Round 9

Stax - Africa’s offline payment superapp

All your bank accounts, crypto, and mobile wallets in one lightweight app that works without mobile data.
$
200,000
worth of XLM on the day of pay-out*
worth of XLM on the day after voting*
Website

Stax is Africa’s offline payment superapp. Manage all your bank accounts and/or mobile wallets in a single lightweight app that works without mobile data. Stax currently supports 90+ bank and mobile wallet services across 10 African countries. We are applying to the Stellar Community Fund to accelerate our plans to launch a self-custody, multi-token wallet across our markets, starting with USDC. Stax users will be able to send, receive, and store USDC without using mobile data, and sending USDC will be as simple as sending a message.

In operation since

June 2017

Based In

Stax is a product of Hover Developer Services, Inc., a Delaware C Corporation in the US. We operate remotely with teammates in Kenya, Nigeria, the UK, and the US.

Stage

Growth

Products & Services

Stax is a universal money app for Africa. Our proprietary technology allows us to both automate existing USSD-based services (e.g. mobile banking and mobile wallet payments) and use USSD as a transport layer to deliver real-time services to our users without requiring a mobile data connection. 94-97% of all digital financial transactions across Africa rely on USSD because users either can’t access an internet connection or frequently switch off their costly mobile data throughout the day.



We already support 90+ bank and mobile wallet services across Africa and plan to work with Stellar to provide users with a self-custody, multi-token crypto wallet, starting with USDC.


Our goal is to make crypto accessible to the 300m Africans that own a smartphone and choose to transact offline via USSD instead of via apps. This starts by making crypto-based services available “offline” (i.e. without using mobile data), then focuses on obfuscating the complexity of crypto with approachable language and user experiences. We plan to start with USDC to give users a de facto US dollar domiciliary account--a safe, stable onramp to crypto and DeFi that insulates first-time users from the market volatility associated with Bitcoin and other crypto assets.



With USDC via Stax, Stax users will be able to send, receive, and self-custody USDC alongside their fiat accounts--all in one lightweight app optimized for low-bandwidth and low-storage devices. A Stax user in Nigeria, for example, will be able to send USDC to both Stax users and non-Stax users across Africa. When sending to another Stax user, funds will be credited directly to the recipient’s USDC address and can then be stored as USDC or withdrawn via Stellar Anchors to their local fiat accounts. When sending to non-Stax users, recipients will have the option to either open a Stax account to manage their USDC, or withdraw directly to fiat via local Anchors. Our goal is to make sending and receiving USDC as simple as messaging between phone numbers.


Following this initial seeding strategy, we plan to give Stax users access to DeFi (e.g. 9% APY on USDC balances via Ultra Stellar) and other crypto assets. Crypto across Africa is increasingly person-to-person. We are uniquely positioned to accelerate this trend because Stax is non-custodial for crypto and fiat alike, enabling a seamless settlement experience for person-to-person trading. By contrast, a crypto user in Nigeria might use Binance to buy/sell crypto, but settlements happen via bank transfers using internet dependent bank apps. In Kenya, settlements tend to happen via mobile money transfers using M-PESA. Stax enables bank, crypto, and mobile wallet transfers within a single, unified experience.

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Goal & Budget

We have two 6-month goals:

1) achieve our first 100k monthly active users, and

2) achieve a floor of $10k/mo in fee and commission revenue. Achieving these goals will position us to raise a Series A in 2022 to scale to all 54 African markets. At a product-level, we plan to support sending, receiving, and storing USDC via Stax by April 2022.

We have several ways to stimulate early use of USDC via Stax. First, we will begin to pay Stax Money Mappers via USDC. Money Mappers are Stax users that get paid to help us add support for local bank and mobile wallet services by running and recording specific USSD menus (e.g. Send money from GT Bank to Access Bank to earn $5). Money Mappers often become Stax super users and tend to invite 5 or more of their friends to Stax. Second, we will implement a cash back system to reward Stax users via USDC for buying airtime and data, paying their utility bills, and more via Stax. We will negotiate discount rates via local aggregators, then share these discounts with Stax users via USDC. For example, a Stax user could get 5% back via USDC every time they purchase airtime.

