Paycode

The Problem

Entrepreneurs living in deep rural areas can't access basic financial services because they lack formal identity, don't have connectivity and can't afford high fees. This means that they struggle to grow their businesses, get access to capital and are vulnerable to economic shocks.

The Solution

Paycode's technology ecosystem bridges the gap between financial institutions and entrepreneurs by providing last mile delivery solutions. We give users a biometric digital identity. We enable seamless interoperability (mobile money, insurance, micro loans) making it easier to earn a living, access capital and weather economic shocks. This gives entrepreneurs access to the financial services they need to grow and sustain their businesses.

How our Solution could positively change lives if it was scaled

Our solution can impact the lives of 590 million Africans by enabling financial inclusion and driving inclusive entrepreneurship. 

The specific problem

Entrepreneurs across Africa can't access basic financial services for three reasons:

• they lack formal identity documents, preventing them from opening a bank account or receiving social benefits
• they lack connectivity (no internet, no mobile connectivity), preventing them from utilising many products and services (e.g. mobile money)
• they can't afford the high costs of traditional banking (account fees, transaction fees, travel costs to reach a bank, lost revenue from travelling to a bank, high cost of data to access available mobile services)

The scale of the problem

Globally, 1.7 billion people worldwide are unbanked. 30% of young adults are unbanked. 63% of women are unbanked. [Source: The World Bank Global Findex Database 2017]

502 million Africans have no formal identity (41% of the population). [Source: The World Bank State of Identification Systems in Africa 2017]

The proportion of households with internet access in Africa is 18%, and 14,7% in the world's least developed markets. [Source: ITU's Facts and Figures Report 2017]

Because of this, 590 million people in Africa are unbanked and are unable to access basic financial services.

Which factors contributing to the problem relate to your solution?

• Identity
• Connectivity
• Cost

What is it?

Our solution, EDAPT (Electronic Data And Payments Technology) is an end-to-end data and payments platform that enables any financial institution to provide last mile delivery financial services solutions for entrepreneurs.

How it works

User KYC data and biometrics are collected during the onboarding and KYC process which takes around 5 minutes per user. Once the system verifies that the user is not already in the system, the biometric smart card is issued to a customer. The card provides the user with a biometric digital identity and a virtual bank account (e-wallet). 

Paycode software runs on a Stratus switch holding millions of virtual bank accounts. Each bank account on the switch is mirrored on a customer's biometric smart card which relays data through a biometric POS device or ATM.

Every day, transactions are conducted regardless of whether POS devices and ATMs are offline or online. Each night online transactions are settled between accounts on the switch and between banks. Offline transactions are processed when it is possible to connect. Every transaction is verified and authenticated using fingerprints. Biometric and user data is held securely in-country on a Dell server. 

Target Population

Our solution serves people living on less than $2 a day who have no access to electricity, the internet, mobile phone services or financial services.

Our users don't know their birth date. Their village has no street names. They live many hours away from the nearest town. They often never leave their village in their lifetime.  

Our users are beneficiaries of government social services and rely on social grants to survive. Most of our users are women. Our users have never had a formal identity document. Our users have never had a bank account and have never had access to financial services.

How we engage them

We work with government institutions, NGO's, village chiefs and local partners to understand our users. We customize our software to the specific needs of the user for every project.

How our solution addresses their needs

Everyone deserves access to good jobs. Everyone deserves the opportunity to be self-sufficient. When you're unbanked, you're excluded from a world of possibilities. But when people have access to basic financial services, lives change for the better. We give people living in the world's most remote places biometric digital identity and affordable access to basic financial services.

Entrepreneurs from deep rural areas struggle because they can't access basic financial services (the problem) remaining excluded (i.e. no inclusive entrepreneurship) and unable to create good jobs.

Making the world's financial system accessible to everyone (the solution) can significantly increase inclusive entrepreneurship. A robust financial technology ecosystem in deep rural areas will stimulate job creation (good jobs) and more opportunities open up (inclusive entrepreneurship) because of access to technology and capital.

With access to affordable financial services, millions of small and new businesses (the target population) would more likely prosper, create good jobs and get access to capital.

We make proprietary software called EDAPT (Electronic Data And Payments Technology). A core component of this software is that it is able to process transactions offline in real time. The innovation here is that it makes the product available in places where financial services technology was previously unavailable. 

