Unchained - BitPesa's Elizabeth Rossiello on Necker Island

Episode Date: June 14, 2016

Elizabeth Rossiello talks about how she went from being a credit ratings analyst for microfinance investors to heading up an "international mobile money" company for sub-Saharan Africa that uses Bitcoin's rails. Along the way she reveals how convoluted, expensive and unreliable the movement of money into and out of Africa can be -- many people sending money in envelopes via regional buses and even traditional banks having to send money from Africa to Asia via North America. With BitPesa's fast and inexpensive international solution, companies are opening up new markets and people sending remittances no longer have to pay exorbitant charges. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Forbes Podcasts. Hi, everyone. Welcome to Unchained, a Forbes podcast produced by Fractal Recording. Thanks for tuning in. Today we're launching with two podcasts, both from Sir Richard Branson's Necker Island in the British Virgin Islands. After today, you can expect one new show every other week. For one of our inaugural podcasts, we're talking with Elizabeth Rosiello, the founder and CEO of Bit Pezza, a sub-Saharan African foreign exchange and business-to-business payments company. Elizabeth tells us what's broken in the world of remittance and B2B payments from Africa. And she also describes the solution that her company offers. So welcome Elizabeth Rosiello.

I'm so glad to have you on my show. I've heard so much about you and was so excited when I realized it was going to get to meet you in person here. Oh, so nice of you. So I was wondering, I just, I'm sure many of our listeners are kind of interested in the atmospherics of Neckar Island. What has been your kind of the highlight of your time here? I mean, you just don't realize how diverse some people's lives have been and what they were working on before they came into either business or before they get into government. And my dinner partner last night was the former prime minister of Haiti during the earthquake. And if that wasn't enough, we then started talking and it turns out he's got an office in Senegal where I live.

And he's been working in West Africa for decades. So, I mean, it was just, wow, okay. So you don't really get that kind of networking, staying at home. Right. And then you don't normally do that and then also go paddleboarding the next day. Yeah. And, I mean, you know, when you're running a startup, it's pretty intense. You don't get a lot of time to just think strategically.

So there's definitely some space here for that, although not a lot. Right. Yeah. No, we've been very busy. Okay. So tell our listeners the story of how you came to found BitPesa and what the company does. Sure. I'm American and I was living abroad in Europe for a few years, working in investment banking,

and I paid off my student loans, and I decided with my husband at the time that we wanted to go to a more interesting market. We were in Europe. In Zurich and London, working for credit suites. And we actually applied for a job in Singapore and in the sector of microfinance, which at the time was the fintechiest thing there was. And the rating agency, which I applied for a job with, said, sorry, that job's full. Why don't you go to Nairobi, Kenya? So sight unseen.

In what year was that? 2009. Okay. So I accepted the offer in 2008. And in 2009, I began my training in Paris with Plano finance. And they sent me to Bosnia and Georgia and Azerbaijan. And I thought, wow, these banks here really are horrible. I mean, I can't believe the operations and the governance and the system.

And they said, well, but these are A-rated banks. Wait till you get down to East Africa. And I went down there and I let up the office. And every month I would visit a new financial institution from Kenya to Botswana, so covering all of sub-Saharan Africa. And doing everything from interviews with the governance teams, so the executives, down to the branch officers, talking to the customers in the field, whether they're an urban trader or out doing agriculture. looking at their credit products, looking at these million-dollar management information systems. That's an MIS system. What's that? That's the nuts and bolts of how the bank runs. So for small banks, it's everything. If you don't have a good one, you don't know how many customers you have.

You don't know whether they have loans, when they were taken, how much they've paid, how much interest you're, how efficiently you're operating, which branches are doing better than others. And if you do have a good system, it can make a huge difference. So for the systems that really integrated with mobile money, which at the time was really coming up. You saw operating expense ratios drop from 70% down to close to 10, which would give them an A rating. So for me, it was really interesting always, you know, you could be in the coolest market with a really innovative governance team.

You could have a great customer base, a really cool product. But honestly, if you didn't have the efficient back office, it wasn't going to work. And if you couldn't manage, collect, sort, and risk, identify the really. risk of your data and all those things, and you really had some big problems. So that was really interesting to me. And I started to move away from doing the ratings to kind of interpreting the ratings for investors. And by investors at the time, those investing in the microfinance space were social investors. So Gates Foundation, an Acumen Fund, Grameen Foundation, and they would come down and say, well, we think microfinance works. And there was a lot of hype about microfinance, very

