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FinTech

Ugandan Fintech Startup Targets Payments Broker Role

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In some parts of the world, such as China, cash is all but disappearing from retail. In some cases, however, cash is the only viable means to pay. In particular, two scenarios stand out: when the buyer is not banked, and when the seller prefers to receive cash. Two-year-old Ugandan fintech startup OlyCash is gearing up mainly to address the first scenario.

The solution, centred on the OlyCash app, is combining location-based services and financial transaction. It starts with the OlyBoss, who, as an individual or a business, opens an account at OlyCash. They become the facilitator of the transaction and can choose to make themselves "discoverable" by turning the service on, or off, when they like.

The seller uses the app to generate an "identification" code for their business, to be added to their e-commerce website or app, indicating that they accept payment through OlyCash. When a buyer from a different location does not have access to bank payment, they can search out the closest OlyBoss, pay the cash, and in return receive a code on their phone from OlyCash, as the proof they have made the payment. The money is transferred to the seller's OlyCash account instantly, so they can fulfil the order: They can cash the transfer from any OlyBoss.

In the process, the buyer pays a commission to the OlyBoss. The guiding rate from OlyCash is 1% on top of the amount paid to the seller, though the OlyBoss has the discretion to set their own rate. As it is not too hard to become a "boss," competition makes them more or less stick to the standard rate. This is slightly higher than an average debit card payment charge of 0.8% but much lower than the 2.9% PayPal is charging. The fundamental difference is that the debit card clearing platforms (such as Visa) and third-party platforms (such as PayPal) charge the seller, while OlyCash's buyers pay the processing fee upfront (to the OlyBoss), which in turn encourages sellers to join. Three months into its operation, OlyCash has signed up almost 300 sellers in Uganda.

Kampala-based OlyCash is also eyeing the opportunity for the second scenario, when a seller prefers to receive cash payments. A typical cash-on-delivery case would be a transaction coming out of a Facebook second-hand group where the buyer and seller are in different locations. An intermediary to handle payment without involving a bank transfer would help fulfil the transaction. OlyCash is considering a test run in California to address this segment. It may find more competition in this field though: This scenario can be a good target segment for solutions such as Apple Pay Cash, Google Wallet, Venmo or WeChat Pay, which enables individuals to receive payment directly without going through banks or involving payment cards.

However the first scenario OlyCash addresses will be hard for others to replicate without going through all the groundwork. All the other mobile payment apps in the market now need the user to link the apps to their bank account. OlyCash's unique solution for the unbanked users plus the ecosystem it has developed in Uganda does not only stand it in good stead in its home market, but also provides it with a strong springboard to expand to other developing markets with similar gaps.

— Wei Shi, Site Editor, Connecting Africa

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