Seamless Cross Border Infrastructure in Africa

Speaker A: M foreign. Welcome to Fintech in the Cloud with aws, your direct line to the founders, investors and startups who are shaping the ever evolving world of fintech. I'm your host, Sukain Demonga. On, um, today's episode I have the pleasure of speaking with Jess Anunna, founder and CEO at Klasha. Klasha is a financial technology company on a mission to build cross border payment solutions for African consumers. Clash is backed by leading venture investors including Greycroft, seedcamp, techstars and Plug and Play. Jess and I talked about a few things in this episode. From the challenges of raising capital on the continent to Clash on migrating their workloads onto AWS as they continue to scale. Jess is an impressive founder and CEO. I really hope you enjoy this episode. Jess, welcome and thank you so much for joining.

Speaker B: Yeah, amazing. Thank you so much for having me.

Speaker A: Yeah, I'm really excited to have you on this podcast in this particular episode. So one of the things we like to start with Jess, is to understand your background and your journey to fintech. So I'm curious to know a little bit about your background and what your current role is today at Clasher.

Speaker B: I have an E commerce supply chain and technology background. I started my career in London working at Net a porter in operations and logistics before moving over to Amazon where I worked in business development and then I worked at Shopify for four years before living in China for for four years running a product sourcing company exporting FMCG goods to frontier markets. Before I moved back to Lagos to start Clasher, I basically saw a gap in the market for E commerce seamless E commerce infrastructure. I wasn't able to access the goods and services that I was used to accessing in other frontier markets and thus I wanted to bring that seamless experience back to the continent.

Speaker A: Very cool. Do you speak Mandarin?

Speaker B: My Mandarin isn't as great as it used to be, but I'll say, um, it's intermediate right now.

Speaker A: Yeah, yeah. I'm assuming that can also be beneficial being the fact that you're in the continent understanding Mandarin to some degree.

Speaker B: Absolutely. I mean China's Africa's biggest trading partner. We work with a lot of Chinese merchants at Klasha and are looking to onboard more Chinese merchants. So it's definitely been handy in scaling the company across the continent.

Speaker A: So let's perhaps talk a little bit about Clasher. And how would you define Klasha for those who are not familiar? I may not fully comprehend the different forms of payments.

Speaker B: So we're a cross border Commerce company that uh, facilitates payments from Africa and allows international merchants to scale into Africa using our technology. So essentially we collect African currencies, deal with the hedging, the forex and the exchange spread, and then we pay our merchants in hard currencies like dollars, pounds or euros. So that's essentially what we do. We don't really trade within Africa itself. We mainly deal with payments from Africa to the rest of the world.

Speaker A: Got it. So essentially payments from the continent going to the rest of the world. And then obviously you mentioned targeting certain merchants who want to also target the continent as from a payments perspective, correct?

Speaker B: Yeah, absolutely. And we have two sides of the business, B2B and B2C. We have the Clash of Business account which has a library of different products allowing merchants in Africa and outside of Africa to send money and accept payments from the continent. And then we have the B2C which is our consumer facing app which allows customers in Africa to create virtual dollar cards, shop from global retailers like Zara and H and M and get fast delivery to the continent.

Speaker A: Got it. And you mentioned earlier in your intro that obviously you saw some challenges that you realized were occurring when you were in Lagos, specifically around cross border and payments on the continent. Cross border in general is still not an easy vertical. I think you'd argue certain large networks or even different financial institutions are still trying to kind of crack the nut depending on how they're managing their money movements. I'm curious to get your perspective in terms of like some of the key challenges that you saw on the continent first. And then also, how is Kalasha addressing some of those challenges today?

Speaker B: Well, I think the first thing is that cross border payments are slow, costly and inaccessible to the, um, unbanked. Especially given that 75% of the population in Africa are unbanked. I think also consumers in Africa are expecting more convenient ways of sending money cross border, cheaper and faster payments as well. At Clasher, we pay out our merchants in one to three working days, so T plus one to four. And that really cuts down the time for the payment value chain for our merchants who are trying to access payments from the continent. I think funding cost of liquidity can be quite difficult as an internal challenge. Pre positioning liquidity can have an impact on us being a provider in this space. So we've had to really pre forecast where our payments uh, are coming from and account for liquidity accordingly. I think the last thing is the fact that 22% of fewer banks are providing access to cross border payments since 2011, which means that we have more limited partners to work with as we're trying to scale our business across different geographies.

Speaker A: And then when you're looking at the different payments that are happening from a cross border perspective, what is the most popular corridor or payment functionalities? Are people paying for, Is it people paying for merchandise in terms of clothing or is it paying for school fees? Like what is the typical use case for people leveraging a lot of your services?

