.

[00:44:02] They are main businesses transactions switching.

[00:44:05] I'll talk about it.

[00:44:08] They do that for custom for retail and for businesses and governments.

[00:44:12] I'll talk about those separately.

[00:44:14] Second is they make commissions through the CBN Shared Agent Network expansion infrastructure service.

[00:44:20] One thing we need to talk about that they do is that they have a network of agents.

[00:44:23] They say they have 30,000 agents as well and they make money through the agents that they have onboarded

[00:44:28] in part of this legacy of when they had the mobile money service which I'll talk about in a second.

[00:44:32] By customer.

[00:44:33] On the retail side, they have products that allow, this is what they say, they have products that allow customers show products

[00:44:40] and sell payments and accept payments.

[00:44:42] They have PUS devices, a lot of goods that allow retail customers accept payments.

[00:44:46] You want the accept payments to go to the executive device and you can still use that to accept payments.

[00:44:50] Last of the they do for businesses.

[00:44:52] It's not very big, not even think it's big.

[00:44:55] You can look at their annual reports and realize that it's not very big.

[00:44:59] For businesses and governments, they do collections and payments.

[00:45:04] That's where it gets interesting.

[00:45:06] Transaction processing for institutions, government agencies, donor agencies,

[00:45:10] United Nations, UNICEF, World Health Organization.

[00:45:13] If UNICEF is trying to give 10,000 people, 10,000 NARA,

[00:45:17] it transactions like, say less, give me the exospecies.

[00:45:20] Give me the exospecies with the names and account numbers and 20 minutes everybody gets that

[00:45:25] because what I was even thinking is they also do payroll for a lot of businesses.

[00:45:30] If you are even trying to do, I would pay 30 employees.

[00:45:33] What people do typically is you take that spreadsheet to the bank by the way.

[00:45:36] That's what used to happen if I remember right now it's on the 9th to 10th.

[00:45:39] You take the spreadsheet to the bank and then the bank runs the spreadsheets.

[00:45:42] We had the spreadsheets in our company now limited.

[00:45:45] I was doing my account, they already sent the spreadsheets.

[00:45:50] That was next space cycle.

[00:45:52] So they do that quite a bit.

[00:45:54] They also do a lot of revenue collection.

[00:45:56] One of the best things for their businesses is by law in Nigeria.

[00:46:01] The idea is you have something called a treasury single account where all government revenues need to be paid into one account.

[00:46:06] So that pushed a lot of payments online or through some web services and they also do that.

[00:46:14] They also have the federal internal revenue service to collect tax.

[00:46:17] I'm giving all these examples, they get a good sense of how big their collection business is.

[00:46:21] Like the tax agency for all of Nigeria, they are one of the payment providers.

[00:46:25] So it means they do have some sort of niche that's useful I guess.

[00:46:28] They can always work with the governments on large businesses from whatever financial service those parties need.

[00:46:33] United Nations, UNICEF, World Health Organization.

[00:46:36] Their collection business is pretty massive so all of these customer groups is not just for to establish them as somebody who does business for these large businesses,

[00:46:45] not for the business that they stack is going after.

[00:46:47] Yes.

[00:46:48] Yes it's a very very different.

[00:46:50] Yes it's very different.

[00:46:51] Yes inevitably Clay Christensen will say bottom end disruption it will eventually converge but as of right now they're very different markets.

[00:46:59] Yeah they connected all the telcos and the banks and the do payment processing for them as well.

[00:47:04] The handle pension payments for random you see all Nigerian military something something pensioners in terms of access handling payments, monthly payments to 20,000 pensioners.

[00:47:13] They build a lot of these custom solutions for these companies depending on their use cases.

[00:47:18] And the reason why this is not as easy as it's not only technological problem because it's easy to think oh we know how to as a society technically we know how to connect.

[00:47:30] To this bus money to 25 bank accounts cannot be structurally that difficult.

[00:47:34] It was anywhere laborious cheap but all of these companies have different specific use cases.

[00:47:38] I imagine that pensioners want to buy it at 15,000 documents first and then have those validated and stored somewhere in addition to the payment as proof of payment.

[00:47:47] And then on a regular basis otherwise stop payments and do every six months all of these things will have custom utilities that some companies may be unwilling or unable to build.

[00:47:57] Given the scale but this is stuff that each transact has where haven't done this for different people love it might be usable, love it may be understandable so they have these like.

[00:48:07] They don't just it's not just a tech took accept the payments is all the things that happen before and maybe even after the payment has done that these people need that I think it just like is excellent at this.

[00:48:17] I don't want to discount that still in the same person and would talk about competition realize that's what makes it hard between relationships.

[00:48:23] And if you want to build something for Nigerian then I don't army to pay people we have to face a whole new in the bank and the payment system and I'm using festival right.

[00:48:31] I'm in the first. I'll test some of the are I'm even talking to religion. I'm talking tech. Let's talk about this.

[00:48:37] I'm just taking a religious tech. You do first of all know that Texas and that I use in festival for payment right for personal man for personal management for pensioners that left 30, 40 years ago.

[00:48:45] But is this a big business though? This is just an offline. This is a paper business. Is each transacted tech company?

[00:48:52] I know you're being intentional. You want to get me round up. I almost felt you were just I was why you like because I had a face I had a face like are you joking?

[00:49:03] Are you having enough? No absolutely right because what we have discovered throughout ability is there really no tech businesses.

[00:49:11] Exactly. There's only this money.

[00:49:15] The race money. Do race money. When you when you hear asset like the really skeptical right asset lights is really skeptical.

[00:49:24] Basically you have to be boots on the ground like you can't make payments to Nigerian army pensioners. We don't have been boots on the ground for pensioners to submit their forms and for someone to validate them and send something all of those things become expensive to do.

[00:49:35] So that's basically a core business for retail and for business.

[00:49:39] And collections and that's a huge part of it. The collections business is pretty massive as you can see the pools of capital two ways they do right so they also help these entities disburse payments out and collect payments in.

[00:49:50] If you're in the middle of those flows not only do you make and this will make more sense when we talk about their business in a second what only do you make the payments processing vague.

[00:49:58] Let's call it two percent three percent payment process and vague you get to negotiate management contracts with these people because it's not that you get to make a different fee with this people and different structure.

[00:50:09] It makes me more positive when you transact because the hard work needed to get the deals done and the potential of the customers not switching because the customers like trust them or more old school less likely to turn that may mean they have more

[00:50:26] defensibility in their business than they would otherwise appear.

[00:50:30] Yeah, I was listening to this podcast on this Swedish Swedish machine devices company or something if I find it out at last cup course something and part of the reason why they're big is it like it's not a big portion of the expenses of the company but

[00:50:46] it's a crucial portion so they willing to over pay for something steady and I feel like for these businesses if you're United Nations is boss implements and I

[00:50:54] just like it's going to cost me some money to the boss this boss payments.

[00:50:57] But let me get it down.

[00:50:59] Yeah, I got to get it done.

[00:51:00] It's I'm dispersing literally 100 million dollars.

[00:51:02] I'm happy to pay X million to this person right and therefore having services it becomes very sticky.

[00:51:09] You have specific use cases look I mean much more much much more to lateral agency.

[00:51:13] These are the things from the head office that I have to abide by you're not due to it already don't do it.

[00:51:17] I feel like that's a core product business here.

[00:51:20] Hmm, let me I like the way you broke up the product view in those buckets.

[00:51:27] Let me give a slightly different view and they will coalesce everything at the end.

[00:51:31] I have a product line centric view of their business which is similar but it's like a different angle.

[00:51:37] The first major product is switch it's SWI TCH IT and that's basically transaction switching platform.

[00:51:45] The primary business connects all the payment network you said at this jump.

[00:51:48] The second major product line is corporate pay great I love these names.

[00:51:51] It's from the name you know exactly what they do.

[00:51:53] And corporate pay is the that's for some say the ball payments to employees like you said the salaries the benefits whatever.

[00:51:59] We have paid outlets and pay outlet is supposed to be for bills and utilities but the way thing is the people who know what they're doing.

