How pan-African fintech unicorn Chipper Cash is navigating the downturn

Thank you for having me, Emeka. It's good to be with you today.

Absolutely. Thanks for having me on the podcast today. I think what's important at a macro level is what's happening in the economy today is cyclical. It happens every 10 or so years. We go through periods of boom and high growth, low interest rates and lots of capital, then you go through periods of less capital, asset prices fall, interest rates go up, capital is expensive, and so forth. So it's cyclical; it's happened before. What's different is that it's maybe happening after a bit of a longer period of a very strong boom and growth period. I think what's also interesting is it required many companies like ourselves to adjust and be more nimble and responsive to that environment. For us, like many companies, we've essentially been incredibly tight with how we use our resources. That means thinking about our business from a perspective of just doing what's capital intensive, which usually is very high growth, high expansion, getting into multiple countries, launching multiple products, getting licenses, hiring a lot of people. Those are very expensive things to do. When capital is less freely moving in the economy and it's more expensive to get, you want to be very frugal and think about your allocation incredibly deeply. I think that's actually a good thing. I don't think it's entirely bad. For us, the company has looked at it as an opportunity to become incredibly efficient. You've talked about the layoffs, for example. That was a very painful process to go through because you work with people very closely, become friends with them, respect them, admire them, and then you have to let them go. That's very tough. But the silver lining is that it actually makes the whole organization much more efficient because you can execute faster, you can become a more productive organization as a whole. Across the board, it's reinforced a very strong mindset that every single resource has to be used efficiently: capital, time, human capital. Everything in the company, we have to think about how we maximize its use. That's a very powerful state and muscle for any company to build. I actually feel much better about us as a company today coming out of a process where we've had to rethink our entire resource allocation strategy than before, because we're that much more efficient going forward. Everything else we do from this point onwards is being done with a level of efficiency and an ability to execute with our resources in the most efficient way. Part of the stuff you see us launching today is a reflection of us having this mindset. Chipper ID, although it's been an 18-month process to build it out, really was accelerated by us thinking about where the really big cost centers in the business are today and where we can be more efficient. One of our big cost centers was that we were paying a ton of money to all these very expensive vendors on third-party services to handle compliance services, and they were giving us at best subpar results because, to no fault of theirs, many of the services are built for the Western world and now you need to use them in Africa where we have our own unique set of challenges. An example I can give you is onboarding: someone puts in their phone number, gets an OTP to sign up. In the US and most of the Western world, that's not a problem; you get your OTP right away. But if you're operating a user in Uganda, Nigeria, or even some parts of South Africa, you actually have an issue with text deliverability rates, which means more than half your OTPs don't get delivered. Now that becomes a problem with onboarding, and you're losing half your funnel at the very top. So you think about your onboarding, compliance, user verification, all those things much more deeply and much more uniquely for your situation, and it forces you to build those things out for yourself. We've built out services and patented many of them, such as our USSD verification service, to solve these challenges uniquely. On the compliance front, we've built a number of really powerful services and tools that we use internally that work very well for us. As they've saved us a ton of money, millions of dollars, we've actually gotten to a point where we say, 'Hey, we can actually offer this as a product to other businesses in our space because I know they'll want to have the same capabilities, they'll want to have the same savings.' So Chipper ID is a result of that. You take what's originally a cost center, bring it down in cost, and then flip it to a profit center. But it's a function of thinking about every aspect of your business: where can you be more efficient, where can you cut cost, where can you be better? I think that's a very powerful state for every business to have. As much as it's been a challenging period to adjust from that period of very high growth and high spend to a period of efficiency and profitability, it's made us and many other companies much more efficient, and I think we're better off for it.

