About six weeks ago, twitter went agog with giveaways. There was a new sheriff in the fintech town. Abeg allows you to send money to anyone with just a username. It was poised as the Cash App for Nigeria and we all jumped on this wagon. Abeg was not the first peer-to-peer payments platform in the country but they immediately stood out in the giveaway industry. What made the difference?
Unbundling & Rebundling Banking
The Bank is a behemoth of a financial institution. It services all kinds of financial needs from savings to loans to investments. In fact, some bank institutions have a holdco structure that allows them to engage in non-banking services like insurance. The way it currently operates is not just inefficient, it’s become a dinosaur to the internet generation of today. And fintech companies are racing to solve this problem. Some are banking the unbanked while others are unbanking the banked. In fact, there are fintechs who are rebanking the already banked. We have neobanks like Kuda Bank that are creating a new channel for banking while we have P2P payments like Barter that allows you to send money but complements your bank account. In fact, one of the key value prop of these complementary products is free transfer to your bank account. They rely on Bank Verification Number (BVN) – Nigeria’s national banking identity code. You cannot have a BVN without a bank account, which means that these apps are really catering for the already banked.
I digress. Talking about unbundling, fintech apps start by helping you with one or two financial (read: bank) services. PiggyBank (now PiggyVest), for instance, started with helping you save. The value prop was sweet and straight to the point – we will help you keep and multiply your money. Savings in a traditional bank is broken. You save ₦500 in a bank for a month and get an interest of ₦1.20. Shortly after this credit alert, you’d get a debit alert of ₦10.50 for your SMS charges. Of course, these are placeholder numbers but literally every Nigerian complains about this. PiggyVest came to solve that. Just like Paylater (now Carbon) came to solve the access to credit problem. When they started, they only provided fast loans, of course with high interest rates but the mandate was clear. These companies have gone to add on more services. PiggyVest now does investment while Carbon now does savings and investment as well.
Looking at these examples, it may seem like it’s normal. This is literally what Minimum Viable Product means in tech – you start small with a working version of your idea and work your way up. However, it is also valid that these companies started with unbundling the bank to provide you these services in a better, focused way but on the long run may end up like the bank after rebundling what they sought out to unbundle.
“There are only two ways to make money in business: One is to bundle; the other is unbundle” – Jim Barksdale
Source: Harvard Business Review
Abeg: P2P or Giveaway?
When I described Abeg as a peer-to-peer (P2P) payment service earlier, that was because we don’t have “Giveaway” as an official category of fintech just yet. If anyone knows anyone at the fintech taxonomy office, I’d love to have a chat. Allow me to paint a scenario for you: say your friend (a fellow Abeg user) asks you for a soft loan of 100k. Would you automatically think, let me send it to them via Abeg? Most likely not. What if it’s 10k? Probably not. For most P2P use cases, Abeg doesn’t come to mind. We don’t think of Abeg when we want to pay cake vendors or when we are expecting a large sum. However, it’s the first thing that comes to mind when we want to gift. Say you want to surprise your friend, you might think of sending them some cash on Abeg, or if you want to do some giveaway online.
Khalil Underwood @RealKhalilU@AlyxMaraj https://t.co/krqIaIgp1F
In fact, Abeg originated from the idea that begging on social media is a thing that a fintech could get behind. Victor had noticed a giving spree on Twitter through cash app and that gave the idea that begging could be facilitated and maybe commercialized. Hence, Abeg. What does this mean for Abeg? Its brand is locked in the giveaway segment. When a brand is locked into a particular niche, it’s hard to break out of it.
Case in point, Flutterwave’s Barter. When Iyin’s Flutterwave started Barter, the goal was simple – help Nigerians pay for items in USD. Our banks were already stifling our necks with limits in USD transactions from a Naira debit card. Barter helps you to bypass this by offering you a virtual dollar card that you can load with your Naira debit card. Over time, Barter grew and started offering P2P payment services amongst other things. You can even pay your bills using Barter. But does anyone care? Most of the complaints on Barter’s twitter is about the virtual dollar card service which means that’s what majority of their users still use them for. They’ve not been able to break out of that virtual dollar card niche. In fact, it was easy for Abeg to steal their P2P lunch.
Same for Carbon which started as a loan service. The name was Paylater. They rebranded and included other services like savings and investment. I’m still not sure if I’d save on Carbon but they are ever reliable for my short-term loans.
From Abeg’s interface, it shows they have their eyes on more fintech services. They have “Ajo” as an upcoming feature. This would allow people to save in groups. They have also spoken about their roadmap a number of times to show that they are working on more use cases in the near future.
The big question is: Should Abeg bother breaking away from the Giveaway niche or just double down on it?