There are regions in Africa where money merchants trade on the side of the road, armed with huge stacks of both US dollars and their local currency, where cash is exchanged so rapidly, so effectively that it barely gets noticed. People go about their business - hardly acknowledging what to many foreigners would probably seem somewhat unusual. But this is the reality of Africa's unbanked, informal but money-intensive market in 2017 - one that mobile payments firm Zoona is looking to target with infrastructure and services.

This is according to Mike Quinn, CEO of Cape Town-based Zoona, an established competitor within Africa's rapidly developing digital finance sector - a market fuelled largely by growth within the mobile money transfer, remittance, and relevant services segments.

In February the company was one of only two African startups to have been included in the 2016 FinTech 100 list compiled by FinTech investment firm H2 Ventures and KPMG FinTech.

It has established a firm footing in Malawi, Mozambique, and Zambia, and plans to utilise the US$15m it secured in a Series B second round funding led by the International Finance Corporation in August 2016 to expand, with short-term objectives to engage the DRC and Ghana.

The company entered the Malawi market in 2009 and according to 2016 stats, had approximately 350,000 90-day clients (who use the service on 90-day intervals).

In Zambia, Zoona took four years to secure its client base, a significant portion of which is also within the 90-day user category and in 2016 stood at 1,350,000, according to the company.

The company believes it is in a strong position to immediately address the issue of financial inclusivity in emerging markets, including Africa, where mobile has emerged as the frontline of financial services delivery and adoption.

Mobile finance

In 2016, the GSMA stated that 1 in 3 mobile connections in Sub-Saharan Africa are linked to a mobile money account, and mobile money penetration in East Africa exceeds 50%.

An IDC report Cross-Border Remittances: The Next Mobile Money Frontier in Africa, claims that the number of mobile money wallets now surpasses the number of bank accounts in several African countries.

According to a blog post by Irina Astrakhan, Practice Manager, Finance and Markets Global Practice, at the World Bank, 700 million people globally have registered for a bank account since 2011, approximately 2 billion remain unbanked. She says 12% of adults in Sub-Saharan Africa have a mobile money account.

Alix Murphy, senior mobile analyst at global mobile financial services provider WorldRemit, said, "In the early days, once mobile money started to gain serious traction among customers in countries like Kenya and elsewhere, mobile operators across Africa began to seriously examine the opportunity of offering mobile money in other markets with large unbanked populations. Particularly when the industry was still learning and building best practice in these early days, it wasn't always clear what would be the essential elements for success in the business."

Entrepreneur empowerment

Zoona has a two-pronged strategy to develop the business and grow its footprint on the continent. The first is to build an ecosystem of products and services to improve the health and wellbeing of a billion people, those who are underserved and do not have access to financial services or have inadequate solutions. The second, the company's core business, is to empower entrepreneurs via its agent/ entrepreneurs-based franchise business model.

"For any mobile money ecosystem to work, you need a way of converting cash into electronic and electronic into cash, because people need to put the money into the system. So the innovation of M-Pesa, everybody thinks it was about the mobile, but actually, the real innovation was how they took a bank branch and converted it into an agent...so now someone with a ten dollar phone and a box of cash can be a bank branch, a human-powered ATM," explains Quinn.

He says in the telco-led mobile money system, the franchise-type scenario exists and companies adopt a mass-market approach involving the distribution network and thousands of agents.

"The challenge with that is most agents aren't active, they don't have floats, they don't earn enough money from that core business, and so when you go as a consumer to deposit or withdraw cash, a lot of the time the agents let you down and cannot provide the service."

Zoona is focused on young would-be entrepreneurs, between the ages of 18 – 25, along with the aim to ensure 70% of these candidates are women.

"We provide them with this franchise business-in-a-box, where they get a branded kiosk, we fund all their working capital, and we also cover their losses for the first six months. It gives them the runway to ramp their transactions and cover their costs. On the softer side, we also offer training on how to build a business....They also earn a commission on every transaction they do," says Quinn.

The commission is based on a tiered model and according to Quinn, is well above GDP, and the typical agent can make between US$200 to US$500 per month, per kiosk.

According to the company's data science and analytics team that tracks the agent system, there are 2000 outlets collectively between Malawi, Mozambique and Zambia, the vast majority of which are in Zambia, and 3000 tellers employed to run these outlets, as well as 1000 kiosk owners.

The idea is for Zoona to absorb the risk and equip these kiosk owners with the liquidity and resources to ensure that they sustain themselves, eventually make money and actually expand their outlets to the extent that they are able to employ other people to run multiple kiosks.

Zoona is relying on its 'over-the-counter' vs mobile-wallet approach for local remittance and its network agnostic system to differentiate it within an ever-competitive space. The belief among decision makers at the company is that most FinTech operators are not focused on the peer-to-peer component, which gives it a competitive advantage.

"Our key offering centres on Peer to Peer transfers / remittances, as opposed to the payments functionality which is the focus of many of the other players in the FinTech space," the company explains.

The company makes money on the fee charged for every transaction and according to Quinn, the volume of transactions is US$50 million per month, and closing in on US$1.5billion since it started.

"For eight years we just focused on building this network of young entrepreneurs... we are a purpose-driven entrepreneurial business, so we've always seen purpose and profit, and we aim for the sweet spot where there is no differentiation between them," says Quinn.

Zoona recently launched Sunga, which means 'keep', a secure storage facility that allows customers to deposit money and then withdraw it at a later stage.