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BITCOIN COMES OF AGE

Katharine Wooller, Managing Director, UK and Eire, Dacxi

 

The Bitcoin halving event, which occurred on the 11th May, has been a watershed moment for the industry.   It has been a deafening theme for crypto narrative in recent months, and more recently has caught the eye of professional investors and conventional media alike, with some predicting it will be the catalyst for a substantial boom.   It appears bitcoin, finally, has a hard-won place in the mainstream.

 

Halving: In a nutshell

Bitcoin has a key feature; there are a fixed amount available, and, crucially it has a pre-programmed supply reduction built in.  The miners, who maintain the bitcoin network, validate transactions and add them to the blockchain when they are verified.  They do this at considerable electrical and computing cost and thus are paid in bitcoin. Periodically, the reward for doing so halves.  In the past this supply reduction, which previously occurred in 2012 and 2016, has coincided with a strong run-up in its price.

 

All grown-up

Bitcoin has now been in existence more than ten years and has survived the doubters, the scammers, the hackers, government attempts to quash it, and along the way it has given rise to new innovations using the blockchain technology that underpins it.  To overstate this amazing “survive and thrive feat” as well as the innovation it represents would be difficult.  Bitcoin, conceptually, has exceeded expectations.  Alas the 5,000+ crypto currencies that have sprung up alongside it include the good, the bad, and so very ugly.  Nearly all of these should fall away as Bitcoin dominates; at time of writing it is 67% of daily traded volumes.  Understandably, there is a very short list of 3 what we call blue-chip coins (LTC, BTC, ETH) that the institutional investors have shown interest in.

 

Solving some our largest problems

There is a clear appeal of digital currencies to the cashless internet economy based, including 24/7 price transparency that is available, cross border usage, divisibility to many decimal places, as well as third party oversight and controls. Bitcoin has been on a roller coaster ride over the last two years and has held its value throughout the current dramas and even increased in value as governments have stimulated their economies on a massive scale via printing cash endlessly to avert a market meltdown.  This is likely to create a massive inflationary environment into the future and sets the stage for Bitcoin to make its next move upwards after stocks and real estate prepare to reset valuations and attractiveness.

 

A new gold?

A lot of the dialogue around bitcoin talks about an improved version of gold, as a medium to convey value.  Improved by virtue of the technology being quicker, and cheaper to both store and move. Indeed, a recent transaction of $1.1bn worth of bitcoin, by bitfinex, cost $84.  Unsurprisingly this has caught the imagination of the financial infrastructure industry.  Some market commentators postulate a 10x increase in prices in the next 12 months, based on a few % of the global appetite for gold switching to crypto, with bitcoin being the heir apparent.

 

Diversification: Now

For the industry as a whole, it is great news that bitcoin is now demonstrably decoupled from traditional markets.    It is apparent that the price of Bitcoin is outside the traditional assets’ ecosystem, and the market is determined by a new set of criteria.  Bitcoin now has the crucial “social proof” that it cannot be altered by external forces, no matter how powerful, bringing much joy to the libertarians and retail investors alike.  Indeed, google searches for ‘bitcoin halving’ hit an all-time high in the late April, suggesting firm interest from newbies.  Further, the quality of exchanges available to both retail and institutional investors has improved substantially in recent years, providing a much-needed ease of entry into the market.

 

Professional Investors

Indeed, leviathan investors, such as Paul Tudor Jones, coming out in praise of bitcoin, as a viable hedge against inflation, saw bitcoin enter – unexpectedly – stage left to a much broader financial audience.  Bitcoin is viewed as what gold was in the 1970s, thus driving increasing interest from his fellow baby boomer cohort. Indeed, Dacxi, a digital exchange focusing on educating retail investors, saw some of its busiest weeks in the run up to halving.  The addition of global pandemic and imminent worldwide recession has been the perfect storm for the world to crave safe new assets.  Crypto is firmly out of the niche and into the zeitgeist.

 

What’s next

In my opinion, crypto has reached critical mass in terms of adoption. There’s no going back.  I was delighted to wake up in London on the 12th May and see the BBC reporting on halving – it doesn’t get much more mainstream than that!