Absolutely. These are things you don't learn in school; you sort of have to rise to the challenge as you go through those periods. I think to your point, being able to continue to drive confidence and excitement about what the company is doing, because you're solving problems that are very hard, you need people to be more than just happy; they need to be excited to work with those problems and give their best efforts to solve them. It comes down to many things, but in a big way, it comes down to communication. That's one of the lessons you learn along the way: how well you communicate to your team, when you communicate different messages. At its most basic level, it's about understanding that any journey that's worthwhile, any endeavor that's attempting to do something daunting or challenging or meaningful, is going to ebb and flow. It's never always smooth sailing. There are going to be times where it's tough and there are lows, and then you come out of them and you have other highs as well. At a high level, having that mindset that we're in this journey for many years, this is a multi-decade journey we're embarking on, it's going to ebb and flow. That mindset at the very beginning is an important one to instill in the company. It goes back to who you recruit. Finding the right talent is a very important thing that makes or breaks companies. When you're recruiting, you want to recruit people who are subscribing to the idea that 'I'm getting on this journey, it's a marathon, not a sprint. I know it's going to be a long-term effort, I know we're going to have tough times, but those tough times are often when people do their best work.' Part of it is because it forces you to think about things from a resource-constrained perspective. As they say, necessity is the mother of innovation; it actually makes you much more efficient and capable. In many ways, I think most companies are actually most vulnerable when they're on a high. That's when you become complacent, that's when you attract the wrong type of talent, things get too easy, you forget the scrappiness that got you to that point. Most companies are the most deadly and most capable when they're going through a tough time because now everyone is thinking about things from a very proactive standpoint, it's all hands on deck. That's how all great companies start. When you're a startup, on day one, when you're most vulnerable, you're also almost deadly because every day is life or death. The way you think about things is very different from when you have a ton of money and everything is going great and it's smooth sailing. The best companies are the ones that are able to maintain that level of urgency, fire burning, ability to remain scrappy, and feel a sense of 'we're not there yet' even when things are going very well, because that keeps you always thinking about where you can improve. The point I'm making is that having a team and a company that appreciates that at a high level, that knows that today it's this macroeconomic situation with high interest rates, banks collapsing, capital hard to come by, and tomorrow it's going to be something else. Before that, it was COVID. People forget that just a few years ago, when we entered the pandemic, the world shut down, and that was a huge point of uncertainty for many companies. There's always something that comes up that's going to challenge you. The idea is you have to have a mature appreciation of the fact that those things are par for the course. If you signed up for this journey expecting it's only going to be smooth sailing, you're probably in the wrong place and you should leave. If you share the fact that we are going to be tried many times consistently, then you'll embrace those tough times in a way that makes you much better at tackling them when they keep coming. There's no great company today that hasn't been through an incredibly trying moment. You have your pick of them; they all had very many near-death experiences. I'm not saying that's something a company should look forward to or want to have, but the point is that any journey worthwhile is going to have those moments. A high-level appreciation of what it takes to do something and make a difference in the world is very important, so that when those times come, you can navigate them as best as possible. More specifically, how I've tried to think about it at Chipper is we try to be incredibly thoughtful about how well we're supporting different teams. I make sure they have the resources they need to do the work they still do, because that ability to continue having strong synergy across the company, with hundreds of employees across the world, making sure they keep communicating and working efficiently with each other, is something you always have to stay on top of and be as diligent about as possible. Most people understand that these things happen. When people see companies navigate tough times, it actually creates a level of excitement and motivation for the teams because they think, 'Wow, we've become that much better, we've navigated this thing, we've solved this thing, we've actually become more efficient.' The level of excitement in the company that built Chipper ID is very high, and that's a result of us saying, 'Where do we look at areas where we're spending a lot of money and turn them around to be as low cost as possible?' The point here is that in very many ways, these tough times actually build the bonds with teams much more. You come out of it closer as a team, with stronger bonds, and you've built that wartime muscle that will help you navigate the next challenge that comes along on the journey.

If you talk to any fintech founder, if you talk to GB or short or anyone, other shows Pastor was acquired already, but they'll tell you that it's very common for people to reach out to discuss acquisitions. So that in itself isn't new. I think what is new is that someone who was either involved in that process or heard about it thought it would make for good news and they leaked it. And unfortunately, that's part of our business and our industry. People leak stuff, and you just have to roll with it and keep moving forward. But in terms of us having engagements with people that want to discuss acquisitions of Chipper, that's been a constant thing. It always happens. And it's not unique to us. Any company that's doing anything interesting, there's always someone else out there who's thinking, how do I work with these people, how do I acquire them, how do I partner with them, or something along those lines. I know I might sound like I'm downplaying the biggest thing in particular, but that's because we actually had a confidential process that both parties engaged in and agreed to be confidential about. So I don't want to break that confidentiality. I'm only responding to what was leaked about it. To summarize, yes, we engage them, and we engage many people who come out to us. But Major and I still think that there's a lot of value to be built with the current strategy we're on as an independent business. But my view and my thoughts have never been that I say no to discussions with people about ideas they have. Ultimately, our objective is to build great financial services for living in Africa, to return value to our shareholders. And if that takes the form of being acquired by a larger company and working with them and pursuing that angle, then we'll do that. Right now, we don't think it does, so we're not doing it. But we always engage people who come and see what they have to say. And in almost every case, we either leave with a very strong connection that we've made, or we partner with them on some front, we do something together in some avenue, or something else comes out of it. So we will always continue to engage people who want to discuss our positions with us, and that's not going to stop. That's a very potential exit strategy for Chipper. If we do get acquired and it returns value to everyone, that'd be exciting, and I'll be the first to come out and say, hey, we have news to announce. If we go on IPO, which also is a very valuable path for us, that's also exciting. So to me, I'm 100% open to whatever outcome makes sense for the business.