[00:52:06] The other thing is the people who normally pay bills and utilities are end everyday consumers but on the Android app store.

[00:52:12] And on the iOS store it seems as though pay outlet is more of a web service because the apps didn't exist.

[00:52:19] It's either a web service or an API integrated service but there's something interesting about pay outlet it doesn't exist as its own stand alone.

[00:52:26] Also they have pocket money M O N I which the iOS mobile app has been updated since 2015.

[00:52:33] And they pulled the Android app from the app store.

[00:52:38] So the app was supposed to be for sending money receiving money also paying bills which is what pay outlet does but it's either it's been discontinued when I eventually went to the website.

[00:52:46] It says it's going to be quote unquote relaunch.

[00:52:48] I don't know what that means but I'll say think of pocket money as mostly disc I mean they didn't update the iOS happened since 2015 nine years.

[00:52:54] So there was supposed to be an app that did something the website is it says it's coming but probably think about it as discontinued.

[00:52:59] They also had another app called bank it's and a bank at the US app but the same thing the Android app was called the iOS app has been updated since 2017.

[00:53:08] So they have these as again probably discontinued or zombie mode it was supposed to be pay bills send payments basically overlapping functions as pocket money so I would say probably dead or in zombie mode.

[00:53:18] And the last product that was very interesting is credo C R E D O which is a social media payments platform this one looks like it's relatively new.

[00:53:26] It's definitely seems to work and it has a website is supposed to help you if you're a seller you sell clothes on Facebook you collect payments however this is exactly what.

[00:53:34] Substack has a sub stack payment link everyone has a payment link unclear how this product is going to be differentiated it is something more of a startup within each transact but that those are basically the biggest product lines if you ask me nine percent of the important switch it and corporate pay everything else is a little bit old discontinued not working

[00:53:53] and if you focus on switch it and corporate pay issues exactly a bank police is correct yeah probably businesses are governments large businesses to help disbursements and elections not all the CDC stuff which they don't even update apps agree with that interpretation they have.

[00:54:07] A number of things that they tried in the past as well so each transact they had a card scheme Genesis card scheme so the really there's very now on this musically Genesis card scheme they say they're the first to bring to comply with the chip and pin.

[00:54:21] If you remember back in the day there was a magnetist trip and central banks that everybody has to go to chip and pin back of the day in America really got you to pay three years ago.

[00:54:29] I know this was just without a fall something in Nigeria it became mandated the switch happened in goodness by 2010 every card in Nigeria was chip and pin.

[00:54:38] And you couldn't issue a card that was not chip and pin by 2010 and Nigeria so long it reduces fraud it's actually not just a visible thing it's actually has more security compliance.

[00:54:47] This is the fraud in the system which means everyone gets to keep more money you don't need to give more payment allowances for fraud.

[00:54:53] And so they had a card scheme in 2010 I couldn't find any from here about a card scheme it didn't work a lot of people value card outside the card scheme the only people who could make it work was industry which is a lot of really good research about what makes a card scheme had and why industry can very able to do it but each transact was not able to has not been able to very fast been able to build this really purely domestic card scheme without competition

[00:55:15] and CBN announced one like a year ago but you know what the analysis where it was about is like come on CBN didn't build card scheme give me that there are things they also tried this pocket money pocket money was their attempt at mobile money

[00:55:28] imagine if you're each transact now you have this report out where you can basically build a common whatever you can go and pay bills right and they build this app that was essentially an e wallet I couldn't figure out what the banking partner was and it looked like any kind of banking app you have today could put money in you could pay bills is a list of people to pay bills to like honestly like any banking app you have today but it was mobile money but it was the previous situation mobile money so if you follow Nigerian tech a lot of the first mobile money

[00:55:57] the first time the mobile money was ban cleared and startups working with banks to do that I'm not tell cause I'm telling just being the service providers and I remember this interview that tire gave from 2000 tire of use to like I was first name basis no that's tire of use to the founder of Pagga gave about why having mobile money be told colletti in Nigeria was problematic because these companies are foreign owned and that being a cup out of all of the companies in the world

[00:56:27] and the first structure countries infrastructure should not be owned by foreigners and that's a reasonable point of view it makes sense but he also has some biases in the game I mean they had a competitor right and the whole point at the point they tried to make to do a different form of mobile money

[00:56:41] right it didn't quite work there's a lot of really good papers about that if I find on our link if I can find a financial link to it and show us about why why the money work but an empirical interesting this is empirical discussion the short answer is probably distribution like if nobody's making money from it if they're not making as much money from it they will not hear about it so everybody had mobile money and was conflicted with the banks and pocket money was their own like thing you could send money they worked with I saw a lot the launch with Western Union like send money into pocket money from Western Union

[00:57:11] they had this actual service they had a network of agents I watched a lot of electronic videos for their agents

[00:57:16] yeah it's interesting it's basically like any kind of service you had and we had this was 20 from 2015 they had all this agent stuff but obviously didn't work

[00:57:25] and by 20 months that the writing was on the wall you can't get that many years quickly enough

[00:57:30] you can't you can acquire quickly try to do an army of agents do commission on but they're not ready they're not really about the blitzkilling game they don't they need have that kind of money

[00:57:38] they mean I have 100 hundred million dollars though 100 million dollars to get to get to grow their agent of work and they were trying to do this a lot of money

[00:57:46] yeah all of those things they go ahead but back when I went there funny they still have the iOS app come on guys like pull this shit down like I don't understand

[00:57:54] are they has a lot of business in 2015 yeah or even I even couldn't even find like how they didn't even say that the card system was

[00:58:02] cause I can't I don't even know who you use the cards schemes doesn't exist doesn't exist

[00:58:06] but you can't even find a new article a press release that says hey announcing like cards will work on to so did you know

[00:58:13] they're like if you can find the card use it no

[00:58:17] who said it's not okay have you used it that didn't work

[00:58:19] you don't have the card that's saddo maybe tell your bank to sign up for the card

[00:58:24] but yeah did as far as I can tell I couldn't find evidence that these things are ongoing practices

[00:58:31] I couldn't try the iOS app and the apps but I can put my banking data

[00:58:35] the small the small money that I have the small money that I have in GT bank go to want to collect

[00:58:39] I don't know I don't have you have the energy for that oh spirit of GT bike I don't know if you've used their new app

[00:58:45] do you use GT bank at all they have a new app that is I used to use GT back in GT world simultaneously

[00:58:50] but eventually GT world was the newest one so I only use that is that is that the new one is there a new

[00:58:55] new world no GT world was really yeah I used to have to use it this past weekend I don't know

[00:59:01] yes yes you didn't like it I like it it's good no I like it but I I just want them to just like

[00:59:08] do stuff but I don't know I know

[00:59:12] who you want to go on you never see that money again what time on the three episodes ago you were saying

[00:59:18] we have the equivalent of FIDC insurance and I dress up

[00:59:21] I don't know let me tell you let me tell you a story about bank let me tell you about bank failures in

[00:59:28] Nigeria you could go to 1991 1983 there are so many bank failures that my mother would tell me about

[00:59:35] I have to do this in this bank so my family's my family's wealth is you locked it's like

[00:59:45] savanna bank or something bank just to fill on a regular the water said insurance is they'll

[00:59:50] give you money back here so banks banks just to fill on a regular basis like when I say regular like

[00:59:56] oh no oh no savanna bank is so done quick let's go to savanna bank oh no we're late oh well

[01:00:06] you know I when they increase the capital base for all the banks 10 years ago

[01:00:10] hopefully that that theoretically and practically should lead to fewer

[01:00:14] impulsions it's honestly it's the fair of that that keeps driving the consolation of bank

[01:00:19] regulation that we see in Nigeria like I remember very vividly of people just being like you have

[01:00:24] to have the money at home doesn't make sense that's the people get robbed at home all the time because

[01:00:27] everybody knows anybody with anybody with actual money knows that it's better for me to be at home

[01:00:32] with the money and two dogs put it in savanna bank shout out to savanna bank like country people outside

[01:00:40] family if your family is working as a valabar just do that because the causes of the family out on

[01:00:49] your family are you want the money back in dollar terms not an Arab version you know what's funny

