Major US Web3 Players Tap Africa’s Payment Space

By Shogo Ishida, Yosuke Yoshida Co-CEOs, EMURGO Africa

The African Web3 market presents a unique combination of untapped potential, a big young population, local innovation, and a flexible regulatory landscape, making it an attractive investment destination for some major US companies.?

Over the past five years, US-founded Web3 companies have been tailoring their strategies to the specific needs and opportunities of the African market. Now, they play a significant role in shaping the future of Web3 on the continent.

Key Takeaways?

• The leading US companies Find Africa an Attractive Investment Destination for Web3 Payment.
• African Startups Are Banking on the US Web3 Experience for Growth.
• US Web3 Platforms are Helping Reduce Payment Pain Points in Africa.

Why US Companies Are Flocking Africa’s Web3 Sector

Africa has witnessed a lot of friction in terms of remittances. Most cross-border payments take days to be processed, whereas the cost of sending and receiving money remains high and hurts small businesses as well as individuals in Africa.?

The continent is also facing external shocks that adversely impact its economic growth. It is yet to recover from the covid-19 pandemic that reversed the gains it had made on sustained growth for the past 25 years. Again, the Russian-Ukraine war is threatening populations with a severe food crisis in the continent.

Inflation is high in Africa, and most local currencies have weakened against the US dollars and euro over the past two years. As their money keeps chasing fewer goods, many Africans are finding refuge in crypto and the US dollar-pegged stablecoins.

On the back of these hurdles, US companies have been venturing into the continent, which thirsts for solutions to its financial hiccups. They have focussed on remedies that reduce transaction fees, make remittances more efficient, hedge against inflation, and create transparency in cash in- and out-flows. These pain points are a major reason Africa is among the fastest growing crypto markets in the world, with 6% of all transactions being peer-to-peer, more than double the share of the next closest region, according to the IMF.

The US’s continued commitment to working with Africa to eradicate these problems has been evident. The 2023 Africa Attractiveness Report by Ernst & Young indicates that the US is the largest investor in Africa by project numbers (93), contributing to 13% of Africa’s total investment. This also added 13 million jobs to the African market. Thanks to the US-Africa Business Forum organized in 2022, the US invested $6.8 billion across Africa, the highest since 2018, according to the report.

Key Drivers of US Companies’ Interest in Africa’s Web3 Landscape

• Untapped Potential: Africa has a large and young population ( a median age of 19), many of whom are unbanked or underbanked. This presents a vast opportunity for Web3 solutions to provide access to financial services, remittances, and digital assets. The growing tech-savvy population and rising mobile phone penetration further fuel this potential.
• Innovation Landscape: Africa boasts a vibrant and innovative startup ecosystem, with many Web3 entrepreneurs developing solutions tailored to the continent's unique needs and challenges. US companies see partnering with and investing in these startups as a chance to gain early access to promising technologies and tap into new markets.
• Diversification and Growth: Expanding into international markets, particularly high-growth ones like Africa, can help US companies diversify their revenue streams and mitigate risks. Web3, with its global and borderless nature, offers them a way to do this efficiently.
• Regulatory Flexibility: Compared to some developed markets, Africa's regulatory landscape surrounding Web3 is still evolving. This can be seen as an advantage for US companies as it allows them to test and implement innovative solutions with greater flexibility.
• First-mover Advantage: By investing early in Africa's Web3 industry, US companies want to establish themselves as leaders and gain a competitive edge in this rapidly growing market. This can give them access to valuable data, talent, and partnerships for future growth.

Which US Firms Are Investing in Africa’s Web3 Payment Landscape?

• ?Yellow Card (Atlanta, Georgia)

US payment companies’ investment appetite for Africa’s Web3 payment services is growing.

Yellow Card, a crypto exchange headquartered in Atlanta, Georgia and started operations in Africa in 2019 via Nigeria, is leading the mission of minimizing remittance fees in Africa.? It is currently available in 20 African countries. As of March this year, it had 1.4 million users.

Through its Yellow Pay feature, users in these countries can send and receive a variety of cryptos, (BTC, ETH, USDT, USDC, ADA, SOL, XAUt and cUSD) across borders using local currencies. With Yellow Card, users can make transfers without any additional charges, with the only cost being the standard blockchain fee associated with the chosen network.?

The platform, founded in 2016, says it offers faster transactions, a user-friendly interface and supports multiple blockchain networks - Ethereum's ERC-20, Solana (SOL), and Stellar (XLM).? On November 17 this year, Yellow Card, Africa's leading stablecoin on/off ramp, won the “Disrupter of the Year Award" at the 2023 Africa Financial Industry Summit in Lome, Togo. While receiving the award, founder Chris Maurice, said “stablecoins are going to change the world; they’re going to change the way that people use money.”