similar to Bitcoin, I might say. And they said, we can use microfinance for everything. We can collateralize microfinance portfolios together. Sound familiar? We can offer. We can offer credit guarantees from big banks like Citibank or Deutsche Bank that don't even do microfinance. You know, all this kinds of cool stuff was happening and it's going to save the planet. And what we realized afterwards after the bubble died down was it can do a lot of things. It can be a really helpful tool, increasing financial inclusion and growing economies, but it's not the end-all, be-all. And there were some really great learnings that came out of that. And one of those things that I learned was to really make a bank or a financial institution or a product work in a region

where there's very little infrastructure. You have to invest in technology. And the technology not only has to be easy to use, so everybody can understand it, you can't have a really cool technology that only one teenager in the IT department understands, you know? And then when you can bring it up to the C level or the board, they're like, what is this? And they can't interpret the data or how they use it. It has to be intrinsic. So it was really exciting to see. A few banks would be mobile money only. So everything they did was just using mobile money, no paper. Everybody that came in from day one was told all of their procedures and policies were based on that. That started getting me thinking. And I met one of the men, Doug and Goldie,

Scott who had founded the first mobile money-only microfinance institution in Nairobi, Kenya. And I said, look, I've been consulting forever. I'm so sick working for other people. And he said, I'll see you if you figure out a way to bring Bitcoin into the mix. I said, what's Bitcoin? And he had been involved in the Financial Cryptography Association for a while. And he said, it's mobile money that goes beyond borders. It's international mobile money. And his idea was more of escaping the banking system and creating, you know, replacing mobile money and bring it to regions like Somalia,

who at the time were having real problems with international banks. They're all being cut off, right? There was all these injunctions against Barclays because they cut off Somalia. But for me, I said, well, I'm still a business person. I'm still pretty practical-minded. What I'm most interested in is how do we get better products to those urban customers that you see all across Africa

from Dar es Salaam in Tanzania to Lagos, Nigeria. They're importing from Dubai. They're exporting to Europe. They're importing from China. They're trading with each other. New digital businesses are growing up that have customers. They're doing digital advertising in four East African markets. These are really the customers that get me excited.

Agricultural lending, bottom of the pyramid lending, financial services for the extreme poor, I haven't given up that there's a little. for that, but it's very multifaceted work. It's really multivariable work. You need a lot of people in the ecosystem to make that work. So I have a lot of friends that do some very cool work from One Acre Fund, to even at Syngenta with Farm Force. But for me, I was interested in creating a product that could help these urban customers grow their businesses beyond their own markets. So how do you make a payment to your supplier? Well, the way most of these people made payments

was they would carry cash on an airplane. One friend would be a representative to go to Guangzhou, China, with a bag full of cash, or worse. I'm sorry, but was there any risk that if they were caught doing that, then, like, the money would, you know, be... Sure, cash is risky, but, you know, it works in different ways. The other way would be to send a wire to an unknown fixer or partner in China ahead of your trip. That would take a few weeks. And then when you get off the plane, you hope that guy has sent the wire to your hotel. The hotel gives you cash again in U.S. dollars.

And then they have the hotel FX broker come with his backpack to the hotel and change the cash from U.S. dollars into R&B. Oh, my goodness. So, I mean, those are just some of the chamber ways. People used to move money around. Wow. Yeah, I mean. And what's like a less chain way? Like, I'm kind of curious.

I mean, you know, you don't go in person, you send the cash with other people, you know, there's a lot of informal networks, semi-formal networks, something like over 75% of regional remittances out of South Africa travel by bus, an envelope. So, and I found this myself in Nairobi, Kenya. I once was at a safari house, and I forgot the key. And they said, we'll put it in an envelope and give it to the bus driver who drives the route up country. Oh, my goodness. I mean, that's a common thing to do. Because there isn't a reliable postal service? Or, yeah, there's no, there's no postal service in Kenya, no home delivery.

There's only a few GPO's. But forgetting the postal service, there's a lot of informal networks that have sprung up that are just better than the formalized networks. But those only really work where you have trust. You do it on the bus routes where you know the bus driver. And they're all of the same tribe from the same region, so they're probably not going to cheat you. And if they did, you know where the guy's sister lives or the mother, right? But what happens when you need to kind of go out of your Nigerian community

and you need to deal with somebody in Dubai? Or out of your Kenyan community and deal with somebody in Germany. Now, you don't know the German sister. You don't know where his mother lives. You know, you don't know where he went to school. So if he is not trustworthy, how do you deal with him? So in a system like mobile money, it's domestic. It works beautifully because everybody's got it.

What if you don't have it? How do you trade with them? So all of these kind of questions were just really interesting to me because I had been an expat for 10 years. You know, I had been living abroad. I'd been sending money back and forth between continents for years. And it was always interesting to me how crazily different it was with each country. You know, I moved to Germany. My first internship was with the German parliament, the Bundestag.

