USSD, which stands for unstructured supplementary service data, may appear hard at first and can rapidly become technical, but there are two crucial concepts to grasp for the purposes of financial inclusion.
To begin, you are utilizing USSD when you dial a number that begins with * and ends with #. Second, for delivering mobile banking services to limited-income customers, USSD is presently the receive the best communications technology.
Stax, a firm that uses automated USSD codes to enable Africans to buy airtime, send and receive funds, and move payments between accounts, has acquired a $2.2 million seed round.
World Within Ventures and Noemis Ventures, both based in the United States, co-led the round, which also included Anthemis Group, Orange DAO, 500 Startups, Garuda Ventures, and GAN Ventures.
Then there’s Stax. Ben Lyon, Jess Shorland, and David Kutalek founded the firm, which gathers all of these numbers from numerous accounts into an app that customers can access offline, allowing them to conduct purchases without dialing any USSD codes. Stax’s goal here is to better user experience.
Lyon, Shorland, and Kutalek met in Kenya while running various fintech-related firms before starting Stax. Kenyans utilize mobile money more than everyone else on the planet.
As a result, when it came time to start a new project, they focused on the technology that would power it and recognized an opportunity to optimize USSD rails for future use situations.
Stax is all of your bank accounts, mobile wallets, and crypto in a single app that works without mobile data, according to CEO Lyon. We’re attempting to capitalize on the fact that there are over 300 million smartphone consumers in Africa who prefer to transact via USSD rather than apps since they keep their mobile data turned off.
Stax promotes itself as a distributed team, with employees based in the United States, the United Kingdom, Nigeria, and Kenya. Its platform is active in ten African markets, but it completely serves six countries: Kenya, Uganda, Tanzania, Nigeria, Ghana, and Ethiopia, where consumers may access over 100 banks and mobile money accounts.
Last year May, the platform was released from beta. In its initial month, it had fewer than 3,000 monthly active users, but it has since expanded to over 170,000 customers, with just 40,000 of them being active monthly users.
Customers only need to give Stax permission to send and see messages, access contacts, and initiate and manage phone calls when they download the program.
These rights, according to Lyon, do not reveal personal information about users. As a result, in the event of a breach, hackers are unable to hurt users, do anything with stolen data, or move money.
Stax would have gotten ad dollars if it had been able to cross-sell consumers with data-backed insights. However, because the app was created for a different purpose, the company plans to charge commissions from partner brands that supply additional services to its customers in the future.
Hover was the firm’s first iteration. It was an API platform that enabled developers to create USSD rails-based apps.
After the platform failed to generate enough revenue from developers after two years, the company decided to move vertical and create Stax, a universal money app for African customers based on USSD rails. Hover is still the parent firm.
Techbuild’s Take
USSD is still the finest communication method for providing low-income people with mobile financial services (MFS). The great majority of the poor are still excluded from smartphone applications that connect consumers with providers via the internet.
You’ve undoubtedly remembered the different USSD codes for transferring and getting payments, purchasing airtime, and more if you have a mobile money account and any mobile phone.
Dialing a shortcode is the initial user interface for mobile money and mobile banking, and many people prefer it because it can be done on the go, is usually faster, and does not require internet.
Banks are using USSD to enable financial inclusion because it offers an alternative for those who do not know how to use the online banking system.
This mass market is dominated by telecommunications companies and banks, which provide the technological infrastructure that enables these code-based transactions.
However, USSD has its own set of difficulties. Consider Nigeria, where the average banking user has three to five accounts, and while some customers utilize bank apps or fintech platforms to conduct online transactions, others rely on USSD numbers. For the latter, remembering one or two codes is one thing; cramming about five is another.
On the other hand, Stax intends to introduce various features along the way, including a self-custody crypto wallet that will start with USDC, allowing customers to purchase airtime while dialing non-financial digits.
When Stax’s Series A round closes, the seed extension will allow it to further develop these capabilities and expand its services from 10 to 50 African countries.
Stax is also pursuing an emerging market strategy, according to Lyon, in which it will extend outside Africa into other regions where USSD is widely used, such as South and Southeast Asia. But that will be a long time coming.
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