We could even pay bank account and mobile wallet fee rebates via USDC. Third, we plan to launch a Refer & Earn plan where Stax users earn USDC for referring their friends to Stax. Fourth, we plan to leverage a service like Ultra Stellar to enable Stax users to earn daily interest on their USDC balances.

Our Request

We have a 3-person engineering team today and need to hire 3 backend engineers and 1 Android engineer to support USDC across the 10 African markets we serve by April 2022. We also need to acquire our own USSD codes in every market we serve to enable USDC functionality offline. We plan to acquire USSD codes via Africa’s Talking, a telco services aggregator with coverage across Africa. We built and demonstrated a minimum viable product of USDC via Stax at the DFS Lab/Stellar boot camp; now we need to productize it.

Progress so far

Stax currently supports 90+ bank and mobile wallet services across 10 African countries. Our priority markets are Ethiopia, Ghana, Kenya, Nigeria, Tanzania, and Uganda. We launched from beta in May 2021 and have registered 100k+ all-time downloads. We currently have ~17k monthly active users and have processed ~85k transactions from ~25k transacting devices. We have raised ~$3.5m in venture financing to date and are currently raising a $1.5m bridge round (mostly committed) with the goal of achieving Series A metrics by March 2022. We are in the initial stages of launching support for crypto in Stax, starting with USDC.

PROBLEM AND SOLUTION

Mobile data in Africa is expensive. Because of this, 300m smartphone owners choose to move money offline via USSD instead of via apps. USSD is a text-based protocol with an unforgiving nature. It’s universal in the sense that it works on any GSM device without using mobile data, but it’s fundamentally inaccessible and limited. USSD is a poor channel for discovery, for example, or comparing information. Despite this, smartphone owners across Africa have a strong preference to keep mobile data disabled throughout the day, opting for a higher-friction, less featureful user experience.


Our proprietary technology allows us to automate USSD sessions in the background of an Android app. Stax leverages our core technology to provide a universal money app for any USSD-based service (e.g. mobile banking, mobile wallets). Stax currently supports 90+ bank and mobile wallet services in 10 African markets.


HOW STAX USES STELLAR

We are using Stellar to introduce a self-custody, multi-token wallet to Stax users, beginning with USDC. Leveraging our core technology (USSD automation), Stax will enable users to send, receive, and store USDC alongside their bank accounts and mobile wallets, enabling seamless transfer and settlement between digital tokens and fiat money. From there, we plan to introduce DeFi services like Ultra Stellar to enable Stax users to put their money to work across borders and currencies.


TARGET MARKET

Stax is for the 300m Africans who choose to keep mobile data on their smartphones switched off throughout the day. Our priority markets are Ethiopia, Ghana, Kenya, Nigeria, Tanzania, and Uganda. Stax users own an Android smartphone, have 3-5 bank accounts and/or mobile wallets, and tend to be young, urban or peri-urban, busy, and entrepreneurial. Stax users want to put their money to work and are willing to make bets, but are also security-conscious and do their diligence. Stax users are thinking of trying crypto or trade crypto already. Stax users live in markets with high mobile banking and/or mobile wallet penetration rates and settle most payments person-to-person.


REVENUE MODEL

Stax will make money through fees and commissions from 3rd-party service providers. When a Stax user buys airtime, for example, we can earn a commission of up to 10%. We plan to monetize airtime, data, and utility payments in the near-term. We also plan to monetize via DeFi services like Ultra Stellar, where we can split up to 9% APY on USDC with Stax users, and via person-to-person crypto trading fees, leveraging partnerships with companies with LocalBitcoins and Paxful. Taken together, we become profitable by year 3 and generate $8.5m of gross profit by year 4 with conservative assumptions.