[01:00:57] anywhere out they want to give it to me our colleagues inflation adjusted your bank

[01:01:01] currently family back inflation adjusted dollar amount you can get one of the different places

[01:01:06] that's typically how they do let me talk about how they make money now this is fun yes

[01:01:10] monthization this is my best part the company makes money I'm reading from the annual reports

[01:01:14] this is you don't have to conjecture anything that's good makes the company recognizes revenue from

[01:01:21] three different major sources mobile purchases of airtime commissions and switching

[01:01:26] maintenance fee for one of transactions yes makes sense and that's it again all the stuff we talked

[01:01:32] about about about all of those things is just mobile pockets of airtime commissions for switching

[01:01:38] maintenance fee yes all this retail all this we do make anywhere I'll also intrigue but by that order

[01:01:45] the order doesn't imply anything but for sure I'd have expected them to put the switching first

[01:01:49] close the bill stuff is 15 10 to 15 percent which is not a lot or less you have volume

[01:01:54] you see it now you see it now airtime their time self is typically 10 to 15 percent

[01:01:58] you don't make that much money let's get far the airtime is they have a large volume they do

[01:02:01] with all the turkeys and I know that they do and I'm saying but for most startups to say that

[01:02:05] don't believe them you're willing to get it at scale because most people will buy it at par like

[01:02:10] bank will be able buy mc and airtime of 100 now or 400 now but then they get it for 85 or for 90

[01:02:15] we can mix yeah but if you look at the terms of that btb and government cannot not available

[01:02:22] they make money by charging fees they charge on corporate clients the charge

[01:02:25] tell course for distribution of course but this is the important thing their vast majority

[01:02:30] of that revenue is going to be from mobile airtime sales right oh this is 20 times surprise

[01:02:36] you and our reports 2023 is not audited and it looks even the notes to the 2023 account is looking

[01:02:41] like vibes I said to just ticked 2022 because surprise that's the biggest because normally

[01:02:47] for b2b b2g company I wouldn't expect if it's b2c like it's unlikely businesses and governments

[01:02:52] would buy that much airtime and their consumer business is so small but I guess I guess it sort of

[01:02:57] works out where maybe the business enterprise clients can buy it and bulk for their employees

[01:03:02] or something but that's strange more than switching well this is going to be buying airtime

[01:03:06] because no no no they're intermediary between right between the tail cores and the actual customers

[01:03:13] so I don't think it's just for businesses at time oh god i got a lot of notes

[01:03:17] oh god this is very very important this is very important well you're telling me

[01:03:22] the telcos need an intermediary to sell me airtime I thought they had their own financial

[01:03:27] platforms to sell that directly yes no this is why why why build that expertise was the benefit

[01:03:35] in I know I'm building you got nothing what else benefits you win through sending airtime for your

[01:03:39] entire life as a business that's a in house expertise no they should build it I don't think

[01:03:44] they have to build it somewhere else and they can put fees on it I'm charged like it's a very

[01:03:47] easy thing to outsource and somebody can do with the day-to-day of collections and a visa is

[01:03:52] blocking somebody and who wants to like that's interesting that important I mean some could

[01:03:58] and it is a reason you could or could not but I'm firing a conversation I understand what

[01:04:03] you're saying but I think as more telcos are building their fintech arms let's just see mobile

[01:04:11] money arms that's not home in the farms yeah they're building more more financial expertise

[01:04:16] although I guess that expertise is more consumer growth living dread I guess that expertise is

[01:04:23] more consumer adoption led not payment processing led okay okay fine fine you may have a point

[01:04:27] this is more sense now because I was like how do they make money from airtime when there

[01:04:32] are B2B businesses because it's the telcos interacting with the customers for the people

[01:04:36] processing to buy the airtime got it i'm for context so many of these telcos don't even have any

[01:04:40] tech arms at all so I remember etan and i jar famously a couple years ago then tell like network

[01:04:44] management is by it erics you know it's all it's all it's all changed now they're all mobile money

[01:04:49] players now there are like now they move on your arms let's do it up marketing companies man

[01:04:53] let's do it up marketing companies that do it but I want to say that they say bad thing

[01:04:57] as of five ten years ago yes as of now the mobile money fintech arms of those companies

[01:05:02] are so big they're literally hiring all the tech talent from the banks to do those things

[01:05:06] you're yeah your view is correct five years ago less so now you can't see the mobile money

[01:05:10] arm of mc doesn't have any tech the mom money no the mom money is one of our separate businesses

[01:05:15] what i'm trying to say yes yes so they tell the telco part the mom money separate the telco part

[01:05:20] it's separate in the primary owner they're just marketing farm just my own business

[01:05:25] just company yeah it's it's parent company with a majority holding action on store about the

[01:05:30] structure because I know kicker's not investing in any of the

[01:05:35] and invest in the nct which is the mobile money but the investments are still for minority

[01:05:42] states mc and owns the majority airtile owns the majority yeah but eventually it's actually

[01:05:48] those one recently just happened last week I think yeah i think five or seven

[01:05:52] billions of cars must a car must a car must a couple money mtn oh yes for some crazy implied

[01:05:57] valuation anyway yeah back to the back to the back to the revenue right if you decided to get to

[01:06:03] it like based on licenses is what they say right the switching license so let's go to 22.5

[01:06:07] billion dollars of revenue million dollars billion dollar revenue in 2022 21.2 of that is from

[01:06:13] switching and 1.3 is from being a pssp payment solution service provider yes and then like small

[01:06:21] amounts from mobile money and validated services right switching is the biggest or it's not the

[01:06:26] biggest switching is the biggest but you must have the definition of the definition of switching

[01:06:30] includes this mobile money switching as well yes but when you move switching pssp which is the retail

[01:06:37] the the payments are acquiring that's when it gets very it gets much smaller as well

[01:06:45] so what you do find is so based on the most recent audit or report like a fine they make revenue from

[01:06:49] airtime but they make their profit from commissions and you can look at that in the notes to the

[01:06:54] in the thing where you see the airtime sales and you can see the cost of goods basically which

[01:07:00] they have to announce you can look at the price of something and the cost of sales and you see the

[01:07:04] cost of sales for mobile airtime purchases compared to the revenue from mobile airtime purchases

[01:07:08] you look at a let's call even a 2% margin so I don't even know if it's a 10% of the time that

[01:07:11] the money you can make on adichas accale otherwise I think they will not post you then we think

[01:07:15] that is given oh yes no no no I meant if something like chip or cash or kuda sells it

[01:07:23] not the the business side of is the consumer and we have more profit potential

[01:07:29] why I even don't think so I don't think unless kuda is funding that 10% but I don't see I'm

[01:07:34] saying oh kuda is funding that kuda can do whatever they want that's how they're not making any

[01:07:37] well okay let's do on top kuda has money now now I will just as I thought you meant I thought

[01:07:41] you were like oh airtell is giving up 10% of the 100 Nira because somebody's new payment

[01:07:45] persons for them I don't think that's possible anyways back to this what's it from airtime sales

[01:07:50] about 70% but if you look at the cost of airtime sales it's like 1.5% 2% margin but if you look

[01:07:57] at the margin on their commissions and the cost of sales or their commissions it's like 90% margin

[01:08:02] so we how do we define commissions for them that's payment processing transaction fee

[01:08:07] commissions or service development fees everything else because that's very broad commissions is

[01:08:11] no so mobile ATM sales get switching for the collection and other things they do they have

[01:08:16] arrangement that include switching fees but also commissions for printing a platform like if you

[01:08:22] want head organization is using each transaction I was going to pay them 3% I'm going to give them

[01:08:26] commissions for using their platform that's what includes all our commissions nice and if

[01:08:31] I don't even look at the cost of sales for mobile ATM sales and look at the cost of sales for their

[01:08:35] commissions right you find that it's like 90% margin yes yes yes yes because the telecoke can

[01:08:42] squeeze them on the margin for the telecoke but for the airtime but then the other guys the other

[01:08:48] businesses can't squeeze as much because they need them as a partner for implementation but

[01:08:51] also they're also getting costs on things you know no the relationships and pricing and transactions