That's a great question. We've definitely grown significantly from just a cross-border payments app. That's what we did first, so that kind of is what people have always known us by. But I describe Chipper as a platform where Africans can live their financial lives and unlock value for them in the different aspects of their financial needs. That could be in the form of sending money across borders, it could be in the form of investing in an asset in Uganda where we're the only company licensed by the central bank and the Capital Markets Authority to offer US fractional stocks. So Ugandans can use Chipper to buy stocks in 6,000 publicly traded US companies, Tesla, Amazon, whatnot, and buy them for as little as a dollar. So fractional stocks, low entry point. In Nigeria, we also have that product. So people can use us to buy assets and invest and save their money. They can use us to buy crypto. They can use our Visa card to spend money online. As you know, one of the challenges about interacting with the online economy in Africa is that people have the intent and they have the money to buy things online, they just don't have the way to do it. It's still a challenge. Mobile money doesn't work online. Most banks, the cards they give you are just for ATM use. At best, they only work on local websites and not on international websites. So our Visa card has been a hit because a lot of people, that's their sole way to interact with the online economy, to buy things online, pay for goods and services online. And that product has run incredibly well. We've issued over 600,000 cards already. We're the largest issuer of virtual cards in Africa, and that's going very fast. And then now we have the Chipper for Business side. We started the company focused on consumers, and that's still a big part of our business. But ultimately, if you're going to participate in fintech in Africa in a strong way, businesses are part of that. The same challenges that consumers face with moving money are the same challenges businesses face. And as you know, Africa's economy is predominantly small and medium-sized businesses. So if you can solve and enable those businesses to collect payments and make payments easily, to move money easily, you can really tackle the big problem and create a lot of value. So Chipper for Business is super exciting. As our user base grows, over 5 billion fully verified and registered users, businesses want to interact with those people or they want to access those consumers. So the Chipper for Business angle becomes incredibly exciting because of that growth in the consumer business. So it's definitely, from when we started in 2019 to where we are now, it's a very, very big platform. And what's interesting and exciting about the way we've built the platform is that as it grows, we start to unlock value in other areas. I think Chipper ID is powerful not just because it takes a cost and turns it into a profit for us, it's also powerful because it represents our ability to take tools that work for our business, given our skill that we know can support massive scale, and offer them to others. And Chipper ID wouldn't be the last time we do that. There are other areas in the business where we know that we've created tools and products that work very well for us that others will pay money to use. So as we keep growing and getting bigger, we start to tackle and move value in other areas that I think are going to be exciting for the whole ecosystem. So you know, definitely the need to be both vertical and horizontal, although it actually was a painful thing because it was hard and expensive. As we've grown unscaled, it's actually become a value unlock for us as a business because we're now able to take those extra bits of infrastructure that we've built and offer them as a service. So to answer the original question, we've come definitely a long way from being just a cross-border payments platform to being almost your one-stop shop for financial needs and services across Africa, and also for businesses as we keep scaling the business.