PRICING STRATEGY

Stax never charges extra fees. Instead, we negotiate discounts on digital goods and services and share the spread with our users in the form of cash backs and/or discounts. We plan to share crypto and DeFi spreads with Stax users too. Although we may use promotions from time-to-time, we will generally share fee and commission spreads with Stax users on a 50/50 basis.


INDUSTRY AND MARKET RESEARCH

According to Caribou Data, 94% of all digital transactions in Africa rely on USSD, not apps. The GSMA puts that number as high as 97%. Among smartphone owners, 87% of all digital transactions rely on USSD despite the existence of apps because mobile data is expensive. According to the Alliance for Affordable Internet, 1GB of mobile data costs more than 10% of monthly average income in 15 Sub-Saharan African countries.


Based on proprietary data and existing partner agreements, we know we can make $6/year per Stax user on airtime commissions alone. Customer acquisition costs for online channels in Africa are generally below $1.


THREATS AND OPPORTUNITIES

We chose a non-custodial route to minimize regulatory risks. Stax is a money utility app, not a financial service provider, wallet service, cross-border money remitter, or financial institution. Maintaining low regulatory risk allows us to iterate faster and with more autonomy than potential competitors.


As a self-custody solution, we have an opportunity to support our users as they pursue financial freedom. However, self-custody solutions require users to have basic knowledge of how crypto works and how to protect and maintain access to their keys. Users may lose access to their keys and Stax will not be able to help them recover those keys, which could result in permanent loss of funds. We have an opportunity to educate users, help mitigate loss of funds, and make crypto more accessible by obfuscating complexity, but this will remain a threat.


Market fragmentation is an opportunity for Stax. Most users add 3 or more bank accounts and/or mobile wallets to Stax. Even as new digital financial services become available, they are almost always accessible via USSD, which means we can quickly support them in Stax.


Markets with dominant telcos are both threats and opportunities. They are threats insofar as dominant telcos are increasingly agile and seek to be the center of their subscribers’ digital lifestyles, from content to commerce to social. They are opportunities insofar as banks don’t offer seamless payments between themselves and the dominant telco--enter Stax.


COMPETITION

We sit at the intersection of non-custodial crypto wallets like Coinbase Wallet, Lobster, and MetaMask, and mobile banking/wallet services like GT Bank *737#, UBA Magic Banking, and M-PESA. We are unique insofar as Stax is the only money app that automates your existing accounts as opposed to being a wallet provider. We stitch all your money together in one app and make sure it’s available to you with or without a mobile data connection.


We compete directly with telcos, which own channels and cash-in/cash-out networks capable of serving the mass market. Telcos are increasingly agile and determined to evolve from telecommunications companies to digital lifestyle businesses. Telcos are competing with software companies in most categories, from content to hosting to payments to social. We can compete successfully with telcos because Stax supports multiple bank accounts and/or mobile wallets, and it will be some time before telcos embrace crypto/DeFi. No matter how dominant a telco becomes, everyone still has multiple bank accounts and/or mobile wallets, and Stax is a single place to manage everything.


GROWTH

Our 6-month objective is to achieve 1) 100k+ monthly active users and 2) a minimum of $10k/mo in fee and commission revenue. Our Growth team is composed of our Head of Growth, Senior Content and Communications Manager, and Visual Designer and is supported by 3rd party freelancers and media agencies across Africa. We plan to leverage a mix of offline and online marketing to achieve our targets. For example, we are working with a 3rd party media agency in Ghana and Nigeria to acquire new users via phone calls, micro-influencers, and offline brand representatives. We will also do paid marketing via Facebook and Google and organic marketing via our owned channels (blog, email newsletters, social media).