As digital currencies become the increasingly dominant technology, anyone with an interest in markets and investing would be well placed to educate themselves on this seemingly unstoppable asset class.  With the recent momentum gained from the halving, crypto is likely to be a broader theme of daily life for decades to come.

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TIPS FOR BUSINESS EXPANSION

Alan Sutherland, CEO of Kind Consumer

 

Every successful business had a beginning.  Its founders usually looked for ways to gradually expand, attract new customers and increase monthly revenue.  From the outside looking in that type of success often feels as though it requires some form of magic or hidden formula.

So how do you drive success?  There are two which are fundamental to success.  On first glance they may seem obvious, but they are often neglected.

 

Do you have a strong team?

No matter how great your business or idea you will not drive it to its full potential without a strong team behind you.

The process of recruiting and finding the best talent is never easy.  You must over-invest time in the process as it is a fundamental investment and future growth driver.  Two principles I have learned over the years when looking at recruitment are, to surround yourself with people who are better than you and do not be afraid to recruit someone who could make you redundant.

If you can achieve these, the benefits are clear.  Better business results, stronger talent pool, and with capability future fit plus built-in succession planning.

 

Have you created a road map?

Strategy should not be complicated, as it is the set of choices you make to help you deliver your goals.  It is your roadmap.

In thirty plus years of corporate life I have reviewed many.  Countless textbooks have also been written on the subject, but there are some basic principles that I firmly believe work best.  Namely, the vision should be clear, motivating, and understood by all in the organisation.  In addition, it’s important to remember ‘less is more’.  Too often strategy papers can be voluminous and complex.  The best strategy work I have seen is on one piece of paper with clear, simple articulation of the choices you will do and equally what you will not do.  It is very empowering to tell a team what you are not going to do.

 

Alan Sutherland

Have you established a core market?

In any business, the “core” needs to be healthy before you divert any significant level of resource to expansion, there are thousands of examples where enthusiasm to grow has caused companies to fail.

As you evaluate expansion, having an array of ideas and opinions needs to be balanced with a clear brand that consumers feel they relate to.  Whilst adding new products or services is an organic part of company growth it needs to be tempered, so you do not drift too far from your core market.

Therefore, before ploughing resources into new markets, you do need to ensure that new product and services will be of value to existing (or new) customers.  You may need to ask some critical and challenging questions such as, is there a clear need for this?  Is it marketable?  Does it sit within the brand equity?  How much will consumers pay for it?

If you conclude that the demand is there, only then should you move onto executing that new idea because it will require a significant amount of investment of time, resources, and money.  If the market entry cost is potentially high, you should also evaluate a test & learn approach by launching in a limited way and, if early traction is good, then expand.

Once you have revised your existing offering, you need to engage with these new consumers to increase brand recognition.  If your business is not online, add this to your to-do-list because in today’s era, convenience is key.

A website is the shop window to your brand and, done well, can allow you to build up a direct one-on-one relationship with your customers.  If it was already an important criterion before, the impact of Covid-19 will make it indispensable.

With social media and the abundance of mobile technology, it is not difficult nor expensive to drive traffic to your site, so you need to ensure the site is engaging, easy to navigate, informative with a call to action to purchase.  Loyal customers who return to your site are worth their weight in gold!

 

Do you have a healthy working capital?

Finally, a healthy working capital is essential not just for growth but for the day-to-day operations of running a business.  Even as you start to see your business develop, you must keep a scarcity mindset with cash and make sure you have some reserves for when something goes wrong. This has caused thousands of start-ups to fail as they hit unexpected turbulence and had no contingency in place.

In today’s global economy, there is a lot of uncertainty so there has never been a more important time to maximise liquidity to meet short term obligations and avoid going bust.  Not to mention, flexibility is key when a business is looking to expand and without enough working capital a business can lose this flexibility.

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MOBILE MONEY MOVED THE NEEDLE ON FINANCIAL INCLUSION – BUT NEEDS SCALED INFRASTRUCTURE TO FULFIL AFRICA’S POTENTIAL

Dare Okoudjou, Founder and CEO, MFS Africa

 

Africa is gearing up to become of the great success stories of this century, with the continent set to have a larger working age population than the whole of Asia by 2100. This abundance of human capital holds huge potential to accelerate our economies and fuel business success and greater prosperity for everyone.

