Square co-founder and CEO Jack Dorsey headlined the Africa Fintech Summit, an event held from 09 November to 12 November, with an impactful keynote speech delivered during the final day on how decentralised finance can greatly improve financial inclusion in the continent.
The session served as a useful platform for Jack, also co-founder and CEO of Twitter, to speak on digital currency. Jack’s advocacy and passion for bitcoin and cryptocurrency is already well evidenced by his payments company Square allowing its users to purchase digital currencies seamlessly since 2014. And, most interestingly for the pan-African audience attending the summit from all corners of the continent, Jack reiterated his intent to visit the continent and spend at least a few months in an African country – which comes as a follow-up on his earlier pledge to live in an African country for 3-6 months in mid-2020 so as to spread the digital currency gospel.
We now move into insights from the Africa Fintech Summit, where Jack spoke to Yele Bademosi, CEO of Bundle Africa and Founder at Microtraction, in a fireside chat that ranged from subjects as exciting as bitcoins to matters as impactful as financial inclusion for the whole of Africa:
Asking the right questions: Squaring the circle
In response to Yele’s query on Square’s journey to come full circle, Jack noted that Square started “as a credit card reader but finally evolved into a lending arm to provide money to SMEs so they could buy a piece of equipment, hire a new employee, and hopefully double their sales. So, suddenly, we became a more valuable company because we asked a bigger and deeper question to when we started.”
Yele concluded that as an entrepreneur himself, he liked the idea of going deeper into the question of what customers really want, as something which is much more meaningful in helping entrepreneurs build a better business.
In Jack’s case, it went from the question “How can I build a better credit card reader?” to “How can I help an individual or business make a sale?”.
US and Africa: Leapfrog and conquer
Yele next quoted a GSMA report from 2019 which notes that of the 1.7bn people financially excluded, 66% are in Africa. He highlighted that, in the US, when Jack was co-founding Square in 2009, that number was actually 40%, asking him on that sobering note if he saw any similarities between US 10-20 years ago, and Africa today.
To this, Jack responded that there may be similarities, but it is the differences that are more important. For instance, there are not too many entrenched players in Africa, while back in the days, the US had a most competitive environment for FinTechs with too many entrenched banks and networks to face up to, and which were simply not incentivised to help a company that was just getting started.
As words of advice, Jack noted that new businesses must go above and beyond to help incumbents understand how they can help the entrenched players. In case of Square for instance, their goal was to enable access to the credit card network such that, if they were successful, they would allow many more people to use credit cards and enrich as well as increase the usage of incumbent credit card company networks – such as those of Mastercard or Visa, for example. He counselled against playing in to the perception of ‘bravado and arrogance’ that FinTechs are typically associated with and to instead adopt an attitude of collaboration that strives to solve a systemic problem together with everyone else in the ecosystem. “The biggest achievement is to align incentives with entities that you assume to be adversarial,” he concluded.
Bitcoins: Advocacy and application
To Yele’s query on his interest in bitcoins and what gets him excited about them, Jack responded to say that ‘everything makes me excited about bitcoins.’ He traced his interest in bitcoins to a point in time that predated the origins of cryptocurrency, noting that ‘30-35 years ago, I was fascinated by cryptography and how we might use it to create everyday value.’ He went on to stress that Square’s adoption of bitcoins came early in the day, and it was in “2014 that we added the ability for sellers to accept bitcoins but not much usage was seen till we added it to the Cash App in 2018. That’s when we really got it right!”
On Yele’s follow-up query on cryptocurrency as an instrument for economic empowerment, Jack responded that for Square to have been built as an internet company, an internet currency would have been needed first and foremost. “Instead of which, we had to go country by country, and in each country, we had to find a bank to partner with, and comply with the local regulations. So it was very challenging and it took us 9 months to launch Square in the US alone.” He underlined the importance of recognising that the prevalence of a widely accepted cryptocurrency would allow a global company to be built faster and to move faster, while also underlining the fact that cryptography originates from an open source community which is not owned, controlled and hence cannot be stopped by any one person or government – with his own advocacy made evident by having started a small entity called Square Crypto that gives back by working on open source products within bitcoin and protecting the interests of independent developers.
On the biggest barriers for mass adoption of bitcoins, Jack replied that ‘more designers are needed to look at the end-to-end flow and really make it simple and accessible for the people.’ Speed, efficiency, privacy and accessibility may be factors that are being taken care of, but ‘some of the operating basics need to be thought through and designed before bitcoins become perceived to be a real product and as tangible as paper cash, for instance.’
He concluded on the note that they had no expectations from entering the bitcoin arena, other than learning from this exciting development in the FinTech world, and the fact that Square generated $32 million in bitcoin gross profits in Q3 2020, a whopping 15 times growth year-on-year, clearly went above their expectations since they had none to begin with. For the way forward, he indicated that corporates had a huge role to play, above and beyond investing in bitcoins, by either paying open source developers to work on bitcoins; helping provide patents to the community so independent developers not have to suffer their work being taken over by bigger corporations; and writing white papers to give new work to the community.
Decentralised finance – and beyond
To conclude, Yele defined decentralised finance (DeFi) – a system that aims to replicate the open source and permissionless nature of payments represented by bitcoins across other services such as borrowing, lending and credit – as a backdrop to ask Jack if DeFi is overhyped or underhyped.
Jack responded to say that it is both – overhyped and underhyped. It is underhyped in the sense that it offers the opportunity ‘to reinvent a bunch of financial services and financial systems’, so to that extent, its full potential is yet to be tapped. However, it is equally overhyped to the extent that the technology itself is considered the solution to every problem, and this masks a more serious issue where ‘we start with a fixed solution or technology in mind and start running towards it’, instead of focussing on solving a genuine problem.
“Let’s not get ahead of ourselves by brushing every problem with the same solution. It is useful spending time on the problem, articulating the issue, and only then, understanding how technology, be it DeFi or digital currency, will help,” he concluded.