[01:08:56] is not costum and I hope it's not costum Jesus what is what a terrible business at night at 90

[01:09:01] at 90% margin yeah I mean the joke in text acts as everything is slightly costum at some skill but

[01:09:08] I hope it's not they're not starting from scratch each time I hope all that commission all

[01:09:12] that commissions I think you're you're overestimating the rule of thumb of costum is expensive let me

[01:09:17] give you some numbers all our commissions in their annual report to scot it and maintain it's

[01:09:22] let's call it six billion dollar right the actual cost of sales of commissions is like 600 million

[01:09:29] I used to I used to start about costum

[01:09:34] you think that's a bad idea anymore I like you think we did 20 more costum if that's the margin

[01:09:39] they literally make it at 90% margin gross like to be saying gross margin on these things and you can

[01:09:45] tell and so it's easy money if you can get it all of this money says it's not part of it's important

[01:09:50] to notes because ostensibly a trunk at a revenue is attempts sales but it's really all the

[01:09:56] profit is made on collections which is kind of why all these fintechs make a lot of money is on

[01:10:01] collections and for complex each transact a discounted your pre-torn that could be massive we

[01:10:07] didn't talk about system specs another big player in this space and those players do you don't

[01:10:12] really hear that they're in the news for consumer because I'm not interested in banking moment

[01:10:15] pop so instagram is right right right they're really about collect collecting legostates taxes and if

[01:10:21] you can get it not only do you make the payment switching money or at least I'm able to optimize

[01:10:26] even if you're paying other people in the payment channel after we paid you can charge a fee on the

[01:10:30] collections you can charge a fee on the on the collections as well which honestly depending

[01:10:35] on your negligence in power let's just call it negligence in power of relationships that can

[01:10:39] be astronomical so some clarification for me to make sure I'm understanding I understand based on

[01:10:46] the margin differential yes when we talk about just margins they get more money from commissions

[01:10:52] than from airtime I got that but on the revenue side the information let's go through

[01:10:57] it again because information I have says okay let's pick what random year let's pick okay let's

[01:11:02] pick 2021 random year yeah total revenue 22 billion 22.7 billion NARA switching is 21.7 which

[01:11:10] is 90 something percent airtime is very small but it sounds like you were saying even on the revenue

[01:11:14] side airtime is bigger than I misunderstand so switching includes switching there I think

[01:11:20] includes commissions on switching as well if it makes sense but it's they split it by different

[01:11:25] business lines split mobile airtime separately because it's a corporate business but it's still

[01:11:29] switching if it makes sense okay I see it's only the same bucket it's not the same bucket so switching

[01:11:34] and it's technically while W is technically paying a commission on switching right but not just

[01:11:40] switching right right right right okay I want to say switching they mean they mean the switching

[01:11:45] so the switching part you're looking at is the revenue based on licenses so the switching license

[01:11:51] is what lets them offer this thing too triggers a little account or something or the other

[01:11:56] makes sense makes sense another thing to note about the revenue profile over time let's just look

[01:12:01] in NARA if you convert to dollars it becomes a whole mess it's increased very nicely and linearly

[01:12:06] around 0.8 in 2010 2 in 2011 3 in 2012 yada yada 2017 12 but it increases the problem is

[01:12:14] it seems to be increasing at a rate you'd expect for a large business not a tech company it's not

[01:12:19] exponentials very linear and because of the dollar effect it actually looks completely different

[01:12:24] dollar terms but that affects every night drink company so that's a separate conversation about

[01:12:28] a macro which we don't need to get into but it's growing instead it reminds me the way of carbon

[01:12:32] or with the carbon revenue profile nice linear up to the right but not not Chipper Cash

[01:12:39] and not kuda kuda is a bad example not Chipper Cash exponential growth which is what I would expect

[01:12:45] based on the kind of customers and the business they have just one of them besides the company

[01:12:48] it's not going 10 x over year yeah but but what it's fine right it's just like they did

[01:12:54] it's a profile they have they don't have the facilities for that you know what I mean

[01:13:00] it's not even like that that's like asking a fish to fly it's like no I don't have

[01:13:04] no I'm not even criticizing I'm just saying effect if you think about it this way if you

[01:13:07] provide a service to a startup that service can increase by 10 hundred x in a year because

[01:13:12] that startup can increase by 10 hundred x in a year if you provide a service to government obviously

[01:13:17] the government's growth is going to be linear it's expected because of the customer profile

[01:13:21] it's fine it's just a number it's big contract now they need to go and collect kebbi state

[01:13:24] payments and unbrusted payments yeah back then back while I was on monetization very quick

[01:13:30] segue on their stock performance over time so it looks like around 2015 it was two to three

[01:13:37] dollars for most of the year from 2015 to 2022 seven years the stock price was again two to three

[01:13:44] now it's been it was two to three now for eight to nine years around 2023 2024 it increased

[01:13:51] a double to around four five and then it went down again the overall perception I would see

[01:13:55] of this stock is not good performance at all in nine years it's doubled and in 15 years it's also

[01:14:06] doubled however it's hard to compare because this is on the Nigerian stock exchange right

[01:14:10] yeah you have to compare to other Nigerian you can't convert to American ones but not a company

[01:14:13] I would invest in yeah so I was looking at like January 23rd January 2023 on the stock price right

[01:14:19] so definitely thinner but January 2023 had like a big jump from January 23th July or so

[01:14:25] it was pretty much yes still like ten but then he went back down 2023s been going back down and

[01:14:30] now looks like it's around six or seven yeah and I saw that man that's a two hundred and

[01:14:36] two hundred and ten percent increase in like six months and I was because aluminum

[01:14:39] they always have this back and forth where he talks about like investing in the IMO is like look if

[01:14:42] you're a NIRROR yes you have NIRROR liabilities yes yes if you pick the right stock you can make all

[01:14:48] that money back plus profit you can get rid of inflation and for X and profit when I enjoy

[01:14:53] is a unique snowflake man because even if with that six with that entire thing I did the math where

[01:14:58] if you're getting if you took us they put in NIRROR basically knew was going to go up two X to be X

[01:15:03] did it matter inside the trade-in basically put it there yeah and you knew was going to go up

[01:15:07] to X and you go out in and out at the right time if you're lucky you put a hundred dollars in

[01:15:11] you come up with like hundred and four dollars before you can I come for inflation which is crazy

[01:15:18] I was just over this this I said on every episode are you always do five you always take the

[01:15:23] different position I would say the same thing any money anyone any any human being living in

[01:15:27] Nigeria convert all your money to dollars immediately and then at the point of need when you need to

[01:15:32] pay your rent you're if you convert back as little as that's the only logical strategy every other

[01:15:37] strategy doesn't make mathematically now if you want to get emotional I love the country on a hold

[01:15:41] the NIRROR yes this is an emotional podcast for the sake of pure math it doesn't make sense to hold

[01:15:45] the currency because inflation and devaluation it will rob you of all your money it was 28% the last

[01:15:51] week right she's 20% inflation god it's mind boggling it was four it was 459 to $1.9 23

[01:15:59] January 24 was 900 now it's 16 hundred yeah like bro the stock has to be tripling quadrupling

[01:16:07] yeah you will make the money even the stock that's doing well you end up like if you're lucky

[01:16:11] you're flat if you're lucky if you time the market exactly right and it goes up like every time

[01:16:16] now it's like right you get like you get to expect it's really especially hard to make any money

[01:16:21] and if you don't even have a conference inflation let's assume that inflation that's the measure

[01:16:24] you can you take all the confliction like oh the flush what's the measure doesn't really affect me

[01:16:27] you can you can make all kinds of conforming arguments for yourself but even on like an objective

[01:16:33] you as the yeah devaluation affects everyone right that's crazy to me and I thought like

[01:16:38] because I looked at the stock price in January 2023 I thought this company is new very well

[01:16:42] there's a bunch of there's a bunch of the best performing technology companies they're only

[01:16:47] like six of them listed in stock and I just like exchange you know this is doing very well

[01:16:50] and then you look at the stock price and you look at the market and I am like farm