An early indicator of these possibilities is our fintech scene. EY estimates that sub-Saharan Africa’s fintech sector has grown by approximately 24% annually for the past 10 years and that the number of fintech startups has grown eight-fold between 2008 and 2018.

Yet this burgeoning fintech sector is not just a signal of future success – it’s also playing a key role as an enabler of growth, in the form of mobile money. Traditional banking has bypassed the majority of Africans, not addressing their needs or making it easy for them to access finance. There are only five bank branches per 100,000 people in sub-Saharan Africa, according to World Bank data, whereas there are over a hundred times as many mobile money agents.[1]

 

Make it mobile

Dare Okoudjou

By contrast, mobile phones are everywhere with penetration across the continent at 73%. These phones provide connectivity and routes to digital services, and mobile money providers such as M-Pesa have stepped in to give Africans what traditional banks have found it difficult to deliver. As a continent, we can now lay claim to nearly half of the global total of registered mobile money accounts, with nearly 400 million in total.

These accounts have brought financial services to a raft of groups who have been traditionally excluded from the system, particularly people in rural areas and women. Not only has this expanded payment options for people who might have a limited supply of cash, but it has also opened up new business models to, for example, financial services institutions who are keen to offer microloans and other forms of microfinance.

By moving people and businesses onto a formalised financial services platform, mobile money accounts create new and better quality data on how people use financial services. This creates a feedback mechanism whereby financial services organisations can garner a better understanding of traditionally under-served customers and can therefore provide them with better services.

 

The challenges of complexity

Yet mobile money is now pushing up against the limits of African technological and regulatory infrastructure. Our young and optimistic population is keen to drive new ideas forwards, to collaborate with people across the continent, and to do business without borders – 70% of African migration takes place between African countries. They require financial services that operate on similarly open and interconnected principals.

Unfortunately, Africa is beset by complex and fragmented financial services and systems. There are a variety of different digital payment schemes, each designed to meet the specific needs of one (or more) of 55 countries operating in a variety of languages and business cultures. Many of these lack the ability to communicate or inter-operate with other systems or across borders.

The impact of this uncoordinated complexity can be clearly seen in remittances. Fees are simply too high, and they inhibit the flow of money and services across the continent, acting as a drag on business activity and innovation. A Nigerian entrepreneur looking to launch, say, a pan-African ecommerce fashion brand that draws on the best trends has to contend with these obstacles when contracting a cutting-edge designer based in Gambia.

 

A different approach

When it comes to financial services, African businesses and indeed people should not be restricted by where they are from. Bringing down these barriers to the flow of finance will help unleash our potential, and it is this vision that motivated me when I founded MFS Africa. Having worked on mobile money across the continent while at MTN, one of the biggest telcos on the continent, I saw that the next step for mobile money would only come with bold moves, and at continental scale.

The idea was simple: a unifying layer that would connect different financial services to the vast array of telco providers and their mobile wallet systems. To work at a continent-wide scale, it would need to ensure that money could flow smoothly across different regulatory regimes and markets by also carrying out vital tasks such as authentication, credit checks, and know your customer processes.

We created our platform from scratch, working with telcos and financial services institutions to ensure it met their needs and making it inter-operable so that it would not be restricted to only working with a particular system. But it isn’t just the technology that needs to be adaptable to different approaches – we have also ensured that our team is, with a 70-strong (and growing) team on the ground across sub-Saharan Africa, feeding their in-depth local knowledge into our development.

With 200m users already covered, a reach of 34 countries, and 70 partners connected, we’re well on our way to fulfilling our long-term vision of connecting 400m people across sub-Saharan Africa and beyond, through their telcos, banks, money transfer operators and other partners. Mobile money can be the engine that drives Africa’s prosperity and enables us to be the home of the business successes of the 21st century, and we’re excited to be taking on the challenge.

 

[1] https://www.gsma.com/mobilemoneymetrics/

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