And when I had to pay my rent, they said, oh, you just do a wire online. I said, what do you mean? They said, yeah, you just go onto the online banking website and you send an Uber Vising, which is an online wire instant. And I said, but I've been giving a paper check to my landlord at my university for four years. And they said, what's a check? You know, and like back in the U.S., they couldn't believe that we were using this online banking, and that was in 2003. So, I mean, it's just always been interesting me. Like, if the technology exists, why aren't we using it?

Why don't we adopt the latest? What holds people back from that? Having known those ratings, I saw. You have the Dutch government give a million dollar management information system to a bank, and they couldn't absorb it. They didn't know how to use it. There was no customer support that was local. It was super complicated.

They had to do a migration from their old system to the new system. They might have used one functionality out of 100, you know. So the technology had to be easier. It had to be cheaper to set up. It had to be intuitive. and you didn't need to maintain it yourself. So when you think about Bitcoin, right away when you start a company, if you learn about and you have a developer that can link into it,

you can kind of just start. You don't have to build the whole infrastructure yourself. So, yeah, is that essentially what you're doing at the Paysay? Do you feel like you don't have to build infrastructure because it's kind of built in? Yeah, I mean, you have to build security, you have to build procedures, you have to build your product, you have to build your market, you have to build a relationship with your regulator, you have to build your order book,

but I do not need to invest in a million dollar Oracle management information system. And I don't need to hire a team that sits on top of the customer support we get from Oracle. You know, and if it turns out that my business changes and I don't need that Oracle system anymore, I don't need to buy an IBM system, you know? So, yeah, so then describe your product

and how is it solving that problem of, you know, people having to carry cash in suitcases or trust the bus driver to deliver their money. Sorry, not being so succinct today. No apologies. So the problem with mobile money is that it's a closed loop. And the problem with the Oracle systems and the microfinance bank management information systems are that they're closed loops. So a Ugandan microfinance bank wants to do a transaction with another. Let's say they actually wanted to manage their treasury.

and they wanted to kind of make transactions like real banks do. They wouldn't be able to because you can't make a transaction out of the system to another system. They didn't have SWIFT for microfinance, you know. Correspondent bank relationships were only really given to the top banks in these markets. So those banks were just islands amongst themselves. And sometimes they would use mobile money to make payments between them. So what if you used Bitcoin? Wait, I'm sorry, banks would use mobile money to make payments between them?

Yeah, actually, you can pay in and out of any bank in Kenya using mobile money. Oh, interesting. Because there was no other way. Because the correspondent banking, which for our listeners who don't know is, you know, a way to connect kind of smaller regional banks to also smaller potentially regional banks in international locations. When you're U.S. bank, when I went to school up in Buffalo, I think my bank was called M&T Bank, a New York bank. In Kenya, my bank was I&M Bank.

Now, is M&T Bank, North New York, going to have a direct relationship with I&M Bank, Kenya? Two small little banks. How would they ever connect with each other? Well, they have to join, like, the International Correspondent Bank Network, and how do they do that? They kind of sign up to Citibank.

So when M&T Bank, New York, wants to deal with I&M Bank, they go through Citibank. Citibank is their correspondent bank. Turns out, Citibank and Standard Charter own pretty much the majority of the entire African continent's corresponding bank relationship. Almost every bank in Sub-Saharan Africa has to go through one of those two to meet another U.S. bank. That gives it a pretty strong monopoly on pricing. Timing, settlement, no customer support, no incentive to change.

Right. And yet, for the African banks to talk to each other, there was no good... Exactly. So actually, Swift has done this really interesting report that talks about how... when Africa trades with other continents. So when an African payment that's destined for Asia, it often goes through a U.S. correspondent bank like Citibank back to the U.S., clears there, and then goes over to Asia.

Oh, interesting. Okay, so let's talk about, so BitPays that, like... Yeah, so what we decided was we'd put up a flag, and we'd said, we'll accept payments, whether they're for remittances, people, businesses, whatever they are, we'll accept transactions, and we'll put them in a... bank or mobile money or however you want to receive them here not cash so bank and mobile money debit cards in nigeria we put up that flag and we said anybody who wants to gain access into these last mile these last way to a consumer's wallet does not have to only go through a correspondent

bank if you send me bitcoin i will make sure that i'll put the corresponding value in the bank account so suddenly somebody in canada could send me a bitcoin And I would take the value of that Bitcoin, and I'd make a market and a price for that in African currency. And I'd say, well, we've agreed the value of this one Bitcoin is worth 35,000 Kenyan shilling. And I'll put that directly onto the mobile money. Or it's worth $3,000, and I'll put that directly into the bank account. And now I can transact with anyone in the world without going through the correspondent bank. Now, it ends up in a bank in Africa, and it probably started in a bank in Canada.

but now CIBC Bank Canada does not have to have a relationship with my end user. They don't even know that it has to end up in a Kenyan bank. And then does the sender have to convert to the Bitcoin themselves, or do you also do that for them? So that's a great question. In the beginning, the sender had to buy the Bitcoin themselves. So the sender from Canada had to say, I've got Bitcoin, I'd like you to put this in a Tanzanian bank.