More Impact

• Developer Tools: Yellowcard provides APIs and developer tools to enable the creation of new Web3 applications on their platform.
• Local Payment Integration: Integration with mobile money and other local payment methods removes barriers to entry for those without traditional bank accounts.
• Yellowcard Academy: Offering educational resources and courses on Web3 concepts and blockchain technology.
• Partnerships: Yellowcard collaborates with other Web3 platforms like MetaMask, Change Now and DeFi protocols, offering users a wider range of services and functionalities.
• Compliance and Regulation: Yellowcard prioritizes compliance with local regulations and KYC/AML (know your customer/ anti-money laundering) practices, building trust and legitimacy within the Web3 space.
• Block (San Francisco, California)

In April 2023, Block, which was founded by Jack Dorsey and runs popular US payment apps Cash App and Square, partnered with Yellow Card to facilitate cross-border payments among 20 countries in Africa.?

Block specializes in developing software for crypto and Web3 projects, and leverages stablecoins and bitcoin to reduce the fees needed to send money across borders. It does this through TBD, a developer platform focused on making the decentralized financial world accessible for everyone.

Yellow Card provides the software to plug into each of the 16 countries’ financial networks, while TBD is the “bridge” between each of the countries. This means Web3 developers no longer need to worry about compliance in the different jurisdictions where the service has been activated. Part of Block’s mission is to unlock a network of African fiat on- and off-ramps that bridge traditional payments rails to stablecoins and bitcoin.

TBD and Yellow Card have designed a mauch-needed infrastructure in Africa that leverages the benefits of bitcoin and stablecoin to make cross-border payments and liquidity exchanges more accessible and affordable to the African diaspora. In a proof of concept that took place in March 2023, the two companies successfully tested payment rails from the US to Ghana, Nigeria, and Kenya, in real time.

In its broader strategy of cross-border remittances, Block has funded Gridless, a Bitcoin mining firm in Kenya that uses renewable energy to reduce the cost of power.

More Impact

• Bitcoin Remittances: Block's Cash App partnered with Yellow Card to enable faster and cheaper Bitcoin remittances between the US and several African countries. This opens up new avenues for international money transfers, particularly for unbanked or underbanked individuals.
• Cash App Integration: Exploring potential integration of Cash App with various African digital wallets and platforms in the future, further streamlining cross-border financial services.
• Investment in Chipper Cash: Block's venture capital arm, BlockVentures, invested in Chipper Cash, a leading African fintech platform, supporting their development of Web3 products and services.
• Promoting Regulatory Clarity: Block contributes to the conversation around responsible cryptocurrency regulations in Africa, advocating for frameworks that foster innovation while mitigating risks.

In future, Block's expertise in building and scaling complex financial services could be applied to develop innovative decentralized applications (dApps) relevant to the African market. It could also be instrumental in the integration of the Lightning Network for instant and low-cost Bitcoin transactions, while collaborating with African governments to explore potential use cases for blockchain technology.

• Coinbase (San Francisco, California)

California-founded popular crypto exchange Coinbase regards Africa as one of its key markets. On its blog page, the company says Africa is “an epicenter for crypto adoption” and acknowledges entrepreneurs in Ghana, Nigeria, and South Africa for “helping lead the charge.”

With a huge banking gap in the continent, mobile money companies have built a patchwork system around mobile wallets tied to phone numbers — but Coinbase says it found most of these systems not interoperable, and sending or receiving money from abroad often meant high fees and government currency controls.?

While bitcoin payments can be much faster and cheaper than international transfers via companies like Western Union, bitcoin’s network can see transaction speeds slow down and fees spike during periods of high traffic. This is why Coinbase decided to incorporate the Lightning Network to its exchange. The network is bitcoin’s layer 2 scaling solution that moves transactions off the main blockchain, and has helped African crypto users enjoy lower transaction fees and a faster speed, even during periods of high network demand.

Coinbase has also been supporting crypto startups in the continent. Last year, it led in a $23 million seed round financing of pan-African crypto exchange MARA which targets to get more Africans into crypto remittances. MARA’s services are active in Kenya and Nigeria.?

MARA has built a suite of products that address various crypto-finance needs for the African audience. Its flagship product is a consumer crypto-brokerage app that allows users to buy, send, sell and withdraw fiat and crypto assets at low fees. It describes itself as the platform for “one billion Africans to learn through while leveraging blockchain technology to build digital wealth.”

Last year, Coinbase also led in a $7.5 million financing of Jambo, a Congo-based startup building Africa’s web3 user acquisition portal. Founded in 2021, Jambo wants to onboard millions of users to web3 in Africa and help them participate in crypto-based income-generation opportunities through its “learn, play, and earn” platform.

