I think there are two challenges with ride-hailing in Africa.
1. Drivers are squeezed in pricing to entice riders. 2. Allowing drivers to take cash & pay the company later puts them in debt. Recovery is done on the next cashless trip, they feel cheated when the co collects.
So the motorcycle taxi driver decides to use the app to get the customer but collects money outside the app, in cash. When the trip isn't registered as taking place, the company has no cut.
A trip can cost up to 2X if one isn't using the app. The driver is aware that the app provides massive advantages and more revenue with increased trips from visibility. So drivers use the app, offer the same pricing but ask to cancel the trip on the app, and receive cash.
They benefit from the app by getting more trips, but don't pay the company powering the whole process.
It's not true that they hate cashless in itself. They hate accountability and paying the app provider, who is already pricing trips at half of their normal cost outside the app.
Also, it's not true that drivers aren't paid in time. Most ride-hailing apps now offer instant settlement on your wallet. And you can cash out at will.
Uber’s dilemma is two-fold. They allow cash and cards. Drivers take lots of cash and do not remit Uber’s cut. Uber only collects when a customer uses a card. They reconcile and try to recoup the money they're owed from cash trips.
Drive to hate this and feel cheated by the ”free trips.” When they realise that you're a card customer, they do not show up.
Uber only lets them know the payment method when they're close to the passenger. To avoid refusing the job because of the method.
So they drive, get very close to the passenger, check the payment method, and if it's a card, they ignore the trip until the passenger cancels. When the passenger cancels, they get paid for time the passenger wasted by not showing up.
Meanwhile, they're parked nearby, ignoring the passenger.
That is business in Africa!!
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The most foolish thing I hear often is that Africa’s fintech market is flooded with solutions. People have no way to move money across borders within the continent.
For a population of 1.3 billion people, we have a handful tech solutions for cross border transfers in West and East Africa. A few old school web based apps in Southern Africa
Then we have the story that there’s too many loan apps. Stop looking at Kenya (and sometimes Nigeria) and calling it Africa. Formal credit penetration is a paltry 7%.
A thread for fellow founders about unit economics and KPIs to obsess about.
If you’re building for the African market, I implore you to focus on your numbers. This my have a fintech bias, bear with me.
LTV (lifetime value) - this is the net revenue you make from a customer while they’re with you, be it for 1 day or 10 years. Estimate the average amount you make from a customer over the life of your relationship. This is important in deciding how much money to spend in CAC..
CAC (Customer Acquistion Cost) - this is the amount of money it costs you to acquire a customer. This is easy to measure and should be split into channels used. Free customers shouldn’t be average out with paid.
Why wallets are the future of payments - a thread.
Payments have traditionally gone through banks, the outdated SWIFT system, and payment networks like Visa and Mastercard. The problem with that system is that it is designed to pay way too many people.
And it is therefore terribly expensive for the consumer and merchants that end up paying these fees. This system persists because it is deeply ingrained especially in Western countries.
I’ll give 2 quick examples to show how cross border money transfer and card payments work when purchasing something whether online or physically.
With all my meetings in Kenya, what I’m hearing most is that lending is capital intensive. No one is raising the saturation issue until I bring it up. It seems appetite is still there but capital is limited. Which is quite interesting given what we’ve been reading.
Whether the loans are predatory is another discussion.
There’s lots of unmet demand. One of the people I met said he could lend $1M today to a waiting list of vetted, good customers if he had the cash. And this is a very small lender.
What is emerging though is that banks are starting to enter the micro loan game they shunned for so long because it was not worth it. They’re now starting to use AI/ML to credit score and can therefore lend like startups.
If people say your dreams are crazy, if they laugh at what you think you can do. Good, stay that way. Because what non-believers don’t understand is that calling a dream crazy isn’t an insult, it’s a compliment. #JustDoIt
Don’t try to be the fastest runner in your school or the fastest in the world, be the fastest ever.
Don’t picture yourself wearing OBJ’s jersey, picture OBJ wearing yours. Don’t settle for homecoming queen, or linebacker. Do both. #JustDolt