And we said, sure, we'll do that. Now we have a Nigerian. to us and say, I need this to go to a Chinese bank. I don't know anything about Bitcoin. We say, okay, that's fine. So they give us Nigerian Naira. We effectively sell them Bitcoin, but we deliver that Bitcoin, but they don't know that Bitcoin's. I mean, they know they've come to us, because our company's name is Bipasa. They know that we do something unique. On the receipt, it says how much Bitcoin they've received, but they don't have to hold the Bitcoin. They don't have an exposure to the Bitcoin. When we give them a quote, what that Nigerian

Naira to Chinese yen prices, it includes the transaction fee for going through our version of a Kvarisbindem bank. And what do you charge? For a large transaction, it could be less than 1%. Wow. For a smaller transaction, it can go up to 3, 4%, depending on the currency, depending on the form of payment. Sometimes it's a flat fee.

So if somebody pays us by us a debit card or pays us by mobile money, then we need to pay a flat fee for that which can increase the cost. Okay. And how does that compare to what people have been paying using these other methods? Yeah. So they can pay anywhere from 2 to 20%. Wow. And what scenarios are they paying 20%.

So the average cost of remittances to Tanzania is 19%. From anywhere? From anywhere to the average incoming cost of remittances in Tanzania. Intra-Kenia was pretty expensive. it was over 12%. So Kenya to Tanzania was over 12%. And when you use mobile money, so you go from Vodafone Kenya to Vodafone Tanzania,

it's over 6%. Oh my goodness. Same company right across the border. You have some really crazy corridors like Rwanda to India is over 20%. So specific corridors where there's not a lot of competition, it gets very expensive. Now, why isn't there a lot of competition?

Well, is there Rwandan Bank and have a direct relationship? with every Indian bank and every Canadian bank? You know, Rwanda's a small country. Is it the responsibility of those banks go around the world and develop direct relationships? What if they use a different management information system? What if they have IBM and everybody else has Oracle? Forget IBM.

A lot of them have a smaller one called M2 or EMERGE or Octopus. These are small companies that make small bank management information systems. So large banks won't be able to integrate with that. So who are your clients? So our clients started out as... With Amex Platinum, you have access to over 1,400 airport lounges worldwide. So your experience before takeoff is a taste of what's to come. That's the powerful backing of Amex.

Conditions apply. Tech people, so early adopters, who were very excited. They knew what Bitcoin was. They were following Bitcoin online. They were just excited to be able to use Bitcoin. to take over whatever their transactions were in Kenya. And these techies would say, well, I'm paying my cousin. You know, I'm living in Canada.

I'm a software designer. I know about Bitcoin because I'm in the tech world. But I do have to pay my family member once a month. And actually, I pay three family members, $100 each. So I'm going to send you $300 worth of Bitcoin, and you'll pay it out to three different people. And it was, you know, within minutes, you know, 3% as opposed to what he was paying before, over 7%.

And stainless, you know? Yeah, and actually when you say, you know, it's near instant, and can you lift your arms from me? Yeah, so. And when you say that it's near instant and, you know, you gave the examples of money being moved from Africa to the U.S. to Asia, how would that compare in terms of, you know,

how long would it take previously? Yeah, again, it depends on what method he was using before. There are now some apps and some kind of, companies in certain markets, specifically Kenya where you have M-Pesa, where you can pay with a debit card in the U.S. and it goes pretty quickly to Kenya. And it's getting competitive there. But Kenya's the best version of that. And you have to wait. If you're going through M-Pesa, you have limits. It can only go up to $700. So businesses don't really use that. So then we said, well, actually, it's businesses that really need us. We have a jewelry company, which is a social

enterprise. So they employ a lot of women in Kenya making jewelry, a lot of really cool young designers in their headquarters, and they sell the jewelry wholesale online into stores in the U.S. So every month they have quite a lot of money that needs to come from their company in the U.S. to their company in Kenya, an intra-company transfer. Now this is their cash. This is their business. They're a small, growing business. When they would send the transfer via a bank, it could take up to 12 days. Oh my gosh. And they didn't really know what day it would arrive. So if you've got to wait for a big payment, when do you make the order? Well, we don't know when to make the order because we don't know when the money's arriving. So your cash is tied up for half the month. Right. And your staff can't

really plan systematically because maybe this month it came three days earlier and that month two days later. And goodness forbid, you missed the telephone call from the security check from the U.S. Bank, which will call you on the phone in the middle of the night, Kenyan time, that says, are you the person that initiated this wire? You know, I mean, the checks are still pretty old fashion, and then you start the whole process again. And you don't also always know what the price is until it arrives. Oh, wow.