I'm glad you asked that. Major and I, since day one, we've always had this vision. Our ambition wasn't just to do one product. That was our entry into the space. But we always, from day one, wanted to do all the products that we're doing today because we knew that, and if you think about it carefully, every single product we have complements the next product. If you look at it as an ecosystem, sending and receiving money was the first part. But now that you have your money moving in the system, you can do something else with it. You can actually take it and buy a stock online via our product, you can take it and buy crypto, you can use it on your card for spending money online. So all the products are integrated so tightly that they each drive extra value for themselves. If you take them all apart, take our P2P business, our cards business, our stocks business, our crypto business, they can all individually live on their own separately. But they become that much more powerful when they live together. And so that was always by design. We've always been building up those products intentionally from the very beginning. We just couldn't start out with everything at the same time. That was too hard and too expensive. And to be frank, many investors, that's too scary when you have such broad ambition. They want you to focus on one thing and do it well. And so we always wanted to have P2P as an entry point, but our ambitions were always much broader than that. So this is what we've always wanted to do. And then there's also an aspect of it, to your point, that is responsive. One of the most important things any business can do is listen to their customers and say, what are they asking for, what do they want? And we're no different. One of the products which has been requested for so much and will be launching soon in the US is a deposits product. So we'll be issuing essentially full-fledged USD accounts to all of our users because people have been wanting to receive dollars from across the world very easily. And so that's an example of a product where we listen to the customer and say, what else do you want? Chipper ID, I already talked about how that came into existence. That's been more functional, saying, wait a minute, we have far and away the best tech suite for compliance in the space. People will pay for this. It'll save them money and it's better than what's available in the market right now. So in many ways, that's how that came out of it. But the core platform, the core consumer platform, and the high-level chamber for business, are products we've always had a plan to build out. And I think that's one thing that sort of set us apart as a business. Major and I talk about Chipper and the platform as a global platform that's serving Africans and people who live in Africa. And to do that, ultimately you're going to have to do more than just payments. You have to figure out how people save or invest their money, where they spend it online, what are the assets they want to save it in, how the businesses that they use in their lives interact with those assets and with that money. So we've always had that global market and ambition about the business. And we've built it. We couldn't have done that from day one. Each of these products is very hard to build on their own, as I'm sure you know. So it took a very deliberate and intentional focus to get us to this point. I'm not aware of any other platform or company in Africa that has the breadth of products that we have on one platform. And that's because we made a very conscious decision in the very beginning to build up this entire product suite and this suite of services the way we did.

To be honest, we never set out in the beginning to build Chipper ID. It starts by you first filling out the gaps that exist. You go on your onboarder vendor, Onfido, Smile ID, whoever, and you realize that the product as it is does not meet all your needs. There's a gap here, a gap there, a gap there. So you start to build up those gaps yourself. Whether it's some documents don't get verified well, so how do you fix that? Some people get lost onboarding, how do you fix that? Some ID types don't work with the vendor that we pay, how do you fix that? Many times that involved us actually lending technical support for some of our vendors to help them build out their infrastructure to support our needs. And so it starts small, by you just plugging the holes that your business needs because the vendor's solution is not custom made for you. It's a uniform product that they make for everyone to find value on, as opposed to a tailored product that fits your needs exactly. So it starts like that. And because of how much we've grown, our scale, our needs become even that much higher. We start to really, the edge cases become that much bigger. And so you start to invest a little bit more and more to fix all those pieces. And then what you end up with is essentially you've rebuilt the entire product because what you need is still vastly different from what you're getting. And either you live with a subpar product, which is very expensive and costly because you're paying money for it, and on our scale, if even 25% of users are being affected, that's millions of people. So you can't just say I'm going to ignore those people. You have to fix for that. And so you eventually end up with something that works so well for you, and because you've grown so big, it actually supports massive volumes. And then you start to pull back a little bit and say, okay, now we have this service that works well for us. We don't need that anymore. So then you turn that off and you start to really use your own service. And if you do that enough times like we did, you end up with an entire suite. And we went even further. We have very good ML and AI teams at Chipper, but we added extra levels of sophistication of products that tackle things like fraud. And because we have massive amounts of data, we can leverage massive data sets to build out much better products that are better trained, have training on much larger data sets, and can leverage AI and ML teams and tools in a much stronger way. And a combination of those things creates what ultimately is a near-perfect solution for, in this case, identity verification. And soon enough, you start to see yourself come from a place where you're spending so many millions on a bunch of different vendors to you've saved so many millions. And then it becomes a bit more obvious that other people in the marketplace also want to use your product. So then we, like we did, offer that as a service. And the other thing that's very important to understand is that because of how we are positioned as a consumer of Chipper ID ourselves, we're building from the ground up to be as minimal as possible. What I mean is that only the things that are needed about it are what we build. If you're a vendor and your business is to make money off building tools for others to use, your incentive is to generate more revenue from your tools. So you're incentivized to keep adding products and services, some of which might not be needed. Our incentive as the primary consumer of Chipper ID initially is to remove cost and waste. So our incentive is to have it be as efficient as possible. So we're coming from different angles, and because of that, we have a perpetual competitive advantage to offer the most efficient tool that can be offered, as opposed to a bloated tool that is designed to just maximize revenue from the consumer. And those are things that matter for businesses because every small level of incremental efficiency adds a big time as it keeps scaling. So all those things matter very significantly for businesses. It's sort of like if you think about today, most have to choose AWS, but the largest businesses, Facebook, Google, they have their own data centers because their needs are so large and so unique they can't just go and get an off-the-shelf solution to work for them. Now obviously Facebook doesn't outsource its data centers as a business, but if they wanted, they could. That's a whole other point I'm making. But the idea is that we've had to build our own suite of products because our needs have been so unique and have scaled so much. And it's reached a place where the end result has been having a suite of products that we know is going to work very well for others as well, and we can now offer that as a product.

