Early-stage investments are key for emerging markets

Due to currency volatility and infrastructure issues, the use of virtual currencies in emerging markets has exploded in recent years. In 2020, Nigeria ranked third globally in terms of countries with the highest bitcoin trading volumes, generating transactions worth more than $400 million, behind the United States and Russia.

In the private sector, companies like the South African-based cryptocurrency exchange Moon have grown significantly as the use of digital currencies increases.

The firm, which has more than 9 million clients worldwide, sees the African region as one of its strongest markets. Luno also claims that over 45% of the one million new customers added to the platform since June 2021 were based in Africa, while its customer base in the region grew by almost 50% in 2020 alone to reach 4.7 millions.

To capitalize on this growth and the abundance of new start-ups in the sector, the company recently launched Moon Expeditionsan investment arm focused on early-stage FinTech and crypto startups to accelerate the development of a new financial ecosystem.

In an interview with PYMNTS, jocelyn chengCEO of Luno Expeditions, said that the reason for the launch is related to the unprecedented investment opportunities in the early stages that they have noticed in emerging markets such as Africa.

Cheng said that Africa’s unique combination of demographics, particularly its young and tech-savvy population, and economic trends make it “one of the most promising regions for the adoption of a new financial system.”

Read more: African Crypto Exchange Luno Explores US Foray

He said the company’s long-term hypothesis is that digital currencies are going to revolutionize the financial system, so investing in “quality startups” in developing regions that share the same goal of building a better financial system is key.

“Actually, we don’t see many early-stage global FinTech investors with a specific focus on Africa and East Africa. We see an exciting opportunity here to build a fund that reflects the very global nature of FinTech,” he added.

Cheng went on to say that while the US crypto space is more focused on investments, speculation, trading, and derivatives, the usefulness of cryptocurrencies in regions like Africa is much more related to improving everyday life in areas like payments, remittances and greater financial inclusion. — offering a “mass market opportunity” that they seek to take advantage of through their investments.

Remittance use case

Sending money abroad has become an essential part of everyday life, with customers sending billions a year to people in low- and middle-income countries.

As the remittance market evolves, consumers are increasingly looking for faster, cheaper, and seamless alternatives to send money abroad, with some turning to digital currencies as a viable method of transferring funds.

Read the report: The Digital Currency Exchange: The Cross-Border Remittances Report

Data from a PYMNTS cross-border remittance report shows that while 13% of surveyed consumers said cryptocurrency was their most used payment method for online cross-border remittances, nearly a quarter (23%) of consumers who made cross-border online peer-to-peer transfers. -Peer-to-peer (P2P) payments sent funds using at least one type of cryptocurrency.

Cheng acknowledged that remittances are a key use case, especially in emerging markets, but argued that people do not choose a remittance provider based solely on the fact that their service is built on blockchain technology.

Read more: Cryptocurrencies emerge as a preferred form for cross-border remittances

Instead, users focus on a service that has no hidden fees, a streamlined user experience, and high-security support in the language of their choice.

“If all of that is enabled by being on the blockchain, great, but no one will choose a remittance product just for that reason,” Cheng said.

While there are definitely opportunities for crypto to help improve the user experience for remittance products, Luno’s investments will primarily depend on how much consumers adopt the product and the level of community traction and activation it has.

“We are not trying to invest in companies just because they are crypto,” he added. “We want to invest in companies where cryptocurrencies make sense, and I think [remittance] It’s a great use case for crypto, but that’s not the only reason we invest in companies.”

As an example of a non-crypto remittance company with high growth potential, Cheng referenced one of his portfolio companies, Tanzania-based cross-border payments company NALA, which recently raised $10 million to build a “Revolut-style” brand. ” for the African market.

Going forward, Cheng said Luno’s ambition is to increase investments to 200-300 per year, given the abundant opportunities they see in the early stages: “We came up with that. [range] because we wanted to reflect the size of the opportunity [out there].”

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