So with large transactions, the margins get tighter, of course, if you're able to negotiate that. If you don't negotiate, it still can be quite expensive. But the speed and the ease and the customer service are the real problem. So that's what we kind of take care of for these customers. And so you're delivering the money, like, you know, since it's on a Bitcoin blockchain, presumably on average within 10 minutes? Yeah.

I mean, it depends on the last mile. So if the bank that we're putting the money in has closed for the day, you know, that we can't do business. We just did a trade with Bid Oasis in Dubai, and their weekend is slightly different than our weekend. So we had passed the cutoff on Friday for delivering it. So they had to wait until everything. opened up again. Oh, I see. So there are those limits. You know, there's still pretty pedestrian limits on what you're using it. However, it's not weeks. Yeah. And there are limits from the traditional

banking system, not from this technology. So those, those limits were already there, plus there were extra innovations he's on top. So he can get a receipt of payment instantly. Okay. And so, you were saying that now you're seeing a lot more corporate customers. Who are they? So it differs depending on where we're talking about. So in East Africa, we have a lot of social entrepreneurs. That's the testing ground for a lot of social enterprises because mobile money is there. So it makes micropayments easier. More financial services.

There's a lot of funders. Nairobi, Kenya is one of the six UN headquarters globally. So you have just the hub of a lot of that kind of activity. And it's very easy to travel and work between Tanzania, Uganda, Kenya. So a lot of our first businesses there were social enterprises doing cool things like that. Solar, customer, solar, fashion, real estate, microlending even, and even some remittance companies, payment, digital advertising. In Nigeria, you see much larger volumes. So almost triple the average transaction size in Nigeria.

And there you're seeing larger-scale importers, so people bringing in plastics and selling plastic furniture, plastic casing, plastic boxes, lighting, lighting for theaters, lighting for showrooms, you know, much bigger import-export happening in Nigeria. And while they might have already solved that payment problem in East Africa, that's still a major problem in Nigeria. Okay. And there was something very interesting that you said earlier, which I, didn't quite follow, but you said that there's a collection of Nigerian churches in Texas

that used BitPesa in bulk. What was that about? Yeah, I mean, we have, some of the way that we do business development is we go and want to give away all my secrets here for all my business development team, which is quite upset for our competition, so maybe I'll just be vague. But clearly, when you're dealing with the diaspora population, often religious units and networks are really helpful. So we go through a lot of the church groups when we enter a new market and we talk to them about how they send money back. And not only for P-to-P remittances, but you also see private investment clubs and circles sending money back quite frequently and Goodwill. So houses, churches, correspondent church buildings, there's a lot of financial

transactions happening between these networks. So one of our great clients is a Texas company that collects and sends a lot of money back to Nigeria. Okay. And then in terms of examples of some of the bigger clients, you also said some of the biggest breweries, and there were some other... Yeah, I mean, I want to give away, nothing to share publicly yet.

Oh, okay. But we've been talking with a lot of much bigger blue chip Fortune 500 companies. So they're saying now, I'd say when we started, they said, oh, you're just some kind of Bitcoin company. I said, no, we're a company that you can buy and sell African currencies. So are you working in Africa?

Yes. Well, do you have payments or collections in African currencies? Yes. So do you have a team that thinks about how to buy them at a good rate and settle them? And does you have a Treasury Department? No. Well, why not? These currencies are volatile.

They move around. They're hard to access. The banks close at all to hours. The desks are difficult to deal with. Nothing's digitized. Well, you know, we just haven't thought about it. Well, did you see how much? much your FX exposure or your FX risk is costing your company. It's something we'd always

look at as a rating analyst, which is the FX loss that you're not managing. And a lot of them would say, oh, well, we buy our African currencies in London. We buy them in New York if we need to. And we break down their rates and say what they're actually losing doing that kind of business. Or, you know, we haven't entered that market because we don't know how to get local currency. We don't have a local bank account. So it's taking a lot of education and even saying if this solution exists. And then once they say, oh, well, your name's BitPesa or are you dealing with Bitcoin, we say, well, you know, we use it for efficiency.