[01:16:55] now this is crazy no this is not going to work and I'm making adjustments what I said before

[01:16:59] it's not just converting your money to dollars and spending the time of me you can also do a stable

[01:17:03] coin because most stable coins I'll say most not all because stablecoin conversations

[01:17:08] is a different conversation about the pegs but that'll give you almost the exact same benefit

[01:17:11] but holding a bunch of narrows you're taking so much macro risk for your entire livelihood

[01:17:16] I don't know why you want to do that in a developing country but that's just me I'm a finance person

[01:17:19] yeah whoo one position we went on the secret did you do you finish yeah yeah I did finish my

[01:17:25] decisions just to summarize that part they make money from switching a good point of their money is

[01:17:28] not from mobile internet sales but really from the commissions they collect on collections and

[01:17:32] as I say easy money if you can make it but if you if you can't make it sorry

[01:17:36] you're on your own I'm finished if you can if you can talk to the government to give you a contract

[01:17:39] to switch you can I agree good terms get a person to have everything you collect for the

[01:17:45] nine-drug government for federal taxes because there are many places you pay in a

[01:17:49] general government you'll be stunned land use something FIRs FIRC still will be stunned you'll

[01:17:57] be amazed everything has its own custom portal I remember being in university of Lagos what they

[01:18:02] held the department to have his own portal every time his own portal like what they held what's

[01:18:06] going on but the company's like it's like I want to make all the money make some of the money

[01:18:11] on that stuff and they build on the government meetings business say hey whatever you're doing

[01:18:14] we make it easy we collect it everything be simple we do a regular reporting all the good stuff

[01:18:18] that you need easy thank you this is the last section normally this section is competition and

[01:18:25] exit options but we're just gonna do competition because they exited whether they do the IPO many years

[01:18:30] ago competitors they have direct competitors and then indirect competitors on the direct side

[01:18:36] yeah let's break it down based on their business lines their primary business lines

[01:18:40] the primary business line is the switching and the payment processing part of the company if we

[01:18:44] see their major businesses the operate the switching platform a payment processing platform that

[01:18:49] targets large businesses and governments then it's very clear their direct competitors enter switch

[01:18:53] those interstitials almost the exact same thing however if you broaden their business a little bit

[01:18:58] and you say they offer payment processing company at the offer payment processing platform to anyone

[01:19:04] then you start to see okay what about Flutterweave and Paystack however I would see as of right now in

[01:19:08] the market those are very different markets Flutterweave and Paystack doing SMEs developers has nothing

[01:19:14] to do with the Nitrogen governments Nitrogen Tax Authority I will just say over time it's likely

[01:19:17] to converge but I would say the primary competitor enters switch and then everyone else less so on

[01:19:22] the other hand you could also I don't know if sorry just quick quick thing I don't know if Flutterweave

[01:19:26] or Paystack have switching like we just got a switching license like a year ago two years ago

[01:19:30] this company is a bit more downstream all their payments PSSPs payment solutions service service

[01:19:36] solution provider I wouldn't even for the switching I would say it's more like unified payments

[01:19:40] charms yes yes yes a couple of switches that but like their competitors downstream is like they

[01:19:48] also have they also have a PSSPs themselves which they make some money from which is where they will

[01:19:52] compete with Paystack and Flutterweave but they are clearly half-asseted judging by their revenue

[01:19:58] numbers yeah I was talking about the PSSPs smaller part and then another view of looking at competitors

[01:20:04] if you look at all the different product lines so the first product line is switch it which of course

[01:20:08] will be inter-switch their second product line is corporate pay which we said before is when they

[01:20:11] make bulk payments to employees subsidiaries so that'll be any company that offers payroll services

[01:20:16] or let's say disbursement services because payroll implies salary but disbursements can be for

[01:20:22] suppliers can be for anyone and why see a allowance let's literally so in Nigeria spend a year doing

[01:20:29] national utilities and use a bucket of the chair you go to camp I do not even want to talk about that's

[01:20:34] just trauma no reason it's a fun podcast beautiful position in in Europe but not in English can you

[01:20:39] imagine that high level proficiency high level my I don't think it's proficiency I think anyways

[01:20:45] I didn't want to get it but if you want to know if you want to know email email and newsletter email

[01:20:50] and I was another way email and newsletter if you want to hear about my your but my teaching English in

[01:20:54] Europe I was teaching Europe wow that sounds good so NYC yesterday national utilities service there's

[01:21:02] hundreds of thousands of people every year three batches a year literally who received hundreds of

[01:21:07] thousands ask you millions definitely millions maybe we receive payments every month who's going

[01:21:14] to manage that contract is going to be used because in how many pounds I filled and things I signed

[01:21:20] to get the whatever I think was 18,000 I got until my 11,000 I remember in month that's where they make

[01:21:27] that disbursement sorry I was talking about disbursements and NYC is a good example of just lack

[01:21:31] skill regular disbursements and everybody gets that amount for a year fixed as I want to you and the

[01:21:36] day you don't pay NYC that's where you know this protest don't play with that money at all

[01:21:41] ever funnestory so I was an NYC and I go and they're like okay you put in your bank account

[01:21:47] details to get paid I'm like of course that'll be my pleasure I love to get paid I put in my

[01:21:51] details are like oh no sir it must be union back yeah I said what they said oh no we can only pay

[01:21:59] union back before I started to argue I just thought what is the benefit of discussing with these

[01:22:04] people crazy you know what I give you know what I give you that give you what they're calling

[01:22:08] advice it's not instruction advice maybe so you don't have to come back again and explain

[01:22:13] welcome everybody got paid but I didn't get paid I didn't put you know back

[01:22:18] you messed up oh my god I went I went to the union bank branch to open a bank account and this

[01:22:22] branch wasn't saying and they're like bringing electricity electricity bill for three months okay

[01:22:29] let's come back on top it's a five minutes cycle I have a letter that my uncle had to sign as a

[01:22:34] guarantor for me like I'm not going to steal money from the bank I was a university

[01:22:41] oh my god right I like that the digital bank branch to be like this is not going to steal money

[01:22:46] oh my goodness okay okay so those are their primary competitors based on their primary

[01:22:51] business lines they do have some secondary tertiary business lines and therefore some secondary

[01:22:56] tertiary competitors I'll go through them but I'll go through them very quickly because they're

[01:22:59] not as important as your primary competitor which is obviously interest which okay so on the

[01:23:03] mobile money and mobile banking side pocket money's been discontinued right but yeah they say

[01:23:08] they're going to relaunch it if they do relaunch it which is what they says on the website then their

[01:23:13] competitors would be money point Paga Ope Yare Yare the also do similar consumer facing apps for

[01:23:20] bill payments and for transfers next is bankets also seems to have been discontinued I'm not even

[01:23:26] gonna talk about competitors there I'm more confident bank it has been discontinued than pocket money

[01:23:31] the last is credo the social payments since paystack and flood away have have paystack merchant

[01:23:36] flood away have merchants they do face some competitors there so overall they face a lot of

[01:23:39] competitors some of the competitors are smaller some competitors are better funded some competitors are

[01:23:45] younger most competitors however target a different customer segments even though they have a lot

[01:23:50] of competitors I will say most of the competitors are doing something slightly different and don't

[01:23:54] necessarily have a switching license which is the primary source of revenue for our friends at E-Transact

[01:24:00] so that is it for the competitors we can close on let's see what it's at some markets

[01:24:04] they're going they're going from they're going 30 to 40 percent maybe before even

[01:24:11] close out is there like a steady growing business growing at a steady rate they have very well for

[01:24:18] the competitors but they have a very strong niche it's kind of like one of those things where

[01:24:23] you're breaking into any of these custom collection things for their unique use cases we just

[01:24:27] not be worth the time for most people at scale most of the competitors at scale and it's good

[01:24:33] for them and they're profitable in some ways it's like competitors may be going to be overstating the

[01:24:38] intention to compete it's good like of course this company would love the collections but yes good luck

[01:24:44] I like it however there are stock price what you said about the revenue and customers that is one

[01:24:50] view of the world business performance the actual best view we have is a stock price because hopefully