Coinbase is currently expanding to 20 African countries.

More Impact

• Coinbase Ventures: Through Outlier Ventures fund, Coinbase Ventures actively supports African blockchain startups and advocates for clear and fair regulations in the region.
• Direct integration: Coinbase Ventures' investment in Chipper Cash paves the way for future integration of crypto transactions and USDC within Chipper Cash's platform, potentially reaching millions of users across Africa. Collaboration with Yellowcard allows users to buy USDC directly within the Coinbase Wallet app using local payment methods.?
• Multilingual Support: Providing educational resources and user interfaces in local languages removes language barriers and empowers non-English speakers to engage with the Web3 space.
• ?Consensys (Brooklyn, New York)

Founded in 2014 in Texas, ConsenSys has been on a mission of building decentralized applications (DApps), enterprise solutions and various developer tools for blockchain ecosystems, focused primarily on Ethereum over the years.

In March this year, ConsenSys, which has offices in Cape Town, announced a partnership between its self-custody crypto wallet MetaMask and Miami-based MoonPay, a web3 infrastructure firm to offer more crypto payment services in Nigeria. The collaboration added more localized payment methods for crypto transactions, enabling Nigerians to access web3 more efficiently and obtain tokens conveniently without setting up an account with a centralized crypto　exchange. The services have now been expanded to Kenya, Botswana, and South Africa.

In 2019, the South African Reserve Bank (SARB) partnered with ConsenSys to build a proof-of-concept grounded in real-world performance, confidentiality requirements, and diverse bank hardware on the blockchain. By harnessing a permissioned blockchain network, Project Khokha was able to exceed the transaction performance target at 70,000 transactions in less than two hours without a single point of failure. SARB said transactions were processed within two seconds, across a network of geographically distributed nodes, with distributed consensus providing the requisite resilience.

Powered by smart contracts, and secured through encryption, these Web3 applications provide Africans the benefits of lower fees, transparency, auditability, speed, and the immutability they so much need for their transactions.

More Impact

• MetaMask: Providing the popular MetaMask wallet to African users enables them to securely store, manage, and interact with cryptocurrencies and decentralized applications (dApps).? Offering educational resources and tutorials in local languages through MetaMask Learn empowers users to understand Web3 concepts and make informed decisions.
• Infura: Offering Infura, a blockchain development platform, empowers African developers to build Web3 applications on top of Ethereum, fostering innovation and local solutions. Chipper Cash uses Infura as a cross-border payment solution, facilitating faster and cheaper transactions.
• Diligence Services: ConsenSys Diligence helps African startups navigate the complex crypto market and secure funding by providing due diligence and security audits.?
• Strategic Alliances: Partnering with established local players like Yellowcard and Interswitch facilitates wider adoption of Web3 solutions by leveraging existing user bases and networks.
• ?Circle (Boston, Massachusetts)

Circle is the world’s second-largest issuer of a US-dollar pegged-stablecoin. It has completed several funding rounds since its establishment in 2013, attracting investment from the leading US financial firms such as Goldman Sachs, BlackRock and Fidelity.?

Circle’s USD Coin (USDC) is backed by a fund comprising US Treasuries and the US dollars, while BlackRock, the world’s largest asset manager, manages the fund. USDC is the second biggest stablecoin in the world behind only Tether (USDT). In Africa, stablecoins remittances can be up to 20 times cheaper, than via traditional money transfers.? USDC transfer fees are often as low as 0% to 1%.?

Circle has partnered with Mara Foundation, a non-profit organization, to help provide developers in Africa with tools and access needed to build decentralized applications (DApps) and blockchain solutions.?

As Africa’s demand for stablecoin is on the rise, Circle collaborated with Yellow Card in 2023 on the so-called Financial Literacy Tour across South Africa, Kenya, Zambia, Botswana, Rwanda, Malawi, and Cameroon.

More Impact

• USDC Integration: By working with African platforms like Chipper Cash and Yellowcard, Circle facilitates access to USDC, providing a stable entry point for Africans, simplifying cross-border transactions and reducing volatility concerns.
• Mobile Money Integration: Partnerships with mobile money operators enable seamless on-ramping and off-ramping of digital assets using familiar local currencies, breaking down traditional financial barriers for the underbanked and unbanked.
• Ecosystem Partnerships: Collaborations with platforms like Interswitch and Zipline, a drone delivery company, explore various use cases for digital assets in diverse industries, expanding the potential of Web3 beyond just finance.
• Educational Initiatives: Through programs like Circle University, Circle provides educational resources and workshops to promote Web3 literacy and demystify complex blockchain concepts for African audiences.

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