We use it for a lot of different ways, but that's not who we are. When banks started using email. Imagine the first bank went to its regulator, and the regulator says, so what, you're an email company now? I said, no, we're still a bank. We just use email. Well, no, no. If you're using this technology, you're clearly an email company, you know?

And now all kinds of companies use email. But in the beginning, a lot of people would say to us, oh, you're that Bitcoin company. We said, well, being a Bitcoin company is not a business. So we're a foreign exchange solution. We're a payments company. And we use Bitcoin to make prices more efficient. Okay. So another thing that interested me was over, you know, during the course of this gathering,

you have spoken about how your business has enabled businesses within these markets like, you know, in Nigeria or in South Africa. It's open new opportunities for them that they didn't have before. And you made an example about like ads, Nigerian ads in South Africa. There was something. So we met a South African company that does digital advertising across the continent. And they were struggling to collect their ad revenue from their customers in Nigeria. Since it wasn't so easy to make a payment from Nigeria to South Africa, they would have to wait.

And then the FX price might change. And then by the time they received it, they had an FX exposure. So if they could just collect more easily, then they could do it more frequently, and they would reduce immediately their FX loss. So suddenly we said to them, well, you can make a trade every 10 minutes. You know, and you can cut. And they said, wow, wow, do we have to use a credit card? No.

What do I need for that? And when we talk through that solution, it makes it easier for them to do business. And now they're not going to hesitate when they're taking on Nigerian customers because now they know they can collect that payment. Another company we worked with, they always show us a list of all the countries they're operating in. They say, well, where are you in this list? How many more have you opened in? Because they were really excited to take a customer in Tanzania

because they knew that they could then collect payment from them using us. Okay. So tell me how you got that Pesa off the ground. You started and you were mostly dealing with retail customers, and then you said eventually you moved on or found that, you know, there was more work with the enterprise. How did that evolution happen? Yeah. So when we first started, we were really looking at the largest chunk of egregious fees, and that was remittance fees coming into Kenya. And there was a lot of interest from the World Bank and Sea Gap, which is microfinance think tank and body.

And we said, hmm, let's talk at that. So when we first did our pilot and we were two years live now this month. And we went up to the UK and we met with immigrant groups there and diaspora groups there. And we talked to them about and we tested the product. And we said, okay, this will be used for a P to P service sending money home. But people's behavior was difficult to change. Yes, they were saving some money, but it was still difficult for them to get used to the new behavior. and they still needed to have a way to change their British pounds into Bitcoin.

And, you know, we weren't going to be able to do both ends. Otherwise, that would mean me being Allie and Susie at the same time. You know, I'm Susie. I need to find my Ali. You know, I need to find somebody in those markets. And it was very easy to start a business doing that, but you didn't have as many people doing it. There was a lot of hype about Bitcoin, a lot of companies saying they were going to do these things.

But it went and came down to it, and I had my team call them up and say, let me see your API, let me see your platform, what does your KYC and AML look like, you know, let me see your policies and procedures and let's have a relationship, they just weren't ready. So we found ourselves working really hard to make sure we were ready in our markets, but it was difficult for us to find those brokers, at least brokers that were very easy to use from individuals. But when you went up a little bit and you looked at businesses that were really struggling, they had a lot of incentive to change their behavior. And the brokers that were serving those big businesses were much more professional.

They were licensed. They had great treasury desks. They would settle in price instantly. You know, as the margins and the sums get bigger, you suddenly find more professionalism earlier on. Now, I would still love to serve that P to P space, but I think the whole ecosystem has to mature a bit more. And we're doing that in some markets,

and that's coming around. So for the last two years, what we really wanted to focus on is building building an easy, seamless, frictionless way to get access to the currencies in the markets where I operate. And anybody who wants to link into that can do it easily and even for free. And did that mean creating establishing banking relationships in every country that you operate in? That's our model. It's a little bit heavy on the infrastructure. But coming into a country and let's talk about the second part of regulation, which is approaching a regulator and a government

and saying, listen, we're using this new kind of technology, but don't freak out. We're just like the other businesses in your country. We're going to be either a payment institution or a foreign exchange bureau or a money service business. You know, depending on the different regulatory differences between each market, we've got to be one of these three. Maybe we're a commodity exchange.

But just because we're using this technology doesn't mean you have to create a bucket called Bitcoin Company. Because what is a Bitcoin company? What if you use Bitcoin to label water bottles? What if you use Bitcoin to one guy was sending satellites up into space? What if you use Bitcoin to buy and sell currencies? There's a three very business. It's very different businesses.

