Visa and MasterCard are on hangovers, doing everything possible to protect their current businesses. When you examine what they are doing in Africa, the mission is clear: on-board as many merchants as possible into the networks. By doing so, Visa and MasterCard will continue to enjoy their merchant fees, which are taxes imposed on merchants for their financial transactions passing through their networks.
But their minor competitor, American Express (AmEx), losing steam in many areas, is looking into the future. It is not protecting its network because it does not really have a large one, being a premium brand. But who cares if your card is “black” or red when the numbers are stored in digital wallets. Digital payment is attacking the heart of AmEx business, making what used to be luxury brand consistently irrelevant in the age of ecommerce.
In this video, I explain how AmEx is plotting its future with a product African fintechs should care more, over what Visa and MasterCard are marketing across African capitals and banking institutions. AmEx is partnering with blockchain startup Ripple to use blockchain to move some international payments between the United States and Britain.
American Express has introduced instant blockchain-based payments using Ripple, a fintech startup, for U.S. corporate customers sending funds to U.K.-based businesses that bank with Santander U.K., the companies said on Thursday. American Express said its FX International Payments (FXIP) business had partnered with Ripple to provide real-time, trackable non-card payments from the United States to Britain. Customers are already using the service, the companies said, and it would be extended in the future.
While that is happening, innovators are soon going to make the use of cryptocurrencies to be as easy as using debit and credit cards. Square, a payment processing company, is experimenting with making it possible for users to sell and buy Bitcoin via its Cash mobile app. Simply, in near future, expect a Bitcoin credit or debit card and that will make Bitcoin mainstream, removing the geeky complexity for everyday person.
Payments company Square said it has started allowing select customers to buy and sell bitcoins on its Cash app, as it looks to tap into a craze that has sent the cryptocurrency up nearly sevenfold this year
This industry is moving very fast. MasterCard has filed a patent on a blockchain-based money transfer. Generally, I see a future where remittance fee will drop to near zero and commissions on payments will also. In a perfect Internet, there should not be a fee for moving money across the web, as I have explained on Tekedia. Blockchain will likely make that happen, as it removes frictions between buyers and sellers, and by that process removes the needs for companies to emerge, to become intermediaries to fix those frictions.
AmEx is taking us to that future and our fintechs should take note because this is real. A partnership with AmEx will be more vital than what Visa and MasterCard are offering today in Africa, because AmEx operation is closer to the equilibrium point. Sure, AmEx focuses on richer people, which may not be common in Africa. Nevertheless, the forward thinking view on technology should be attractive for our leading banks to meet emerging business needs.
Always remember that blockchain can fix Africa’s intra-remittance. A company like AmEx may get there before most, with this bold vision.
In this videocast, I discuss the need to build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. None of the products we have today meets that standard. Largely, I envisage a situation where all you need to buy and sell across Africa is one bank account in just one African Union country. With that, you do not have to even think about the specific currency of that account as technology will seamlessly make it possible to access other African markets for payments, transfer etc. The banks or fintech companies must still comply with all regulations related to inter-national transfers, forex etc. The only difference is that customers will not see them as they will be hidden with technology.
----REGISTER for my Innovation for Growth Workshop, Lagos, Sept 2018.
---Visit our Store for my books, cases, frameworks and more. Now, enjoy our consolidated subscription for all contents (past, present and future).
-- We offer Advisory Services (tech, strategy & Africa).