Appzone pivots to a blockchain payment infrastructure company

Africa’s remittance market has historically been plagued by several challenges. In fact, the average cost of remittances in sub-Saharan Africa – 7.8% – is higher than in any other region of the world. For a continent so dependent on cash, intracontinental money transfers are notoriously difficult.

According to data, it costs $54 to send $200 to Tanzania, while in Nigeria the same amount costs $38. For context, sending $200 to any country in South Asia would only cost $8.6.

The speed of sending money across Africa is another serious problem. It can take days for money to move across borders, a significant barrier to trade across the continent. According to a recent ACI report, Nigeria ranks among the top 10 countries globally with real-time payment, and Kenya is among the 10 expected to experience the fastest growth in real-time payment. Despite this, transferring money within the continent is a slow and tedious process.

To remedy this problem, Appzone, a fintech software provider, has rebranded as Zone, a regulated blockchain payment infrastructure company. The company has built Africa’s first Layer-1 blockchain network, which will enable direct transaction flow between financial service providers without intermediaries. This move will allow for reduced transaction costs, instant dispute resolution and reliability across Africa’s payment borders and beyond.

Appzone’s cloud-based Software-as-a-Service (SaaS) platform is also being transformed into Qore, while Zone will be the blockchain-based payment gateway. Appzone was founded by Emeka Emetarom, Obi Emetarom and Wale Onawunmi in 2008. Two other co-founders, Mudiaga Umukoro and Elendu Uche, joined their ranks after attaining partner status due to their position in the company. Qore will be led by Umokoro and Emeka Emetarom, while Zone will be led by Obi Emetarom, Onawunmi and Uche.

Zones blockchain network

Zone supports both fiat currencies and digital currencies. Earlier this year, it was issued a “payment exchange and processing license” by the Central Bank of Nigeria (CBN), making it the first payment infrastructure company running on blockchain to be licensed in Africa. This is despite the CBN order to all Nigerian banks to close accounts linked to cryptocurrencies by 2021 and the punishment of banks with a heavy fine for non-compliance.

Speaking to TechCabal, Zone’s CEO, Obi Emetarom said, “CBN has been very skeptical about cryptocurrencies because many of them are not compliant with regulations. These cryptocurrencies run on blockchain as infrastructure, to some extent blockchain has also inherited these concerns. What we however, did was sit down with the CBN, before we started talking about licenses, to showcase our blockchain network, clearly separate the characteristics of the blockchain network from cryptocurrency itself, and explain how cryptocurrency is just an application of blockchain.”

Layer-1 blockchain networks are the basic infrastructure on which other blockchain networks are built, and they can validate and complete transactions. Similar to the cloud-based Software-as-a-Service platform that Appzone built for banks across Africa, Zone’s blockchain network will serve as the infrastructure that powers the future of payments on the continent.

“Our role is to manage the infrastructure, make sure the performance is really good, make sure the nodes are up, and make sure we’re integrated to be able to convert more than one asset, either from fiat to digital currencies and back. We also want to make sure we have a developer framework or a set of developer tools that can allow third parties to build innovative financial solutions on top of this infrastructure,” Emetarom said on a call with TechCabal.

Zone’s blockchain network is compatible with the Ethereum Virtual Machine network. “We did not see the need to build a blockchain framework from scratch, but we did see the need to adopt blockchain technology that is already widely used. We are not part of the Ethereum network, although we can partner with that Zone. The technology behind Zone is the same kind of technology behind Ethereum.”

He added that the decision to become EVM compliant was made because Ethereum has the largest market share and is by far the most dominant player in the decentralized finance sector.

A new direction

Appzone’s products currently process over $2 billion annually for over 500 banks, fintechs and microfinance institutions in seven African countries. When asked what inspired the decision to pivot from such a successful business model to a relatively new one, Emetarom stated that by virtue of Appzone’s importance to the ecosystem, they could see the gaps that exist today.

He added that the company wanted payments to be more reliable and frictionless. “We started building out a new architecture, what we consider the next generation infrastructure for payments. We did a number of POCs (proof of concepts) with the banks and the central bank, and they were excited. We went live with the pilot last year, and we started to see a lot of interest, especially after the central bank approved us. Then we realized that because of the daunting task ahead of us in scaling out this kind of new infrastructure into the cashless era to come, it would make sense to restructure operations so that we can give this goal the focus it really needs. , but without disrupting what we had built. That’s how this transition happened; we decided to spin off the existing business and create this separate standalone company.”

He also added that the fact that Africa still operates with a cash-based economy also motivated the decision to create the Zone. According to McKinsey, domestic e-payments in Africa are expected to see revenues grow by approximately 20% per year, reaching around $40 billion by 2025.

Zone plans to expand across the continent through the current financial institutions using Appzone’s platform. “This is a decentralized payment network. Today, the nodes sit within licensed financial institutions in Nigeria, and the roadmap for the next five years is for us to expand nodes to sit across institutions and partners, everywhere on the continent. The idea is that we can deliver payment services in the country, as we do today in Nigeria, but then we will also be able to connect these nodes across the continent. The nodes will be connected in such a way that our cross-border settlement function can allow funds to flow from one country to another in real time, Emetarom said.

A new dawn

According to the United Nations, Africa’s population will grow to approximately 1.7 billion by 2030, with a potential for $91 billion in cross-border payments and a retail value of over $1.5 trillion. Although there have been several attempts to solve the remittance problem in Africa from both the public and private sectors, the problem still persists.

In 2018, several African nations came together to sign the African Continental Free Trade Area Agreement (AfCFTA), which was intended to promote trade across the continent. This agreement gave birth to the Pan-African Payment and Settlement System (PAPSS) in January 2022, which is intended to be a payment gateway that will assist the AfCFTA.

The PAPSS platform processed its first transaction this week, between Ghana Commercial Bank and First Bank of Nigeria Plc., but widespread use of the platform is still a work in progress. Appzone’s rebranding and leveraging its large customer base across Africa can help accelerate the development and deployment of a true cross-border payment system; However, this is not the first attempt by a private company to do so.

It remains to be seen whether a truly functional cross-border payment solution can be created in Africa. However, a complex problem like remittances in Africa requires multiple solutions, and current developments are encouraging.