Speaker B: Well, I think what's been interesting is that at first we felt very strongly that we were building a uh, business for FMCG M products and goods. But increasingly we've been finding a lot of B2B merchants using US commodity companies using US importing and exporting. So a lot of B2B are actually leveraging our technology. China is Africa's biggest trading partner as I mentioned. So the kind of China Africa trade corridor is a really strong one alongside Africa US and Africa UK as well. I think there's a few countries that I can name, specifically India, Turkey, the uk. These are all major regions for us in terms of where the money's going and also where our merchants are coming from. Very cool.

Speaker A: And you're currently based out of Lagos. Is your whole team in Lagos?

Speaker B: Yeah, most of our team are based in Lagos. We have other team members in Cape Town, Dubai and London as well. But definitely the heart of our business and the core of our team are here on the ground.

Speaker A: That's fantastic. I think I noticed some time back on your site or somewhere where I read an article about Clash. I assume you're evolving into product as well, right? I think you're launching a virtual card or do you have one already as well?

Speaker B: Yeah, we already have a virtual card, a virtual Visa card. So consumers in Africa can top up using the African funding M method, an African currency, and then generate virtual USD cards. And we see users using these USD cards to pay for their Netflix, their Spotify, also somebody pay for their MBA recently. And then also people actually storing value on those cards and actually using it as a bank and hedging currency fluctuation by using their USD cards.

Speaker A: And because you guys are in different markets. So how does the virtual card work typically? Right, so you obviously are leveraging a bin sponsor to manage the processing behind the scenes for the virtual card. So let's say I'm in, I'm making this up, I'm in Lagos and then I have my sister who's in Namibia. If you are there, let's say you are there, hypothetically should have the same virtual Card and the same offering, but obviously being processed and managed by a different bin sponsor behind the scenes or you have this one backend processing platform?

Speaker B: Yeah, it really depends on the market. I mean, typically we have one back end if we're working with cross functional or cross border partners, but it could be a different one depending on the currency and the availability in the market.

Speaker A: Got it. That makes sense. You know, there's so many misconceptions about just the continent in general. Some great, some not so great. This podcast is global and it has different people obviously listening to it. And there's a lot of people who are probably going to be listening that don't really understand the different nuances on the continent. So I'm curious to get your perspective and what are some of the misconceptions about growing a fintech in this market or and the continent in general?

Speaker B: I think it depends who you're speaking to. If you're speaking to people outside of the continent, there may be a misconception about the market size, how many people are online, how many people have access to Internet and banking facilities. I think as we know, you know, Africa is the fastest growing continent and um, by 2025, half of the world's working population will live and work here. So for me, we know that the fastest growth happens, but there's a lack of development. So it's easier for us to scale across border here in Africa than any other frontier or OECD economy. I think that's one of the major misconceptions. And I think the second thing is consum spending power. Africa has the largest consumer spending power rates after Asia, which means that the middle class is growing, you know, salaries are being raised and we're consuming things more than ever here on the continent, which means people need more access to goods and services using their African currencies and money methods. And that's really what we're solving for at Clasher. And that's probably something that's not known as widely across the world as it should be.

Speaker A: And now you guys are currently in Nigeria, Tanzania, Uganda, uh, South Africa, Kenya and Zambia, I believe. Did I miss any markets?

Speaker B: No, that's right, yeah.

Speaker A: What is your strategy in identifying which markets to launch in? Is it market readiness or e commerce consumption? How do you source which market? Some of these are obvious to me given where these markets are on the continent in comparison to their neighboring markets. But I'm just curious to see what your strategy is behind in identifying which markets to target for us.

Speaker B: Just looking at the regulatory landscape in the country is number one, can we actually launch our ah, product into this market and ensure that we're compliant with the central banks and then the relevant government bodies. I think the second thing is looking at what the import and export rates are of the country, looking at the GDP as well, the middle class rates and what consumer spending looks like online as well to know whether this is a viable market for us or not.

Speaker A: And which was your first market? Was it Nigeria that you started with and then slowly kind of got into east and then southern?

Speaker B: Yeah it was Nigeria. I mean Nigeria had the largest economy in Africa. So I think this was a naturally uh, a very smart place for us to start. And then the typical kind of expansion plan across Africa fintechs is not Nigeria, you know Kenya and Ghana and South Africa. We kind of followed that same path.

Speaker A: Yeah, that makes sense. I also curious to get a sense of some of the trends that you're seeing in these markets or just on the continent in general. Because fintech keeps evolving consistently. What are you seeing populating a little bit more outside of just what you guys are doing cross border in terms of trends that are driving or influencing the continent today?

Speaker B: I think really looking at ah, how to make customer experiences more seamless, you're looking at integrated payments, embedded finance and embedded finance into the ecosystems vertically or horizontally is a trend I've been seeing and actually surprisingly is becoming something that African consumers are demanding more here on the continent. I think also just looking at instant payment systems which allow us to plug in directly or indirectly and that becoming more seamless and more companies popping up that create instant payment systems that we can plug into and leverage whatever infrastructure they're offering to fintechs like us. I think securing payments and innovating around seamless KYC processes is something that I've been seeing fintechs invest more in. Think KYC is a big one here on the continent, you know given how nascent payments and fintech is. So we're seeing a lot more innovation around what that looks like. And then I think there's been an increased investment in digital disruption in cross border payments. Looking at how money moves around the globe and ensuring that the last mile delivered quickly. And that's something that we've really focused on as we've been scaling our business.