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PROBLEM AND SOLUTION

Mobile data in Africa is expensive. Because of this, 300m smartphone owners choose to move money offline via USSD instead of via apps. USSD is a text-based protocol with an unforgiving nature. It’s universal in the sense that it works on any GSM device without using mobile data, but it’s fundamentally inaccessible and limited. USSD is a poor channel for discovery, for example, or comparing information. Despite this, smartphone owners across Africa have a strong preference to keep mobile data disabled throughout the day, opting for a higher-friction, less featureful user experience.


Our proprietary technology allows us to automate USSD sessions in the background of an Android app. Stax leverages our core technology to provide a universal money app for any USSD-based service (e.g. mobile banking, mobile wallets). Stax currently supports 90+ bank and mobile wallet services in 10 African markets.


HOW STAX USES STELLAR

We are using Stellar to introduce a self-custody, multi-token wallet to Stax users, beginning with USDC. Leveraging our core technology (USSD automation), Stax will enable users to send, receive, and store USDC alongside their bank accounts and mobile wallets, enabling seamless transfer and settlement between digital tokens and fiat money. From there, we plan to introduce DeFi services like Ultra Stellar to enable Stax users to put their money to work across borders and currencies.


TARGET MARKET

Stax is for the 300m Africans who choose to keep mobile data on their smartphones switched off throughout the day. Our priority markets are Ethiopia, Ghana, Kenya, Nigeria, Tanzania, and Uganda. Stax users own an Android smartphone, have 3-5 bank accounts and/or mobile wallets, and tend to be young, urban or peri-urban, busy, and entrepreneurial. Stax users want to put their money to work and are willing to make bets, but are also security-conscious and do their diligence. Stax users are thinking of trying crypto or trade crypto already. Stax users live in markets with high mobile banking and/or mobile wallet penetration rates and settle most payments person-to-person.


REVENUE MODEL

Stax will make money through fees and commissions from 3rd-party service providers. When a Stax user buys airtime, for example, we can earn a commission of up to 10%. We plan to monetize airtime, data, and utility payments in the near-term. We also plan to monetize via DeFi services like Ultra Stellar, where we can split up to 9% APY on USDC with Stax users, and via person-to-person crypto trading fees, leveraging partnerships with companies with LocalBitcoins and Paxful. Taken together, we become profitable by year 3 and generate $8.5m of gross profit by year 4 with conservative assumptions.


PRICING STRATEGY

Stax never charges extra fees. Instead, we negotiate discounts on digital goods and services and share the spread with our users in the form of cash backs and/or discounts. We plan to share crypto and DeFi spreads with Stax users too. Although we may use promotions from time-to-time, we will generally share fee and commission spreads with Stax users on a 50/50 basis.


INDUSTRY AND MARKET RESEARCH

According to Caribou Data, 94% of all digital transactions in Africa rely on USSD, not apps. The GSMA puts that number as high as 97%. Among smartphone owners, 87% of all digital transactions rely on USSD despite the existence of apps because mobile data is expensive. According to the Alliance for Affordable Internet, 1GB of mobile data costs more than 10% of monthly average income in 15 Sub-Saharan African countries.


Based on proprietary data and existing partner agreements, we know we can make $6/year per Stax user on airtime commissions alone. Customer acquisition costs for online channels in Africa are generally below $1.


THREATS AND OPPORTUNITIES

We chose a non-custodial route to minimize regulatory risks. Stax is a money utility app, not a financial service provider, wallet service, cross-border money remitter, or financial institution. Maintaining low regulatory risk allows us to iterate faster and with more autonomy than potential competitors.


As a self-custody solution, we have an opportunity to support our users as they pursue financial freedom. However, self-custody solutions require users to have basic knowledge of how crypto works and how to protect and maintain access to their keys. Users may lose access to their keys and Stax will not be able to help them recover those keys, which could result in permanent loss of funds. We have an opportunity to educate users, help mitigate loss of funds, and make crypto more accessible by obfuscating complexity, but this will remain a threat.