[01:24:54] the analysts take all the data all the metrics the growth and they discounted and that's just

[01:24:59] been terrible let's take out the 2023 where they they grew by some crazy amount from 2014 to 2023

[01:25:05] eight to 10 years it was literally two dollars the stock price was flat for 10 years I don't know

[01:25:09] somewhere but in era I was linking I'm flinking now look at the dollar stock price yeah I'm

[01:25:16] looking no no no look at the narrow it was around in 2015 and also to Nara in 2023 I don't know

[01:25:23] eight years of flat stock price just says there's something going on there you know how it's easy

[01:25:29] that your stock price I remember we know one of my first introductions in that your stock price

[01:25:34] I think it was transscorp was IPO and it was a big thing I didn't my transcript IPO was but I

[01:25:39] remember my mom until I hate you knew she'd invest in transscorp and you told her to invest or

[01:25:44] no no I didn't I cried too much I was as if baby boy stuff at that age I was just

[01:25:52] really know a lot of stuff anyways but I remember heard me like she's get me started investing

[01:25:56] and like I'm gonna buy some transscorp shares for you nice I remember being like oh I have

[01:26:01] transscorp shares for a couple of years it looked just like that thing went to near zero if

[01:26:06] you didn't go to zero because transcopy sold everybody dream a lot of all of that to say all of

[01:26:11] that to say by the way I don't have a transcopy is doing now there's a separate conversation so

[01:26:14] right actually the disclose that I miss shareholder in transcop I don't know if you know how many

[01:26:19] 5,000 or 15 years ago but like it's all gone to zero so a lot of people in Nigeria believe that

[01:26:28] for good reason there's a lot of inside actually in this stock and if you don't know what's

[01:26:33] happening do you even go and play with these people that are playing and in the stock market in general

[01:26:37] I'm not talking about any stock in particular so what do my Nigerian stock exchange just be clear

[01:26:41] and see maybe the US one too to be honest you speaking you speaking about the stock price

[01:26:51] and getting some insight from me as well I'm gonna be like they probably are no they know

[01:26:54] yeah I don't know why okay but okay but no let's take a few a few steps back the only reason I

[01:26:59] brought it up is you were trying to glean insights from their revenue growth I'm saying revenue growth

[01:27:04] is only one criteria hopefully the stock price incorporates all financial metrics no I'm saying

[01:27:08] it incorporates all that metrics that's what I'm telling you I'm telling you that I'm telling you

[01:27:12] that the revenue is growing but if the stock price don't respond to that all that things that we

[01:27:16] are not seeing that's what I'm trying to tell you because it's not only based on revenue it's based

[01:27:21] on revenue profitability cash future it should incorporate everything in a regular performing market

[01:27:26] now this market maybe you're saying 2018 they were going the entire revenue 236 billion 2016

[01:27:31] that effort for 11 billion I'm just sorry I'm really at the time of course there's

[01:27:36] way to be flat do you think that the business would survive I'm a bit more I'm a bit less

[01:27:44] well let's willing to take this stock price as a measure of anything I'm less than you are

[01:27:47] you see buyers see buyers but equally disregard 10 years start performance to keep as a

[01:27:52] ritual opinion ha lord any wrong comments I'm gonna use that me that knows what is on the line

[01:27:57] you're looking at the facts as gospel I'm telling you that the facts as they exist are just vibes

[01:28:03] the telling me is gospel which is stock price do you want to tell me some price if well if you

[01:28:07] weren't talking to me and it was another person you'd be like what's the last time you get a

[01:28:10] die-chair is that one way the last time I said I drive it basically like okay you go and invest

[01:28:17] your money let's don't need to copy to anybody you can tell yourself now Jimmy you said you said

[01:28:22] you said that the stock price is not reflected now it's quite reflected by yourself go and put the money

[01:28:27] in your records I wouldn't even invest five dollars in each transaction you surprise yourself you

[01:28:32] surprise yourself you're not surprised anybody else we're a simple narrow my name is you tell

[01:28:38] your friends that you invested in Nigeria no I wouldn't invest in it as a basket as a whole index

[01:28:43] and I during suffix things knew it that's that's investment in the macro in the whole country

[01:28:47] yeah I'm not you're not patriotic but that's okay we've really stopped is that

[01:28:53] let's let's let's let's close you want to go I can I can go I can go a couple of things there's

[01:28:59] three parts what the business is the risks and then with traditional business that's it or maybe

[01:29:05] let's take that back I want to summarize two parts of my summary what the business actually is

[01:29:10] and the risk of the actual business it's clear what the business is from my entire conversation

[01:29:14] it's they do a lot of things and one business enables the other the one business enables them

[01:29:19] to create a strong base to make a lot of money from collections and commissions it's that

[01:29:25] way you can plan ahead of time you have good visibility to revenue it honestly has utility

[01:29:31] utility cash flow modeling is what I would expect even look into that because you know

[01:29:37] you kind of get a sense for Nigeria has to forecast revenue for next year basically yes

[01:29:41] and they forecast are ready for next year you know that what's going to come to your platform

[01:29:45] this year you know this your commission if this comes to the platform they have strong visibility

[01:29:50] into future revenue if you are if you are that kind of fundamental investor and you can believe

[01:29:54] the numbers that we are seen from all our pieces so it's it's it seems to me on from the outside

[01:30:01] in like a super stable super predictable business because of the nature where their money is coming

[01:30:05] from the second thing I like is is related to that it's just been a traditional business built on

[01:30:12] relationships and and build on relationships traditional businesses built on relationships right

[01:30:19] and what's it's amazing to me is they have these like abilities to get good deals however they

[01:30:24] get them people somebody who knows will listen to them but like I you don't know anything or like

[01:30:28] you're right i'm just saying that yeah we're in bunch of comedians just comedians just that we

[01:30:38] don't have a show yet if you have a show for the leagueers let me do I'll come out stand on stage and

[01:30:42] do more of these jokes they have good relationships with the God with these governments which is

[01:30:49] interesting because governments change people change and they can't manage to stay steady

[01:30:53] sticky customer relationships with the telcos basically all the MNOs in Nigeria, Ghana,

[01:30:57] South Africa is what they say connect it each time for a time top up by mobile phones or

[01:31:01] subscribers like it's difficult to have this for a long time I imagine

[01:31:06] I'm gonna miss something I'm missing definitely peace email loss I find that very impressive

[01:31:09] like it's 20 years or less you grease the wheels then it's easier

[01:31:14] ah okay the final piece in my summary they have significant risks of being intimidated there's a

[01:31:20] lot of competition and at some point it will make sense for somebody to go through this as a

[01:31:25] loss leader because whatever they're doing somebody else can do we super well funded

[01:31:30] as a marquee client or something and I wonder what that looks like for competition because whatever

[01:31:34] they've built for the Nigerian army to show up to these birth payments paste that kind of

[01:31:40] stensibly build and with enough enough money to lose they kind of stensibly go out for these

[01:31:46] businesses now how likely is that to happen you know in the short term it's likely midterm more

[01:31:52] like midterm more likely and it's almost like they don't have any fallbacks though which is crazy

[01:31:56] there's not like like paste I can move upstream as I try to do now and then we're did but they don't

[01:32:00] have a lot of strong fallbacks and they don't have a lot right to win outside their current

[01:32:03] current market that's probably like what would make me hesitate for an investment

[01:32:07] because you don't see a lot of growth and everybody knows that stock prices are driven by growth

[01:32:11] right that's it that's my summary thank you my summary is has three different components

[01:32:18] entrepreneur story negative bear case positive book case entrepreneur strike what it was

[01:32:23] I like stories of founders who were doing people services businesses and then try to find a

[01:32:30] way to convert that to technical tech businesses typically it's extremely difficult

[01:32:35] they're almost actually impossible to do the fundamental nature of the businesses are different

[01:32:40] I still find it intriguing to go across that challenge even those difficulties I like the founding

[01:32:44] story especially because I know to do what we're trying to do in 2000 and 2000 to 2003-2004

[01:32:49] to require a lot of perseverance and grit and I don't we don't have all the full details

[01:32:53] of how did it eventually happen just the idea of I think this is the vision and they eventually made