We'll have to do another one of these if I can share that. I just don't want to get ahead of myself. But the point I was trying to make is that what's interesting about Africa and the space we're in is that you have to be both vertical and horizontal in many areas. You have to build your product and the services that support your product because they probably don't exist. And so if you get big enough, the services built to support your product can be used by others. So there are many aspects of our business where we've done that. This is just the one that we've publicly announced. But there are many other areas where we're aware that in due course, we will be a very strong competitor in that field. But we'll have to do another one of these before I can share more about that.

I would say that this is a marathon. It's a long, arduous, painful journey. But it's highly rewarding. And the reward isn't just so much in the end state, it's in the process. Now people can say, easy for you to say that, you guys have raised a little money, you've done well, blah blah blah. And that's everyone's experience and that is true. But the reward isn't just in making some money. And the way you can really tell that is if you were just about making some money, we would all be gone. We've been fortunate enough to already make enough money along the way with Chipper that we're very comfortable and very happy. But that's not what we started this for. We're in it for a bigger purpose. And the bigger purpose is seeing the impact that you can have on the lives of people living in Africa, in this case, or wherever you're trying to solve a problem for. And that is a uniquely rewarding thing that is worth giving your best energies, your best efforts, and staying at it for a long time. Nothing worthwhile gets solved overnight. So I would say strap yourself in and be okay with the fact that it's going to take a long time. And that's fine. Give yourself the time, make mistakes, learn from those mistakes. And another thing I would say is that it's okay if you're the only person in the world who sees the value of what you're building. Entrepreneurship is a very lonely journey. I've had the hardest time raising money for Chipper in the beginning. No one gave us any time of day. I got left out of many rooms. People didn't take this seriously. No one really saw the value of what we were doing. And that can take a toll. It took a toll on me. That stuff was very hard. And those are the areas where I really leaned on my co-founder, Major, and he was like, dude, we know what we're doing. We'll just keep building, keep moving forward. And that refusal to give up and that refusal to be led down by other people's inability to see what you're building is very powerful. It's almost like a shield. And I tell every founder, have that shield and keep it close to you. It's 100% okay if you could be the only one in the world who sees the value of what you're doing. That's all you need. Stay at it. Don't let other people's opinions or thoughts distract you because there'll be a lot of those. Everyone has an opinion about what you're doing. Everyone will talk about it. Everyone will be very quick to point out why you've made a mistake. That's just noise. There's a lot of that noise that will always be there. Just stay laser-focused on what you're doing. Don't worry if only you see the value of what you're building. That's kind of what makes it insightful. That's what makes you the visionary, because you see something that everyone else doesn't see. So really lean on that. And allow yourself the ability to appreciate that it can be a lonely journey and that's okay. Don't worry about the fact that many people don't see what you're building. Just have your idea, have whatever team you're working with, and just stay the course with those people. I can't stress that enough. I've seen so many highly talented people with great ideas give up too soon because it really gets trying. Anyone who's done anything new or daring understands how tough it can be when you're really in the thick of it and you don't see the end of the tunnel. But you have to keep going. And that's what entrepreneurship is. That's what startups are. So I really, really emphasize that you embrace that uncomfortableness, that uncertainty, that pain almost that comes with having to go against the grain, think differently, do something daring. And even if you fail, you'd have still been successful because you tried. And that in its own right sets you far apart from anyone else who didn't try. So that's what I'd say. And we need more people to do more difficult things. There's still so much opportunity around us that has not been tackled. We've just spent an hour talking about Chipper and financial services, but we have education, we have healthcare, we have transportation. In so many areas around us, we need smart, driven, hard-working people to say, I'm going to take a stab at this and I'm going to try and solve it. And I try to support as much as I can. Major and I both invest in many young companies. Each of us has invested over a million dollars of our own personal money in startups across Africa. Because I think access to capital is going to be one of those things that ultimately, if we as an industry could solve and help make less of a challenge, we're going to see an incredible explosion of value created and people building great businesses.

Well, thank you for having me. And thank you for all the good work you do with Africa Digest. People like yourselves, you guys tell the story of our ecosystem. So you do a critical role, and I'm grateful that you made the time to speak with me. It was very enjoyable. So yeah, I look forward to keeping in touch.

All right, sure. Sounds good. Thank you.