Market fragmentation is an opportunity for Stax. Most users add 3 or more bank accounts and/or mobile wallets to Stax. Even as new digital financial services become available, they are almost always accessible via USSD, which means we can quickly support them in Stax.


Markets with dominant telcos are both threats and opportunities. They are threats insofar as dominant telcos are increasingly agile and seek to be the center of their subscribers’ digital lifestyles, from content to commerce to social. They are opportunities insofar as banks don’t offer seamless payments between themselves and the dominant telco--enter Stax.


COMPETITION

We sit at the intersection of non-custodial crypto wallets like Coinbase Wallet, Lobster, and MetaMask, and mobile banking/wallet services like GT Bank *737#, UBA Magic Banking, and M-PESA. We are unique insofar as Stax is the only money app that automates your existing accounts as opposed to being a wallet provider. We stitch all your money together in one app and make sure it’s available to you with or without a mobile data connection.


We compete directly with telcos, which own channels and cash-in/cash-out networks capable of serving the mass market. Telcos are increasingly agile and determined to evolve from telecommunications companies to digital lifestyle businesses. Telcos are competing with software companies in most categories, from content to hosting to payments to social. We can compete successfully with telcos because Stax supports multiple bank accounts and/or mobile wallets, and it will be some time before telcos embrace crypto/DeFi. No matter how dominant a telco becomes, everyone still has multiple bank accounts and/or mobile wallets, and Stax is a single place to manage everything.


GROWTH

Our 6-month objective is to achieve 1) 100k+ monthly active users and 2) a minimum of $10k/mo in fee and commission revenue. Our Growth team is composed of our Head of Growth, Senior Content and Communications Manager, and Visual Designer and is supported by 3rd party freelancers and media agencies across Africa. We plan to leverage a mix of offline and online marketing to achieve our targets. For example, we are working with a 3rd party media agency in Ghana and Nigeria to acquire new users via phone calls, micro-influencers, and offline brand representatives. We will also do paid marketing via Facebook and Google and organic marketing via our owned channels (blog, email newsletters, social media).

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About the Team

Ben Lyon, CEO

Ben is CEO and co-founder of Hover Developer Services, Inc., the company behind Stax. Previously, Ben co-founded Kopo Kopo, the first merchant aggregator in the mobile money industry, and DFS Lab, an early-stage fintech accelerator serving Africa and Asia. Ben grew up in Arkansas and enjoys spending his free time outdoors. Twitter, LinkedIn


Alex Kombo, Principal Android Engineer

I’ve always been curious about how things work, and why they work. Software development was an easy choice as it accorded the most freedom. For 7 years now, as an Android and backend engineer, I’ve been involved in building various products in media, FMCG (Fast Moving Consumer Goods) and fintech. When not actively working, I enjoy teaching and mentoring junior developers. Currently, as a Principal Android Engineer at Hover, I get to indulge in my passion; building for an inclusive world, both in Web2 and Web3. Twitter


Oluwatobi Akinpelu, Senior Android Engineer

Oluwatobi Akinpelu is passionate about making the best use of modern technology to solving customer problems and usually work with a team of talented engineers to design, build, and release iOS and Android mobile applications. With over 5 years of professional experience working in a collaborative environment, he has built robust and engaging apps used by real customers, taking into consideration performance, privacy and security. He works with Hover/Stax as Senior Android Engineer constantly building and improving on products that help users participate in an inclusive internet. Twitter

*The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on September 27, 2021 as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
* The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on the date of transfer as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)
*The USD valuation of the award in XLM is calculated using the CF Stellar Lumens-Dollar Settlement Price on December 16, 2021 as administered, maintained, and reported by the cryptocurrency index provider CF Benchmarks Ltd. (using the ticker “XLMUSD_RR”) (available at https://www.cfbenchmarks.com/indices/XLMUSD_RR)