#20. Cash is no longer king
Welcome! Have you ever wondered:
How could you pay instead of cash in El Salvador, Argentina, or China?
How did Uber’s aggressive penetration strategy perform in Nigeria?
What to read to catch up with the African scene in Spanish?
If so, keep reading…
If you wonder what Emerging Markets explorer 🧭 is, start here.
Cash is no longer king
🇸🇻 September 2021. I’m in San Salvador looking to buy a TV. I have the price listed in USD and $BTC, and I choose to pay with $BTC. But that makes me just 30% of the population in El Salvador: 70% of the population today doesn’t have access to financial services.
The Bitcoin Law, approved on June 8, 2021, to make $BTC a running currency in El Salvador is good for De-Fi and lesser dollarization. But there is an elephant in the room: how many people in El Salvador hold $BTC as of today or even know what it is? To tackle this challenge, Bukele will create the BUNDESAL, a development bank, to educate citizens on $BTC and will provide the necessary hardware for people to use $BTC.
🇦🇷 September 2021. I’m in Buenos Aires looking to buy a TV. I choose to pay with Mercado Pago, the payment platform of Mercado Libre, which is the most popular virtual wallet in the country. With Mercado Pago, I can pay for the TV using the QR code and avoid credit cards. Additionally, I could obtain a credit line via Mercado Crédito, pay the bills and invest money in a fund managed by BIND. There are 5M accounts in Argentina, the equivalent of 15% of the adult population in Argentina. This is significant given 50% of Argentinians are unbanked.
🇨🇳 September 2021. I’m in Shanghai looking to buy a TV. I choose to pay with Alipay of Ant Group but could go for alternatives like Tencent’s WeChat Pay. Alipay is a Super App by its own merit. In terms of financial services, with Ant Group I can pay using Alipay, finance purchases with Huabei, manage my financial assets through Yu’e Bao, and be insured through Xianghubao. I’m one of the 1.3BN active users of Ant Group, which holds a 54% market share in the Chinese digital payments market.
Failure story: Uber penetration strategy in Nigeria
Uber launched in Nigeria, in Lagos, in 2015. At its launch, they had a dual mission: get new clients to sign up, and get new drivers to join.
They had 3 additional challenges when arriving in Nigeria:
Competition from taxis. Uber is used to disrupting the taxi industry, and Nigeria was no exception.
The absence of a national ID system to assist them in identifying people, both users, and drivers. This would mean they’d need to find alternatives in identifying people, in which they’d have to balance speed and reliability.
Cultural differences. When internationalizing, a company needs to find the balance between a standard implementation strategy, which is easily scalable; and the domestic nuances to make it succeed.
The two latter aspects were contributing factors to a recipe for disaster in Uber’s usual aggressive penetration strategy:
To gain new clients, they incentivized the creation of new accounts with a bonus of 2000NGN. People started signing up for multiple accounts with different emails. Then, Uber distinguished accounts by SIM cards, and users would buy new SIM cards (200NGN) and get the 2000NGN bonus. Finally, they limited this to 3 new accounts per phone to minimize the losses.
To get new drivers to sign up, they created a referral bonus of 40,000NGN, which at first was claimed but the drivers only joined and never drove. Then, they gave it after 20 rides, and a driver would partner with a client, which would hire the driver on fleet mode for 20 rides, and they’d claim and split the referral bonus. A similar fraud happened with the bonus for the airport rides, aiming to compete against taxis.
Uber operates in Nigeria as of today, but they had to remove these incentives as they backfired due to this fraud. This is an example of how culture eats strategy for breakfast.
I recommend reading the thread for further details, you’ll have a major laugh.
Source recommendation: Africamundi
Africa Mundi is Spanish a newsletter covering the most relevant news in Africa on a weekly basis. They want to make Africa approachable for the general public.
Africa Mundi is written by David Soler, a journalist working at the NCID Think Tank, and Soraya Aybar, a political scientist and journalism student.
They started writing Africa Mundi 2 years ago, and prioritize sharing the work of Spanish journalists to prove the Spanish knowledge of the continent.
As of today, Africa Mundi includes 3 types of newsletters:
A weekly newsletter with the most relevant news, sent every Tuesday. Read the latest one here.
A Breaking News newsletter for relevant events in Africa. The latest covers the diplomatic tension between Spain and Morocco.
Lecturas Africanas, on African literature. The latest is on Aurora Moreno’s book: El cambio climático en África.
You can subscribe here: https://www.africamundi.org/