[01:32:57] something of it and especially in a country like Nigeria where the partnerships are very difficult

[01:33:02] my hat's off to the team as specifically to Valentine O.B. negative bear case positive book case

[01:33:07] negative bear case is long okay I mean you just let's just go through it I'll just try to

[01:33:19] okay there's something with you know a rock in a hard place on one hand they want to serve

[01:33:23] old school businesses large governments with payments and switching solutions but then

[01:33:28] inter switch is more established also has a switching license has more mind share probably has

[01:33:34] more market share and is also serving the same sort of clients with more money what does that mean

[01:33:39] I don't know on the other hand the growth part of the market which is online payments micro entrepreneurs

[01:33:45] SMEs agency banking that space is overcrowded everyone is in that space the space which has more growth

[01:33:53] everyone is in the space they're in they could probably say oh no we do government contracts but then

[01:33:58] inter switch I'm sure that's true but it just seems to me that it's unfortunate to be serving a market

[01:34:04] the so-and-else is funding with more money is serving more money and more market share and

[01:34:08] then the other group part is completely like flood away pay stack oh pay we didn't talk about

[01:34:13] money points and on and on the list is endless on the growth side I just don't know did you seem stuck

[01:34:18] let me let me give you an analogy it's like Oracle Cloud will tell you that they can acquire

[01:34:26] customers who basically the opportunity on the other side is what is being discounted I'm giving

[01:34:31] I'm trying to give it a counterpoint to your case which is no this is actually part of the

[01:34:35] bulk case what things are going to say look I know you think that we need to be serving stripe and

[01:34:42] at the end all this you need to be serving these cool customers that doing co-stuff but I just

[01:34:46] want to serve like mom and pop storage businesses that doing three million dollars in revenue

[01:34:50] on the Midwest we need to move to the cloud for stuff and that's where that's the bigger

[01:34:53] opportunity that doesn't just make the tech people not the creators and influencers and because I have

[01:34:58] this existing relationships and businesses and stuff I just have that muscle I can always say

[01:35:03] those would better than stripe and better than Google Cloud and AWS can I can do the 10 million

[01:35:08] dollar like card dealerships across America that's a big business for example yeah

[01:35:13] to be clear what you're saying is correct but the growth potential of what you just said those

[01:35:18] mom and pop businesses in the Midwest way higher than the the Nigerian government it's apples

[01:35:23] oranges because those businesses in the Midwest when you lump them all together they represent a

[01:35:28] section of America which has high growth potential not what what these guys are doing what they will say

[01:35:33] what they will say is no no is government agencies there's like Niger has a proliferation of MDAs

[01:35:39] that collect money for something or the other right and when you go state level at federal level

[01:35:43] it's literally like government spending crowds of all the spending and Nigerian economy and if that

[01:35:47] spending goes through you get higher than the last spending that beats out any of these random

[01:35:53] influencers selling here on Instagram why are they better positions to do that then we said UPS

[01:35:58] we said insert switch why they better position in those guys because they have the historical

[01:36:01] relationships yeah we're sorry love historical relationships if you do for a long time let me tell

[01:36:04] you historical relationships don't work in Nigeria Bancoleo it's money but even if you're not

[01:36:09] this podcast no let's let's be explicit even if you assume at risk of not even even if you assume

[01:36:15] that there's some on the hundred ten who has more experience figuring out doing the hundred day

[01:36:20] and then the guy to pay off who knows who assisted GM so so if you assume that other so it's like

[01:36:30] whatever I expertise you it is just give me a donate to so many places as well whatever I

[01:36:34] expertise you imagine it is legally whatever I can say to you by the way to be very clear I have no

[01:36:39] it's not illegal at all I have no reason to suggest no of course of course this is a study

[01:36:43] you know now we're just joking this is a comedy podcast okay okay anyways I'm saying that that

[01:36:49] expertise that's what the negative like look what people are under under valuing is the fact that

[01:36:55] if we get an NYC business that's a step changing out you know business if we get the number

[01:36:59] of states what are corporation business that's a step change if you do a bonus state's a step change

[01:37:02] if you do legal state kind of a battle step change right that's what they'll say that's what I'll

[01:37:07] say that's what I'll say for industry now is it possible to a true TBD but that's the counterpoint to

[01:37:11] your the moment pops up so I'm saying green point that's what I was going to go through hundred percent

[01:37:16] hundred percent fair point similarly to that if we switch to the positive bull case I will say that

[01:37:22] the types of businesses they serve will tend to trust them and not want to turn a switch

[01:37:27] which we because they've been working with e-transact for decades yeah and things have been mostly

[01:37:32] fine solid normally customers are always look business customers are always looking for efficiency

[01:37:39] trust reliability they're less looking out for what what's a new shiny object there do you just want

[01:37:43] something that works and it's fine it meets the business needs also their Nigeria which is the

[01:37:49] largest market and they've been in Nigeria the entire history so I guess the positive bull case does

[01:37:55] have those advantages another thing I'll say is I'm not sure how much of this is true but I think

[01:37:59] another part of the positive bull cases most of the executive team have been in place for decades

[01:38:05] so they're more likely to know that we're around the tricky nitrogen ecosystem of this person this

[01:38:10] company this approach versus if a company was founded two three years ago less likely to be the case

[01:38:15] so anyway overall 70% negative bear case 30% positive bull case the face too many competitors

[01:38:21] I worry about the long term business I'm I prefer companies that are doing things downstream and

[01:38:27] have the optionality to go upstream versus companies that are upstream and have no optionality

[01:38:32] there's no way these guys have any optionality to go down however I'm not like 90% negative bear

[01:38:37] case because I think their business of state government local government federal government actually

[01:38:42] has a wider surface than a lot of people think even if you're not good with a number of governments

[01:38:46] you can do the legal state government this there's some scope there but I just can't be positive on

[01:38:50] the company it's their head into a position if interswitch didn't exist I'll be more positive

[01:38:54] I'm concerned about businesses that so-and-else has the same license everyone else is on something separate

[01:39:00] and they're an old school company so overall I like them but it's I'm not surprised why no one

[01:39:03] talks about them in tech circle they just they've been doing the same thing with minimal progress

[01:39:07] for 20 years I wish them the best of luck but that's very positive let me even put it this way

[01:39:12] is like I see your points I do when this I agree with you but I see the counterpoint of view

[01:39:17] I don't have a good disagreement with that either maybe that's where I am it's kind of like I can see

[01:39:21] this because I'm like I can sit up but I'm like well I don't know I know like I hate what you're saying

[01:39:25] but I don't know I don't it's hard for me to be bullish about this because it's just it's just hard

[01:39:32] in general and it's just tough and I don't know it doesn't feel as you're just having the

[01:39:37] customer that wants this it's being sold it's not being bought like the Instagram person is like

[01:39:41] they need you for their stuff to work and like the the the anambra bank that does their

[01:39:47] Pharisees telling you at the risk of telling like if like don't go to this branch we'll impound your

[01:39:50] card lock it up you're good to the brand campaign there was something about interswitch having

[01:39:55] the switching license also being as old and having more money it's just like are you telling me

[01:40:00] interswitch can't get the same I mean they have the same experience they do the same

[01:40:03] management switch does a lot more collections exactly so it's sort of like they're bigger

[01:40:09] more well-known have the same license it's just like what are they doing then are they tell me they have

[01:40:15] some good they have some good contracts is basically what it sounds like yeah yeah well I'm

[01:40:19] sure they'll do fine but I was them I was the moment they're going to they're going to look for you

[01:40:23] after this podcast is wonderful you can email me bankwayduffer.v.com

[01:40:31] I'm excited to do a value card in the future that'll be the trilogy of old school

[01:40:36] switch love process you know five payments is a company that you have seen a lot of value card

[01:40:41] in fact in the same business you have seen a lot of but you didn't realize that it's them

[01:40:44] like they had this I think there was yellow machines that are very like they're very popular a few

[01:40:48] years ago like they like you if you even Google it night but like oh that's the company we just all

[01:40:54] click to you but it's pretty big okay close it up recommendations moments let's do it go for

