Driving financial inclusion through digital payment methods is among the top priorities for the governments of Africa’s biggest tech ecosystems where cash is still king. Several initiatives launched by these governments have increased the number of banked citizens in their respective countries. In Egypt, for instance, platforms like Fawry and InstaPay — tapped into the apex bank’s policies to reduce cash dependencies — are responsible for the spread of e-wallets and cards in the North African country where 64% of Egyptians increased their adoption of digital payments solutions last year. The number of mobile phone wallets reached 46,500 per 100,000 people, according to a Mastercard report.
While e-wallets and cards dominate the digital payments landscape, Egypt’s apex bank is keen to promote another method: contactless payments, after recently issuing regulations governing payment card tokenization on mobile apps. However, with services such as Apple Pay, Google Pay and Samsung Pay — which allow customers to make contactless payments with digital cards in mobile wallets via NFC (near-field communication) tech — mostly absent in Africa, platforms like Flash provide an alternative through QR codes.
The Egyptian fintech, which provides cashless payment solutions for consumers and businesses through a scan-and-pay service, has raised $6 million in seed funding led by Addition, the venture capital firm headed by former Tiger Global executive Lee Fixel. Flourish Ventures and other strategic angel investors participated in the round, which will help the startup accelerate product development and customer and business acquisition in Egypt.
Flash, off the back of obtaining approval from the Central Bank of Egypt to operate as a technical payment aggregator, allows customers to purchase with their phones by adding any existing bank card or digital wallet to the app and scanning a QR code that is presented by a business, in-store or on-delivery. This way, businesses can accept payments without needing the tasking technical integration typically encountered with expensive NFC-enabled point-of-sale (POS) systems.
“We’re eliminating the need for cash or carrying cards for our consumers and the POS machine on the merchant side,” said Erik Gordon, Flash co-founder and CEO, in an interview with TechCrunch. “With QR codes, businesses don’t have to worry about integration, setup and maintenance fees and it’s low tech, so anyone with a camera on their phone can pay that way.”
The inefficiencies that exist in a very cash-based society such as Egypt are something Gordon noticed during his time at Uber as head of marketplace for the North African country and later the MENA region. According to the chief executive, 90% of Uber’s rides were paid in cash. When collected from the drivers at the end of each day, this turned into piles of money being counted in warehouses, which led to fraud and theft.
Finding ways to stop this leakage, which hurt consumers and businesses in Uber’s ecosystem of products, was a massive headache for his team. While they came up with stopgaps, Gordon, alongside co-founder Sherine Kabesh (another Uber alumnus who worked as the ride-hailing giant’s head of marketing in Egypt), decided to take on a new challenge to build a platform they thought addressed the issues faced at Uber and was also in alignment with Egypt’s financial inclusion strategy.
The fintech, founded in 2021, provides its services in partnership with the Egyptian bank Banque Misr. In a statement, Kabesh said Flash securing license approval and bank partnership “strengthens our commitment to developing the cashless ecosystem, introducing new products, and diversifying our digital payment portfolio,” which includes automated bill payments and behavioral insights into spending, for instance. Flash has several competitors across its slew of products, including Telda, Khazna and Paymob.
E-commerce platforms and businesses whose payment methods include cash on delivery — pharmacies, restaurants, fast-food chains and grocery shops — are Flash’s main customers. Around 80% of goods purchased online in Egypt are paid COD, per a report; among other factors driving this, consumers prefer to receive the product before paying. The problem, however, is that many businesses do not provide a POS option on delivery. As such, “Flash on Delivery” allows these businesses to present a QR code to customers, which can be scanned at the point of collection. While the executives declined to reveal how many merchants (and end customers) are using its platform, they say the two-year-old fintech aims to serve over 100 businesses in the next 12 months. Some of its current business customers include Homzmart and Rabbit Mart.
Meanwhile, payments made on delivery or in store are settled the following day, which, according to Gordon, “is the best in the market.” The chief executive officer says in addition to being cheaper than other forms of digital payments, the next-day settlement gives Flash an advantage over current digital payments products, whose settlement times take longer (up to a week in most cases), and global payment methods, including Apple Pay and Google Pay (settlement could take up to five days) should they enter the Egyptian payments landscape in the future.
“The cost of the business will be less with Flash compared to something with Apple Pay because Apple, the card companies and banks are all taking a slice versus the kind of direction Egypt is going, which is similar to what’s happened in India where QR codes, cheaper for businesses, have proliferated and become the standard,” said Gordon, further stating the pros of QR codes versus NFC tech. “The central bank is also opening this instant payment network up to third parties, which would also enable instant settlement. So longer term, I think we can also perform instant settlement and lower transaction costs.”
That’s not to say QR code technology doesn’t come with cons, some of which include tampering with codes or placing fraudulent codes over real ones to divert payments. So how does Flash avoid this? Typically, businesses on the platform are onboarded in compliance with regulations set by the CBE and Banque Misr, allowing Flash to determine if they’re legit. Afterward, only QR codes generated by Flash (for businesses) will work with the Flash app (for customers), said Gordon. “Any money paid to a QR code can only end up in the account of that business. Flash never touches the money; it goes straight from our partner bank to the business’ bank account,” the CEO remarked. “So if someone stole a QR code, it wouldn’t make sense because any money paid to it could only go to the business.”
Andrew Miskiewicz, an investor at Addition, noting why the New York-headquartered firm backed Flash, said the fintech is “transforming the payments landscape in Egypt, simplifying the complex transactional process for consumers and businesses with a safe and easy-to-use application.” The fintech, which claims to be processing 50,000 transactions, is approaching over 10 million Egyptian pounds (~$324,000) in cumulative transaction value. At the same time, its revenue, made from charging businesses a processing fee, is growing 30% month-on-month, Gordon said in the interview.