Yellow Card launches PayPal USD in Africa, Zazuu shuts down and BOG lists LEMFI and others as unapproved MTOs
Here are the highlights of tech around Africa for the week:
- Yellow Card launches PayPal USD in Africa
- Zazuu shuts down
- BOG lists LEMFI and others as unapproved MTOs
Yellow Card launches PayPal USD in Africa
African cryptocurrency fintech Yellow Card made history by being the first on the continent to launch PayPal USD (PYUSD). A new age of digital financial transactions between the United States and Africa has begun with the issuance of this stablecoin by Paxos.
A Chainalysis analysis showing a startling 1200% increase in the cryptocurrency industry between 2020 and 2021, reaching $106 billion, demonstrates the tremendous development in cryptocurrency usage in Africa. Notably, Kenya, Morocco, and Nigeria have landed among the top 20 countries in the world for cryptocurrency adoption. Stablecoins are mostly to blame for the increase in usage; because of their increased stability and ease of use, they have become popular with both new and seasoned traders.
With operations in 20 countries and a steady pace in the developing African cryptocurrency sector, Yellow Card has emerged as the fastest-growing cryptocurrency company in the continent. Africa's reputation as a top market for the quick spread of cryptocurrencies is consistent with the company's success.
The introduction of PYUSD to the US market in August caused a stir within the sector. This fully backed USD stablecoin has reserves that are entirely protected by US treasuries, cash equivalents, and US dollar deposits; all of these assets are closely monitored by the New York State Department of Financial Services.
The CEO and Co-Founder of Yellow Card, Chris Maurice, highlights the importance of the partnership, saying that it upholds the company's core values of innovation, financial inclusion, and progress. He also notes that the launch of PYUSD on their platform is not just a business achievement but a commitment to their mission of democratizing access to digital currencies throughout Africa. The integration of PYUSD into the Yellow Card platform facilitates fund transfers between the U.S. and Africa, allowing users of PayPal and Venmo in the U.S. to easily accept PYUSD and exchange it for dollars, removing lengthy procedures while guaranteeing security, stability, and speed—all at a cost-effective and reduced expense.
Through this partnership, African clients will be able to transact on the Yellow Card platform and purchase, sell, and transfer PYUSD without the need for a PayPal account. This will present new prospects for international trade.
The cooperation is based on a common goal of empowering people and businesses throughout Africa to engage more successfully in the global economy by advancing financial inclusion, education, and closing the gap between traditional and digital financial systems.
Zazuu shuts down
The U.K.-based fintech company Zazuu, which has its sights set on Africa, said that it was closing down operations because it was unable to obtain further funding. The company said, "We explored every option before taking this difficult decision," adding that "we failed to secure a growth funding round." In order to improve its cross-border payment services and create what it called the first unbiased payment platform in the world, Zazuu successfully raised $2 million last year.
Since its founding in 2018, Zazuu has developed from a simple chatbot that offered daily exchange rates on Facebook and Telegram to a UK-based company with an FCA license that serves customers in eight North American and European nations. The business expanded quickly, becoming the fastest-growing bitcoin business in Africa and having a presence in 20 nations. Zazuu encountered difficulties obtaining money to continue its ambitious aim, despite its early success.
Zazuu's demise is indicative of a larger pattern in the African fintech landscape, where capital is becoming more and more limited. In a saturated market, the firm faced challenges despite its intended goal of lowering the cost of remittance transfers into Sub-Saharan Africa. The highly competitive environment presented obstacles to Zazuu's objective of building an impartial and transparent remittance marketplace where users could compare rates from over 17 service providers.
Though the firm saw impressive growth—it added 2.3 times as many users in the first quarter of 2022 as it did in the entire year—it was forced to close due to the harsh realities of operating in the face of intense competition and limited finance. Zazuu's closure is evidence of the unpredictability of the funding climate, and its downfall highlights the challenges encountered by fintech firms in navigating a challenging and competitive landscape.
Zazuu's experience also emphasizes how difficult it is to maintain operations in a fragmented market, provide openness in remittance services, and address financial inequities. The fintech industry's strategy will probably be reevaluated in light of the lessons acquired from Zazuu's collapse, with an emphasis on the delicate balance between user development and sustainable operations.
BOG lists LEMFI and others as unapproved Money Transfer Organizations (MTOs)
A number of Money Transfer Organizations (MTOs) operating without the required authorization in the Ghana Forex Market and Remittance Market have been detected and listed by the Bank of Ghana (BoG). LEMFI, WISE, TRANSFER GO, XOOM-A PAYPAL SERVICE, SENDVALU, BOSS REVOLUTION, BTC-AZA FINANCE, and SUPERSONICZ are some of the unapproved companies mentioned.
The Foreign Exchange Act is cited by the central bank to underscore the prohibition on doing foreign exchange activity without a proper license. All foreign exchange transfers to or from Ghana must go through licensed money transfer companies or approved dealers, per Section 15(3) of the Foreign Exchange Act 2006 (Act 723).
The public, banks, Enhanced Payment Service Providers (EPSP), and Dedicated Electronic Money Issuers (DEMI) are all advised not to trade with these unapproved organizations by the BoG. The statement emphasizes that authorized MTOs must strictly abide by operational requirements and channel all foreign exchange transfers through authorized partner institutions. According to the Bank of Ghana, serious consequences—including the revocation of the institution's license—may ensue from non-compliance with these instructions.
The central bank's caution serves as a reminder to all market participants to follow the set criteria in order to avoid legal ramifications and emphasizes the significance of regulatory approval in the remittance sector.