Speaker A: I love asking this question specifically uh, about the continent because a lot of the times it's pretty much mirroring what we're seeing also here in the US specifically and it gives people a better understanding that there's more similarities than we think, think obviously there's different geopolitical influences on the continent and we can go talk for days about the different things that are going on in the market. But at the core, if you're talking about fintech and things that people are looking for or the trends that are emerging, they're pretty reflective to what's going on in the west as well. Right, so you mentioned customers are demanding more. Customers are demanding more here too. They're influencing a lot of the things and the solutions that are kind of being brought to market. Customers are more sophisticated, they understand tech a little bit better, they know what they want. And a lot of the solutions are really kind of leaning towards customer experience to actually address some of those needs. So it's interesting to see that you're seeing that as well. But it's also very similar to what we're seeing here as well in the US and other parts of the markets.

Speaker B: Yeah, absolutely. And I think a lot of what is going on in frontier markets and OECD economies, you know, we look at what those trends look like and seek what best practices we can take and implement here on the continent. But it's very important to note as well that whatever is going on outside of the continent can't be necessarily copied and pasted to Africa. And I say Africa, but I'm talking about 54 different countries which are very nuanced as well. So.

Speaker A: Right.

Speaker B: Although we're learning from more developed economies, we're very specific with how we implement these trends and learnings into our business, given the nuances of each market we're operating in.

Speaker A: Yeah, yeah, that makes total sense. And you can also even say, Jess, to some degree, to some of the OECD markets can actually learn from what's going on in the continent as well. So there could be this whole notion of cross pollination where both sides actually kind of getting some different variations or understanding of solutions that can actually be brought to market in a different way, maybe for them. But there's still learnings from there as well.

Speaker B: Well, yeah, absolutely.

Speaker A: So you were backed by some notable investors. It's up to you, you care to share some of them and your overall experience as a founder considering capital for business and continent is quite challenging. I'm just curious to get your experience of how that's been going because I speak to a lot of founders, particularly from the continent and even from here, to be quite honest. And investing and backing is the big challenge and it takes up a lot of their time. So I'm just curious to know what your experience has been on the continent overall as a founder considering capital in a market or a continent like that's quite diverse. With 54 countries, as you alluded to earlier, but also with its own misconceptions to people that are outside, raising money

Speaker B: on the continent has been challenging, I think also given some of the preconceived conceptions people have had about the continent. But I think that's definitely changing and luckily I have a lot of open minded investors who are excited about the opportunity of investing in Africa. Some of my investors are American Express Ventures, Greycroft in the U.S. seedcamp in London. Um, we also have Plug and Play. We started on techstars which is an accelerator. And really these investors are excited about the opportunity of scaling businesses across Africa, particularly fintech and they have experience in scaling payment businesses and or experience in scaling businesses in emerging markets like Africa. So it was challenging at the beginning, but I think also given how quickly fintech is growing across the continent, the conversation has definitely gotten easier as we've been raising subsequent rounds. So I think more founders will find it easier to raise money for the continent, especially given some of the success stories we've heard about recently in payments and fintech and also just given the share tam of the market and how underdeveloped it is. We need more solutions here on the continent. There is space for everybody. I think we're definitely playing to win Herat Klasher, but I think there's definitely need an opportunity to create a more competitive ecosystem.

Speaker A: Yeah, I love that. I'm in the process of putting together a paper, a white paper around cloud and the role of cloud and fintech specifically on the continent and what that means for innovation and growth for some of these smaller fintechs or even some of the larger ones, and how it's influenced some of the growth that's happening today. I'm curious to get your perspective on what role cloud played in your overall development for Clasha and at what point did you identify cloud in your journey?

Speaker B: So we recently just migrated cloud provider to AWS for a number of different reasons, particularly for, you know, elasticity and ensuring that we're able to create a flexible backend infrastructure as we scale the business into different continents and different cities. It's really important that our architecture scales with us. AWS really offers that to us. I think also just security and ensuring that our backend and our code base is safe and really investing in that infrastructure with AWS is probably one of the biggest decisions. We decided to move over to them.

Speaker A: Very cool. So, Jess, we've reached the end of our discussion. Thank you so much for joining. Where can people find you?

Speaker B: Yeah, absolutely. Thank you so much for having me. Our website is clasher.com clasherapp uh, on Instagram and Twitter or Clash of Business on Instagram and Twitter.

Speaker A: Thank you so much.

Speaker B: Thanks for your time.

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