A Zimbabwean tech startup, Kura is hoping to upend the mobile money market with a digital wallet that offers consumers no fees for transacting. The service, co-founder Michael Charangwa explains, achieves this through a set of services that includes ads, a marketplace, and other things that collect and leverage customer data.
Charangwa says the digital wallet, which is called KuraCash, is set to launch in June this year if there are no major hiccups on the regulatory side of things.
Kura is positioning the wallet to compete against dominant wallets in the market; EcoCash, Innbucks, and to an extent emerging ones like Omari that are also trying for a piece of the local mobile money, money.
The main idea, according to Charangwa is that while mobile money has been a big success across Africa, the fees charged to customers are quite high, negating the benefits of this innovation to consumers. And considering the amount of back and forth transactions between people and and when they pay small businesses (Msika, kombis, tuckshops and more) the cumulative fees charged on the same dollar circulating several times a day can be astronomical.
So the ads will pay the fees. But anyone that it’s in the digital ads locally knows the yield for ads in Zimbabwe is quite low. How much ad viewing and clicking would it take to pay a few transaction for, for, say, $10?
Charangwa explains that brands are not willing pay much for ads currently because the targeting is too weak.
“The underlying problem [with the low cost per click] is the unavailability of data. If someone in Zimbabwe were to click an ad, there are currently very few points the person can be identified by. And this is a big African problem. If an African consumer and an American consumer both have $10, I get more insight on the American than an African, and it’s really a data insight issue.”
So given all the data KuraCash will gather, thanks to KYC, they have, in theory at least because the app hasn’t been released yet, the startup will have better and better targeting. Better than or even good enough to get relevant ads from advertising platforms looking to target Zimbabweans. Kura itself also plans to build out its own advertising platform selling inventory to local brands directly.
Charangwa says the marketplace will just add to this rich data they’ll have on everyone using the platform, leading to even better targeting, leading to better performing ads, leading to more ad revenue, which would allow them to offset fees they’d have needed to charge for the wallet services.
And when this flywheel works well enough, it might even get to the point where they share some of the revenue with users of the app – rewards – for things they do within the app.
Chicken and Egg
So how will KuraCash get enough people using the free mobile money so that it’s attractive to the advertisers? They’ll need to invest in an extensive distribution network (agents and merchants), awareness, so customers feel its visible and liquid enough to try.
That certainly looks like a huge cash outlay, time investment and just organisation building, to get it all working – especially if the objective is to challenge the big boys in the game – and to do that with a no-fees strategy. It’s literally spending lots of money for nothing in return, for a while.
Additionally, marketplace sellers will also likely see no value in listing their products unless there are lots of people transferring money.
Charangwa says they are no under illusion that there will be a period of spending on the network and the costs of transacting until there’s a critical mass attractive enough for advertisers to spend on. In fact he says this is no bootstrapped startup. They are raising money specifically for this purpose, targeting investors that are happy to put money until everything is in lockstep.
How long a runway they will need until the components of sides of the business model are feeding each other seems clear enough to the founders – several months at least he says.
And what about the taxes?
One complication of providing a zero-fee wallet is the taxes. The tax-collector is incentivised to collect, whether the provider has charged a fee or not. Charangwa admits this cost cannot be innovated away.
If Kura manages to get customers using their wallet, customers will be incentivised to send big amounts using the platform, which means government will just want even more tax. Charangwa assured me in our conversation that the model will still hold.
The Cost of Mobile Money
Charangwa also says they are going to be quite aggressive keeping the costs of the service down. He says mobile money providers incur significant costs at the point of cashing out, so Kura’s strategy is to give customer no reason to cash out.
Competing against incumbents charging an arm and a leg, and a government wanting its tax is one thing – a hard thing, just to be clear – but can KuraCash win against Cash.
Charangwa explains that people only use cash because mobile money providers’ fees are too high. He also argues that these incumbents don’t have a wide enough merchant network to guarantee customers they can spend anywhere with the wallet.
There are definitely challenges – taxes not least of them – of providing this alternative take to digital wallets. If KuraCash can successfully navigate them, it could reshape how Zimbabweans use mobile money, and maybe even Africa. Time will tell.
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