We exclusively use the Idemia Morpho biometric fingerprint scanner. This scanner measures and compares deep vein blood flow. The innovation here is that fingerprint scanning used by mobile phones is a comparison of an image file against the fingerprint being scanned, but can be easily spoofed. However, a unique finger vein pattern can be used to authenticate a person more accurately, regardless of their change of fingerprint status (e.g. sweaty fingers or degraded skin). The result is that a fingerprint scanned with an Idemia scanner will guarantee proof of life. 

The combination of innovative software and hardware means that Paycode can guarantee that the intended beneficiary is who they say they are, has definitely received the funds and was definitely alive at the point they received the funds. Users don't need to connectivity to transact as the platform is able to operate offline in real time. We can operate at scale in areas that other service providers simply can not reach.

Our biggest competitor is cash. We view industry players like Mastercard, Visa, UnionPay, mobile money and traditional banks as potential partners who can use our technology to reach the last mile due to our strong focus on interoperability.

Our core technology is our proprietary software, EDAPT (Electronic Data And Payments Technology). 

We go to villages in remote regions of Africa and onboard users by scanning their fingerprints and recording their KYC data.

A secure central data server (supplied by Stratus) stores users Know-Your Customer (KYC) data including personal details, fingerprint biometrics and location data. The server performs real-time fingerprint matching and searching to detect duplicates. The digital identity created is unique and users can never be enrolled more than once, however, they can have their card re-issued if they lose it. Once registration is completed, the user is given a smart card which holds their biometric data which is linked with their Unique Bank Identity Number. The card also contains an electronic wallet which acts as their bank account. It is also possible to transact without cards, just using fingerprints.Data and transaction processing can be done online or offline in real-time.

Any financial institution can connect to our platform through our API's in order to provide financial services to users. Using EDAPT, the financial institutions become the issuers of the biometric smart cards and thus, providers of mobile virtual bank accounts to people. The EDAPT back-end manages interbank switching, settlement and clearing as well as a suite of smart solutions. The system is a combined data and payment management information system (MIS) for financial and non-financial statistical reporting and trending, enabling big data to be analysed in real time.

Paycode currently has over 4 million users and 6 million e-wallets across eight African countries: Ghana, Namibia, Botswana, Nigeria, Malawi, Zambia, Guinea Conakry and Mozambique. Ghana is our largest user base as we are the technology provider to the Ghana Interbank Payment Settlement System (GhIPSS). Paycode's EDAPT solution is the technology behind the central bank, Bank of Ghana's National Switch called eZwich. 

A short documentary describing the eZwich system and its benefits is available on the GhIPSS YouTube Channel. CLICK TO VIEW HERE.

EZwich celebrated its 10th Anniversary in 2017 and the team from Paycode is featured in a video marking the occasion. CLICK TO VIEW HERE. 

On our YouTube page, we show a video which demonstrates a point-of-sale transaction taking place offline in real time. CLICK TO VIEW HERE.

This is a video showing two project implementations we did in Zambia and Mozambique which shows our technology in action. CLICK TO VIEW HERE.

A larger version of these slides is available here.

Currently: 4.2m

Within 1 year: 20m

Within 5 years: 100m

The 5 year goal is less than 20% of the number of unbanked adults in Sub-Saharan Africa.

Paycode will enable affordable access to basic financial services to 20m people in Africa by the end of 2021 and 100m people in Africa by 2025. 

Our user acquisition strategy hinges on strong relationships with local partners, banks, government and actively driving and pursuing opportunities to roll out our world class technology across Africa.

Paycode has appointed Value Added Resellers (VARs) to work with local branches of funding organisations, financial institutions, Central Banks, Government Agencies and private sector companies.

We work with suppliers and industry allies to innovate and drive user growth. The Gemalto Dual Card was the first smart card in the world to support the EMV standard (open-loop card payment scheme), as well as the Paycode standard (closed-loop card payment scheme.) We have been approached by other industry players like Sopra Steria Banking Software to add the Paycode solution to their product suite.

Paycode has strong relationships with representatives of The World Bank, United Nations, national funding organisations, commercial banks and NGOs to enhance its position as the technology of choice for last mile delivery of financial services and the ability to guarantee proof of life, which reduces fraud and results in significant cost savings.

Paycode tracks and submits tender applications to governments across Africa as projects arise. We supply the technology that runs the Ghana Interbank Payments and Settlement System (e-zwich). We have enabled social grants for INAS, Mozambique's government social protection agency. We have enabled and distributed agricultural loans for the Zambian Ministry of Agriculture.