Should you have a regulatory bucket just for that? But a lot of regulators got distracted and said, if you're using email, you're an email company. No, we're not an email company. You're still a bank. So some markets we went in. to and the regulator just said, well, we don't really know what to do with you yet, so we're not going to even deal with you. Now, you're not illegal, but you're not licensed, so you're in

limbo. And then how long would it take them to come around? Well, we're still talking to a lot of them. Oh, really? I mean, even in the U.S. and in Europe, you're just seeing now regulators become much more clear. So the U.S. was the first to make very clear statement saying, you are definitely an MSB. Anybody using this technology to do what Bepa is doing would be considered an MSB. In the UK, we received a license from the FCA as a payment institution. We've seen Japan come around, Luxembourg come around. A lot of other countries make clear statements. Unfortunately, we still don't have an African regulator that's made a very clear statement. Now, there's many, many shades of gray, and we could sit here and talk all day about all the different ways, the different

regulators in the region have approached us and talked to us and how they're looking at the topic. And it's sad to say that in some markets, the regulator is really just not investing the time to really understand it and realize this is just a piece of technology that can be used by all the businesses here. Well, but so it sounds like you have really established relationships with the number of banks even in African countries, and yet you're doing that without clear guidance from regulators there? Well, some of the regulators have spoken to us, spoken to the banks, given us guidance, told

us that we have to consider AML KYC, which we do, that we have to register, we pay our taxes. I mean, we're registered in all these countries. So we're actual incorporated businesses. We follow the rules. We pay taxes. We have work permits. You know, we have a physical office. We submit KYC and AML. We have bank accounts. There's many ways to kind of run a business. When we're over certain local laws, like $10,000 transactions, you have to submit to a whole different point of rules. Those all happen even without a license. That's just being part of following the law of a lot of these countries. Now, going above and beyond that, we don't hold deposits. We don't have wallets. So we couldn't do that without a license. Okay. So one thing that I was

curious about is when you were talking about those really high fees, like 20% and stuff like that, you would mention something earlier about a study that talked about how if Western Union or Money Bank enter a market first and make a deal with a postal service, then they will end up not only with the lion's share of the market, but then the prices in that country will be rather high. Yeah. What are the stats on that? And is that the reason for those high prices that you mentioned earlier? I will send you the link so you can look at the stats yourself because I don't want to recite them. And I will send you the two economists at Sonia Plaza is one of them at the World Bank that

published that report. But essentially what it was is that, cornering the postal service, the post banks in a market, and getting an exclusivity agreement with the postal banks of a market severely affects the average rate of remittances into that country going forward. So it did a really great study where they went across Southeast Asia, Africa, South America, and they looked at all the different markets with really expensive remittance corridors, and they said, you know, well, is there an exclusivity arrangement with one of the big with moneygram. That means that every post office bank in Ecuador

has a money gram sign and no Western Union. That means it's an exclusivity agreement. And usually there's like a price floor because they have to pay a fee back to those banks for every transaction. So now you've suddenly set the price of the market. So I mean, it just distorts that those exclusivity agreements are quite damaging.

Because when you have a new customer, a new company come in and we say, hey, we can strike a deal, we can give your customers better service. They go, why? I'm getting all these kickbacks, all these fees from this exclusive arrangement. I'm not going to ruin that, so you don't get to enter this market. Wow. Wait, and has that been an obstacle for you?

Well, there certainly originally, we approached a lot of banks, and they said, well, we're already working with these three companies, and they give us a per transaction fee. So why would we work with you who has less fees? And then... And then we talk about... well, actually, you know, we're bringing more money into the country. So do you want your customer's bank accounts to have more money in them? You know, they'll actually transact more money if the fees are lower.

So just a different kind of perspective on what would help grow their business in volumes. And you have to kind of align your interests. Oh, I like that argument. In general, what are some of the bigger obstacles you have tended to face and how have you gotten around them? Well, regulation is the number one obstacle we face. where in the region where you've had the least clarity from regulators. And if you look at a map of the world and you look at countries colored by what the regulators have said, so clarity or not green, red, yellow, you just see a gigantic gray space for Africa.

