If markets are perfect, there would not be companies. Yes, if buyers and sellers could transact businesses without frictions, we would not need companies. But since there are frictions in markets, we need companies. They provide services to “melt” those frictions. That is why we pay them, and they earn their fees.

In international remittance, there is a major friction. The friction here is that someone in New York has money to send another person in London (or Lagos) and doing that is hard. Typically, a bank exists to fix that friction. We pay the transaction/remittance fees. That is how Western Union, MoneyGram and banks make money.

But a startup thinks that technology has made it possible that the friction has gone, and that means there is no need to pay any company to “melt” that friction. That startup is Circle, a company funded by Goldman Sachs. It now allows entities to wire money from U.S. to Europe at zero fees. That is the new era. It has already arrived. They make the transfer without loss of exchange rate. It costs $0.

Blockchain-based payments startup Circle Internet Financial on Thursday launched an international online money transfer service that allows people in the United States and Europe to send money to each other instantly and at no cost as it seeks to tear down borders in the payments world.

The new service is part of a push by the “fintech” — or financial technology — sector to compete with established financial institutions, by using digital technologies to offer cheaper and more user-friendly services, often via smartphones.

Boston-based Circle Internet operates its app-based peer-to-peer payment network using blockchain, the technology which first emerged as the system underpinning cryptocurrency bitcoin.

One of the most well-funded blockchain startups, its investors include Goldman Sachs Group and Baidu.

[…]

“When’s the last time you sent a ‘cross-border email’?” Allaire said in an interview. “The idea of cross-border payments is going to completely go away. … Our vision is for there to be no distinction between international and domestic payments.”

Using Circle

On its website, Circle noted: “Finally. You can share money like everything else online — whether your friends are in the same room or a different country. Super easy and totally free. The way it should be. Free. We’re free to download and to use — wherever your friends are. Even between currencies, there are no exchange rate markups and no fees. (The rate we get is the rate you get.)”

How do you compete against zero? I am not sure, the new era is here. I do believe that within 7 years, we could move money from New York to Lagos at absolute zero transaction fees with no exchange rate markup. That is the real melting of friction, made possible by technology.

I wrote this week in the Harvard Business Review that African startups may struggle to compete with ICT utilities like Google and Facebook. Interestingly, the new landscape goes beyond startups: everyone is going to be affected.

Google has a peer-to-peer payment in India called Tez. It has been doing well. Facebook has a messaging app called WhatsApp which we all use in Nigeria. Until recently, Google was doing its payment while WhatsApp was anchoring chat. Then the war began.

Google has added chat in Tez. It did that because WhatsApp has also included in-payment capability. With excess of 200 million users and practically anyone with smartphone in India, WhatsApp has a solid positioning. Google had to add that chat to at least keep its customers.

The biggest loser and increasingly vulnerable is the local payment company, Paytm. Paytm had added a chat option also but it is losing steam. Everyone is doing the same thing for that final moment of glory, even coming from opposite trajectories.

Both Google and WhatsApp have built their services atop the Indian government’s Unified Payments Interface (UPI) system for transferring money by tapping into bank accounts directly rather than maintaining a virtual wallet. However, it’s clear that they’re going about the design from opposite directions — one company is adding payments to a chat app, and now the other is adding chat to a payments app.

Look carefully in these solutions, you would see one feature: platform. Yes, everyone wants to drive that consolidation where its platform is the place everyone comes. In coming weeks, I expect them in Nigeria. They are experimenting in India but Nigeria is not far. GTBank would be waiting because as the CEO noted, it wants to be a platform also:

To  “create a platform and partner anybody who has a service to offer. So that if as a customer, one comes into our ecosystem, you can do just anything. You could do your banking business, buy your tickets, insurance, travel; if you wanted a 10-day pay day loan, you can do it. So, really we want you to come into our ecosystem, maybe five times a day to do different things other than banking.”

If you are a fintech, there is an asymmetric warfare looming. If payment becomes a chat conversation, I am not sure the value of even opening another app to make payment.

Yet, there is no reason to lose hope as Transsion (makers of Tecno) plans to go public. The phone maker defeated Apple and Samsung in Africa. Yes, our fintech can repeat same against the likes of Google and Facebook as they converge.

Led by founder Zhu Zhaojiang, Transsion shipped nearly 12 million [see comment below on this number] smartphones to Africa in the first three quarters of last year, helping it leapfrog Samsung Electronics Co.and Apple Inc. to become the largest player on the continent, according to researcher Canalys. The Chinese company has become the biggest seller in countries from Kenya and Nigeria to Senegal.

But fintechs should remember the untapped opportunity: intra-African remittance.

Ahmed sees this as an important opportunity for his company to fix a multi-billion dollar money transfer problem between neighboring African countries. This wouldn’t just have a significant impact on the hundreds of thousands of Africans moving between countries in search of a decent living, but also even those traveling on short business trips. Not only does technology add a convenience to the process but in Africa it brings a layer of transparency to things like exchange rates which should have significant impact and encourage more economically beneficial movement between countries

We cannot forget that. Yes, someone has to fix the problem of moving money across Africa.

The positioning has started: every telecom operator is bragging about the wonders of 5G. From Barcelona to Bauchi, the message is the same: 5G is going to change the world, offering faster connectivity. Sure, the technology would do just that. But in my beautiful Nigeria, is that really the issue? In my opinion, the most important challenge before telcos in Nigeria and most parts of Africa is not 5G but affordability of the services.

Yes, if going 5G increases the cost of services, telcos would lose more customers. In other words, even if they improve speed and other auxiliary features, without reducing cost, through 5G, they would not see a lot of traction in their businesses. I have a case ready: when 9Mobile (yes, Etisalat Nigeria) was at its peak, it had the best network quality. But that did not bring many users because it had the most expensive service in the nation.

So, 9Mobile was the “4.5G network” [ahead of the lower level networks in the country] but that did not help it because few could afford the services. If we follow the same analogy, investing in 5G while necessary should not be expected to reverse market issues anchored on the limited purchasing power of the consumers.

The world has about 3.5 billion people which are yet to get online. Africa hosts about 20% of those global citizens. To get online in Africa, the path is largely via smartphone. But instead of the penetration rate of smartphone increasing, it is dropping: in 2017, market share of feature phones [the cheap Nokia old phones] moved from 55.4% to 61% while smartphone dropped from 44.6% to 39% when compared to 2016 numbers. In other words, people dropped their smartphones and went back to feature phones. With feature phones, you do not need 5G networks, you just need a network (2G would do) to do sms and make calls. Our situation is different from what they have in places like U.S. where smartphone business is going through a maturity phase.

The retail apocalypse hit Best Buy’s line of small mobile phone stores. The retailer said it would close all 250 of its tiny outlets. “The mobile phone business has matured, margins have compressed and the cost of operations in our mobile standalone stores is higher than in our big box stores,” CEO Hubert Joly wrote to employees. (Fortune newsletter)

My point is that our major problem is affordability since that is what would drive our march to immersive connectivity. 5G would be a waste and a distraction to most Africans if the hype does not bring down cost. Most cannot even afford 4G; the 5G would be pointless. The key thing is to find ways to make services affordable. And that includes reducing taxes, providing electricity, and other enabling infrastructure. Possibly with those, services will become more affordable.