[01:41:01] yeah I got recommendations I have two recommendations one is an article by Stephen Wolfram about

[01:41:06] computational knowledge to chat GPT so Wolfram Alpha is a computational search engine

[01:41:11] it does really good inference and compute stuff and it's a language it's a bunch of things

[01:41:15] the language is a software that's also part part of the search engine that is great

[01:41:19] the real firm is like genius because being a genius this was like four years old basically

[01:41:26] and he wrote his article about the reasoning limitations of large language models

[01:41:31] I don't even think about a GI and what Lada and everyone's can do with

[01:41:34] an analytical engine like Wolfram like the Wolf Wolfram Alpha search engine pretty interesting

[01:41:41] this big take the big one one big amongst others is LLM predict what's next they don't really

[01:41:46] do reasoning but they have good prediction of what's next when you ask them a question

[01:41:50] of good predictions there's a lot of talk talk about them struggling to do math or struggling

[01:41:54] to do deductions when it's not a prediction of what word is next and how you when you combine

[01:42:00] them with something like a prediction method we really good examples in there

[01:42:04] is that you try and fix me in the small things but you still want to be able to get close unless

[01:42:09] you include something like Wolfram Alpha very controversial point of view but I can't wait to read it

[01:42:14] because I read snippets of it I never read the full article the snippets came out when

[01:42:19] open AI released plugins which had GPT and one of the plugins was Wolfram Alpha and Wolfram

[01:42:24] was saying it wasn't what the purpose so I never read it I'll read it I don't know since he's so biased

[01:42:29] after discounted because obviously what you're saying matches his business model perfectly yeah but I

[01:42:33] like it many very very smart too yeah he's really I did find the reasoning part thoughtful because it's

[01:42:40] what do you mean when you say the LLM knows that Legos is the capital Legos is Legos states it's capital

[01:42:44] of of Nigeria which is not but what do you mean when an LLM says that there's no idea does it find

[01:42:50] it in a document somewhere and it's pretty good that's the next word after that therefore is that

[01:42:54] reasoning no no it makes sense but but like why would you need an external third party to do the

[01:43:00] computational part of it because other engines because first of all let's be clear they're macro

[01:43:04] models and submodels anyway there's no one model anyone in the business knows why can't you just

[01:43:08] make a subspecific we don't get a quantitative model just does that and supports the answers when

[01:43:13] that why do you need a third part so I can argue to either way his point is that the machine learning

[01:43:18] techniques don't provide that answer it's the it's a you have to a different kind of model a

[01:43:22] reasoning engine which is what we'll from our friend thing is that's his whole point but what

[01:43:26] was it you a third party reason and why can't they build one internally and add it in a good

[01:43:30] lock that's why he's telling you that like you can you can build comes to build a new language

[01:43:34] mad lab do do you know like it's like good luck I don't think it's possible anyway that's one

[01:43:39] recommendation second recommendation is this song by Bernaboy it's kind of like maybe four years ago

[01:43:44] called comma by Bernaboy it's old it's like tell me why your skin is good I don't care yeah tell me

[01:43:51] why your skin still lights on your elbow black are they sick right there yeah it's shit I like

[01:43:57] I like it I like it it's a good jam I thought I'll put you guys on some good Bernaboy how about

[01:44:01] you I'll go ahead with the best recommend I recommend old banquoli songs one year later 2025

[01:44:05] February watch out for me this exact same song the recommendations I have four a lot of

[01:44:11] recommendations either it's been a long time since we recorded or I've just been ingesting a lot

[01:44:17] of materials first a million miles away movie movies incredible it's it's a biographical movie

[01:44:24] about Jose Hernandez which pulls like a Mexican American migrant farmer those living California move

[01:44:29] there with his family I won't spoil it but let's just say it's very motivational in the way

[01:44:35] the story unfolds and I think a lot of people that like this podcast would enjoy it so that's

[01:44:39] the first one nice second one is okay so I have three more songs it was great never enough

[01:44:45] Lauren already all red okay I'm pretty nice last night but incredible basically I realized I like

[01:44:50] all songs that are like ballots and this is like a proper Whitney Houston right I carry type

[01:44:56] ballot emotional highs oh my god so emotional I'll start singing it right now but this is not

[01:45:00] the kind of comedy show second one is Lapa Chata I live in Miami so I guess I'm into this shit now I guess

[01:45:07] so by by by Manuel Turizo it's amazing wonderful especially good for like dancing all the all the

[01:45:17] all the steps and then finally someone you love this is not the original song actually this is a

[01:45:23] cover of the song and it's done by some YouTube artists who wanted to do a cover of the song and

[01:45:29] it's incredible the best part is the third verse when both artists sing simultaneously I like

[01:45:35] much I'm like oh let me listen to original do better than the original love it okay a lot of

[01:45:40] killer lines one of my favorite lines I was kind of getting used to being loved by someone but you

[01:45:45] oh emotional for recommendations one movie three songs the songs are great especially the Lapa Chata

[01:45:52] okay I gotta check it out small wins okay girls moments yes you girls moments I so I grew up

[01:45:58] a beard for a wedding um holy shit I always had a beard no go to see please don't you have a go to

[01:46:04] out of go to baby was we're back we're back when we knew me when I was having a great facial hair but

[01:46:09] oh shut up I'm back to being clean shaving now which is my small win I've been

[01:46:18] clean shaving for a while but when I so I have friends who get married and my friends my

[01:46:21] non-jump friends are like in clean shaving I German have beard it's basically my friends time at

[01:46:25] time so when I'm going to be good man they'll be like you'll do you gotta fix your hair because

[01:46:29] you're not coming to this wedding I have to travel for a wedding I grew my beard for the wedding and

[01:46:32] then I came back and I'm clean shaving again you're baffling was hyping his shaving knowledge skills

[01:46:39] aren't you gonna do a post about the technique the water the cream bevel you had a whole thing

[01:46:44] about it my skin is my skin is smooth like dude like it's a science and if you're a black man especially

[01:46:52] usually this product's built for white hair does not work we have to be

[01:46:56] close it's curly right it's curly get it wrong now my skin's smooth

[01:47:04] you should post on your personal website then link it on the upper

[01:47:08] floor just both okay my simple Africa tech is black people in black men that's how you know where

[01:47:13] click comedy podcasts I just send you podcasts if a substock newsletter will be like

[01:47:17] my shaving plus a little bit of skincare routine

[01:47:21] I'll get the most amount of people that's the way to do this people are clowns

[01:47:26] press me about that that you try to act people like people like people like clowns

[01:47:30] people like dude I told you was a comedy podcast what do you expect you thought we're kidding they're

[01:47:35] kidding like student of comedy oh my small wins I bought a circus elitio in Miami that I'm

[01:47:43] gonna watch next week I've watched a bunch I've seen every circus elitio but always

[01:47:46] in Vegas when they came to Miami I was so excited I guess this is a future small when it hasn't

[01:47:50] happened yeah I don't know if this counts the category but I'll say it about it yeah cool

[01:47:54] close normally most of them are not in they're not outside of Vegas I'm never seen one outside

[01:47:58] yeah and it's so close like 15 minutes away so I'm gonna watch that next week I'm excited there's

[01:48:01] something about the music the vibes the acrobatic moves the atmosphere I like Cirque du Soleil

[01:48:06] a bit expensive but usually quite nice I'm looking forward to that next week go check it out we

[01:48:11] gonna check it out I haven't seen any I haven't seen any sectors for this shows ever do you like

[01:48:15] life performances with acrobatic stuff I just I like being home with a book man okay no then if

[01:48:20] you don't like it for 120 $130 yeah I was like it because it's absorbent I do I like I like

[01:48:25] music calls though I'm like we get like I'm like I'm like it is once I go to musical I'm the

[01:48:31] kind of present to be like I think I'm like I'm like I'm like I'm like I'm like I'm gonna go to

[01:48:37] New York I haven't seen anything cool I gotta go get it good thanks for listening we'd

[01:48:42] love to hear from you if you have any feedback topics you'd like to hear or just want to say hello

[01:48:47] please email info at afrobility.com thanks