So that hurts every time I see that, you know, not to get emotional. Because, you know, without the regulatory clarity, you really struggle to have, market entrance. And, you know, we do a lot of things to get through that. We have a lot of communication with the central banks. You know, we have meetings with them. We'll bring our investors down and we'll sit down with them. We talk about where they will be going when they finally get there. What's the time frame? How they view it. What are the other ways that we can transact? Can we partner with a regulated entity? We've done that sometimes. But it takes a lot more legwork and a lot more intimate knowledge of the market to know, well, even if their regulation is not

you have these five other signals that tell you how the market will go and what it will look like to kind of understand what your risk appetite is in that kind of in that market. Okay. So what keeps you up at night? Like, what are you worried about, you know, what do you think would be kind of something that could really potentially impact your company in a negative way? I mean, we've already seen the worst that can happen 400 times. I mean, um, we've seen, uh, systems rely on.

crash. Suddenly, we had one system that we relied on and it stopped working for a few days. Wait, I'm sorry, you were saying a system that the pits have relied on? Yeah, I mean, one of our bank accounts, the online banking crashed, so no transactions in or out. So, you know, customers came to us and but we were still relying on the local bank. So, you know, everybody in that market had a problem with it. But, you know, when you're doing business in, when you're doing business in developing markets where all the people you do business with or struggling, you know, you have a lot of weak spaces. So imagine how often a U.S. online banking platform goes offline for three days. Like almost never. Yeah, okay. That happens

quite a lot. That's just part of doing business, you know, but everybody is dealing with that, not just my company, so it's not like our customers are extra angry. But when I'm looking at a company like mine operating in the U.S., they don't even have to worry about that infrastructure problem. Or, you know, you have blackouts or power outages and all sorts of things or elections or random holidays nobody announces. I mean, there's still a lot of bumpy roads to go down, but it's getting less. And I think their demand from the customers for a simple digital product that's user-centric is high.

And so that's been exciting. And the reason that you keep your money in those local currencies is to protect against volatility in terms of the price of Bitcoin? I mean, we're a dollar company. we have our accounts in dollars. We also have our accounts in local currency for sure, but we don't, we use Bitcoin for a settlement. That's it. Use Bitcoin as a debit card almost. We don't have a debit card. We pay people with our Bitcoin debit card. We trade it into Bitcoin to make a payment and then we cash it out. We keep local currency because our consumers need

payouts instantly. And the only way for that to happen is us to have the local currency there. Okay. What's a customer success? story, like a story from one of your clients that has really touched you? Yeah, we have a few. Actually, we just put them up on the website. We have this company that was growing in Nigeria, and they suddenly were struggling to make salary payments abroad. The way that they had been making payments before was a third-party PSP, like a payment service provider. It wasn't working anymore. Price-wise, their system was down, and they really were just like, what do we do? And they knew nothing about Bitcoin. And their friend somehow knew our, new our employee in our Lagos office, one of our employees.

And they come to us, they go, I don't know what you're doing, but I just need to make these salary payments. And they were getting desperate. And their employees abroad were like demanding that they make those payments. And it just came to us and said, what can you do for me? You literally don't have to know anything about Bitcoin. I'll just show you what to do. You're going to send me a Nigerian bank transfer. And I'm going to make that payment. And they said, well, what did you use? Did you have a visa card? I said, no. You know, did you make a big bank international wire? No.

You know, how did you do it? Did you use PayPal? No. So here's a solution, and it's actually quite simple. And that gets as exciting that we're helping companies solve problems that they have, and every kind of company will have this problem. Okay. What have I not asked you that you'd like our listeners to know?

I think the size and the opportunity in the African market is constantly underestimated. you know, there's still this aura of, oh, scary, or oh, so crazy and wild. And maybe I haven't done a great job by telling you extreme stories. But it's a beautiful, diverse, enormous continent. You know, and everybody says, you know, what's happening in Africa?

There's this great Facebook page called Africa is a country that, like, makes fun of the idea that Africa is just one place, so it's small. I mean, I lived in Kenya all the way in the east of Africa for almost seven years, and now I'm in Senegal, which is all the way on the West, and it's like I'm in a different planet. And I've lived and worked in many, many countries in between. So I'm just constantly surprised how many big global companies are just now thinking about

how to enter the market. Now, you have some really big ones that have been there. Uber, for instance, has expanded rapidly across Africa. And thank you so much, Uber, because it makes my life a lot easier when I come into a country to be able to use my Uber account. can kind of consolidate all my expenses, really easy no matter where I'm traveling. So, I mean, that's been awesome, and they've done great. And I think, you know, there's just this fear factor.

You know, people don't travel there as much on vacation. They don't have relatives there as much. They don't hear about it as much. So there's not a lot of African-owned media coming out that reaches the global space. So, you know, stories are really tinged upon a disease and war and all that nonsense. So people don't really think, well, this is a market I want to expand to. So we're really excited to be part of a movement, making it easier for people to do business in the region. Great.

Well, thank you so much for coming on my show. It's been such a pleasure. Thanks, Lord. Thanks for joining us today. If you're interested in learning more about Elizabeth and her work, check out the show notes, which are available on Forbes.com. And please review, rate, and subscribe to the show if you like what you're hearing. Thanks again. You just enjoyed a Forbes podcast.

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