Financial:

• OPEX: We are restrained by the OPEX required to hire staff for product development, sales and marketing Paycode in order to service a large geography.
• CAPEX: Our solution relies on the regular upgrade of hardware. A barrier to scaling is the cost of POS devices, cards and servers. 
• Contract funding: Funds to deliver existing contracts
• Scale funding : Sufficient funding to scale and penetrate new markets

Access to Markets:

• We have strong commercial networks in the countries where we currently operate. In countries where we don't operate, market penetration tends to be difficult.

Financial:

We require sufficient funding ($15m plus) to scale the business. Nearly all of the problems we need to address exist as a result of insufficient funding. This is because there is a requirement for CAPEX funding at the start of each project with a long tail of income and returns which you can only reach if you can fund the CAPEX. Whilst we can continue to deliver projects and growth steadily, to deliver the real benefits we are striving for requires investment.

Access to Markets:

Gaining introductions to decision makers in government, business, non-profits and academia will assist us in expanding our business network and take advantage of opportunities to provide our technology solution to more markets.

N/A

We have 24 full-time staff based in Johannesburg.

Our highly experienced and skilled senior management team are experts in delivering Paycode’s world-class biometric digital identity and payments solution in emerging markets. With a combination of exceptional leadership, innovative software development, efficient and effective in-market operations and end-to-end service capabilities, our team has a long track record of success across Africa and beyond.

CEO - Ralph Pecker

Ralph Pecker has over 30 years experience sales and management at companies around the world. A native Zambian, Ralph is the key contact for Paycode’s high-profile customers such as Presidents and Ministers across Africa. Ralph's extensive network of high-net worth individuals, C-suite executives and government representatives make him an outstanding asset to the company.

COO - Sandy Begg

Sandy Begg has a stellar track record in executive management at large corporates in South Africa. She is responsible for operations and driving innovation in IT at Paycode. She has experience in running large IT teams and ensuring the development of world class technology solutions.

CSO - Mirza Pillay

Mirza is a payments and central banking specialist, and has a deep understanding of the payment industry in Africa. He has strong technical background and extensive understanding of the challenges around payments in emerging markets. 

CFO - Grant Haarhoff

A qualified Chartered Accountant, Grant joined Paycode after 6 years at the South African Reserve Bank where he held high-profile roles including Acting Group CFO. He was an integral part of the SARB’s leadership committees, including the Fintech SteerCo which co-ordinated the Intergovernmental Fintech Working Group.

Our key partnerships are with our customers: The Central Bank of Ghana, Ministry of Agriculture of Zambia, Institute of Social Protection of Mozambique, SmartSwitch Namibia, SmartSwitch Botswana, MalSwitch Malawi, The Government of Iraq, The Ministry of Higher Education of Guinea and the Federal Government of Nigeria. We work with them to provide customized, market-specific solutions for their citizens.

In addition, we have strong relationships with our suppliers who we work with to reduce barriers to our financial technology ecosystem. For example, we developed an innovative new product, the Dual Card, with our supplier Gemalto (now renamed Thales), to provide users with access to all payments system hardware regardless of whether the hardware is supported by the EMV (EuroCard, Mastercard, Visa) standard or the Paycode standard.

We worked with our supplier, Famoco, to bring down the cost of biometric point of sales devices and supply world-class software for their hardware.

We exclusively support the biometric standard of our supplier, Idemia, ensuring the integrity of fingerprint scanning and reading when onboarding users. They way in which biometric data is scanned, collected, stored and used ensures that Paycode can guaranteed proof of life to its customers. 

Paycode partnered with FSD Mozambique, a financial sector deepening NGO, when we implemented the distribution of social grants to the citizens of Mozambique. In the partnership, FSD Mozambique teamed up with Paycode staff when onboarding new users. FSD Mozambique provided financial inclusion training to social grant recipients, teaching them about managing money, budgeting and saving.

A larger version of this image is available here. 

Paycode is currently in a Series A fundraising round, seeking to raise $15 million. This funding will be used for capacity building, business development and marketing.

Paycode's business model is based on a 'software-as-a-service' model, where customers pay a monthly subscription for the use of the platform. 

Paycode derives revenue from reselling hardware from our key suppliers e.g. smart cards, Point of Sales devices, Biometric android tablets, Stratus servers etc.

Paycode derives revenue from licencing our software to 3rd party resellers.

Paycode receives a small fee for every transaction conducted by end users. At scale, this combination of revenue more than covers the costs incurred and is forecasted to provide an excellent return for investors and stakeholders.

