Hey Reader,

This week we published Fintech for Cash-First Markets with Nomanini’s Vahid Monadjem.

In this episode, we talk about fragmentation, interoperability and specialization, amongst other topics. Here's one quote from Vahid that stood out,

"I think one of our beliefs is increasing specialization in the ecosystem. There’s been an emergence of a number of wonderful consumer-facing mobile money wallets that have gained traction and revealed a whole latent demand that I think banks are now beginning to pursue. These are often closed systems, literally or in terms of pricing, where the mobile wallet issuers have to acquire both the consumers and the agents to do transactions. And that’s kind of what’s led to the fragmentation."

Whether incumbents believe that they can do everything or not (and, increasingly, first-party providers like M-Pesa realize they cannot), we've simultaneously seen a significant rise in specialist third-party, API-first providers offering financial services in one level of the banking stack, or specifically to one specific consumer type.

I've always been interested in why Shopify, for example, uses Stripe as their payments processor, when Shopify does massive sales volumes across their platform, accruing to $350 million in revenue for Stripe. The answer is specialization - Shopify pays Stripe to do what it does best (and what it's arguably best in the world at doing) so Shopify can spend its time doing what it does best.

And I agree with Vahid - especially fragmented markets and when dealing in complex financial services infrastructure, we ought to focus on and enable further specialization .

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Jack, Jay-Z and NFTs

This week, Jack Dorsey and Jay-Z announced that they are launching a 500 BTC endowment (around $24 million at the time of writing) to "fund Bitcoin development, initially focused on teams in Africa & India."

I wonder if the timing of this announcement had anything to do with the CBN's crackdown of crypto accounts in Nigeria, or if it was just a coincidence...

Anyway, I've simultaneously been obsessing over and trying to wrap my millenial brain around NFTs (non-fungible tokens), and the practice of producing and trading digital collectibles. For those unfamiliar, I'd recommend starting here, or here for those interested in sports collectibles, here for digital art, or here for music.

While NFTs may not fall under a fund for Bitcoin development, I have nonetheless developed an increased conviction in its merits for creators in emerging markets, in particular, where centralized gatekeepers, cross-border trade difficulties and other logistical considerations have previously prevented those on the continent from gaining access to a global market.

NFTs, and decentralization in general, create more democratized access to digital marketplaces and wealth generation opportunities.

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A Developing Thesis...

The thing about the "next billion" consumers is that it treats Africa only as a consumer market and not a producer market.

Meanwhile, one of the continent's foremost technological innovations - M-Pesa, and mobile money, more broadly - was the formalization of existing peer-to-peer airtime tradaing.

Likewise, P2P crypto trading is prevalant in African countries where formal infrastructure has not yet been built and/or regulation has driven these activities "underground". As I wrote about last week, Nigeria is the number two bitcoin market on Paxful, a P2P marketplace; over $100m of P2P trading in Nigeria also takes place informally on WhatsApp and Telegram; and, Kenya trades nearly $3 million in weekly volumes on P2P exchanges (this after the Central Bank of Kenya regulated against cryptocurrency exchanges in 2017).

And in the week since, the crypto exchange Binance has made it easier to on-ramp to their P2P exchange from Naira, as more users seek out these avenues in light of the CBN's crackdown.

To be sure, this is significant when compared to western markets where consumers are accustomed to intermediated relationships. I think P2P requires more learning and unlearning amongst these consumers.

So what does it mean that this global tech zeitgeist - towards decentralization, democratization and P2P - centers around that which is already prevalant and a wide opportunity on the continent?

This is a question we intend to explore further in the near term.

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Thanks for reading,

Justin