We have a clear vision that we want to bank as many of the worlds 1.7bn unbanked people starting with the mission to bank 100m of the 590m unbanked adults in Africa. 

We think that Solve can help us  by:

• providing access to skills and knowledge that helps us to plan, implement and achieve rapid growth
• providing access to potential funders
• providing introductions to more parts of the UN and The Word Bank and other funding institutions and NGOs who would benefit from knowing about our technology
• directly or indirectly influencing Governments and banks in the developing world about the value to their economies of digital banking, payments and identity
• providing introductions to other innovative technology companies and potential suppliers with whom we can partner and/or integrate

Our partnership model in fundamental to our approach. We already use VARs and have partnership with key existing technology suppliers like Tandem, Famoco and Gemalto. We already work with some departments of the UN and The World Bank.

We are looking for more partners who fall into one of the following categories:

Solution technology: 

Companies that:

• Improve our technical solution either from a technology or cost              perspective
• Already work in the same functional area and with whom it would make sense to integrate or co-operate.

Product/Service Distribution:

Companies and organisation that have a need for our product/service like:

• Governments
• Banks
• NGOs
• Large employers

Funding & Revenue Model:

• Institutional and other investors that can provide funding to help us deliver our mission

Board Members/Advisors: 

• People with specific skills and knowledge of our marketplace who can help us move forwards

Marketing/Media/Exposure:

• Help to maximise our market exposure

We would like to connect with other MIT Solvers, Partners and Members that are based in Sub Saharan Africa and other emerging markets and operate in the following sectors:

• Financial Services
• Agriculture
• Education
• Health
• Refugees
• Gender equality

Specifically, we would like to connect with these Solvers and Partnerships:

• TeachMobile by Eneza (Ghana)
• Practical Education Network (Ghana)
• Tools for Teachers in West Africa (Ghana)
• Hands-On STEM Learning in West Africa (Ghana)
• LifeBank (Nigeria)
• Fresh Direct Nigeria
• TruTrade (Uganda)
• Lynk (Kenya)
• Afya (Kenya)
• Moringa School (Kenya)
• E-Heza (Rwanda)

We would like the opportunity to pitch our solution to and connect with these Solve members:

• Bill & Melinda Gates Foundation
• The World Bank
• Olam International
• Andan Foundation
• Calouste Gulbenkian Foundation
• DBS Foundation
• SOCAP
• Morgridge Family Foundation

The Paycode solution can be implemented in a refugee crisis quickly to create a controlled financial ecosystem to deliver aid directly to the refugee. Our technology gives refugees a unique biometric digital identity and access to financial aid which can be accurately directed towards particular targets like food, education and shelter if required. Paycode e-wallets can be set up in such a way that the funds in an e-wallet can only be used for a specific purpose.

Digital biometric identity is particularly useful in refugee crises because it enables unique digital identity even in situations when people have no other way to prove their identity (e.g. passport, ID document, proof of residence.)

Over time, as refugees are integrated into the general population, it would be possible to monitor and report on each person's economic activity and prove, if required, whether such migrants are beneficial to the host nation. From the host nation's perspective, it would provide certainty about the number of refugees in the country and what they are doing. As the relationship between refugee and host nation develops, they can be incorporated into the host nation's tax system and start to benefit the host nation directly.

The flexibility, accuracy and scalability of the Paycode system can deliver huge benefits by bringing some structure to what can otherwise be a chaotic environment.

The majority of Paycode users are women in Africa living on less than $2 a day.

According to Melinda Gates, "When the government deposits social welfare payments or other subsidies directly into women’s digital bank accounts, the impact is amazing. Women gain decision-making power in their homes, and with more financial tools at their disposal they invest in their families’ prosperity and help drive broad economic growth."

Paycode's technology is an ideal solution for governments to pay social welfare payments to women. We have built-in safety mechanisms for e-wallets in the event that someone is in a situation where they are coerced into accessing the funds. If someone is being forced to access their account by scanning their fingerprint, a "red alert" finger can be used to authorise access, but the system will show a very small account balance, masking the actual account balance in the wallet and ensuring funds remain safe and in the control of the account holder.

If we win this prize we will use the funds to pay for the infrastructure (cards, POS devices, people) to run a proof-of-concept project implementation with our partners in Zambia where we will provide our solution to rural women at no cost. We will use the results of the POC to prove to potential governments and other customers the benefits of banking women in rural areas, the data and insights gained when implementing our system and the positive changes in consumer behaviour and economic prosperity that result from financial inclusion.