Stax gets $2.2 million for its app that lets Africans transact via automated USSD codes – TechCrunch

Staxa startup that enables Africans to buy airtime, send and request money, and transfer funds between accounts via automated USSD codes, has raised a 2.2 million extension round of dollars.

US-based venture capital firms World Within Ventures and Noemis Ventures co-led the round, joining Anthemis Group, Orange DAO, 500 Startups, Garuda Ventures and GAN Ventures on the cap table.

In a market where internet-based banking services can reach 300 million subscribers on the continent, USSD technology, mainly offline and used primarily by feature phones, surpasses it with 850 million connections. This technology allows people to send and receive money, pay bills and buy data offline, and reports indicate that more than 90% of digital transactions in sub-Saharan Africa are conducted on its rails..

Telecom operators and banks dominate this mass market, providing the technological infrastructure that ease these code-based transactions. Typicallyhow it works is that users compose a code for a service, for example *737# from GTBankthen follow a prompt asking if they want to send or receive money, pay bills, or check their account balance, among other features, and the telco or bank acts on that request.

But USSD comes with its unique challenges. Take Nigeria, for example, where the average banked customer has three to five bank accounts and whereWhile some people use banking apps or fintech platforms to transact online, others rely on USSD codes. For the latter, memorizing one or two codes is one thing; cramming about five is a different ballgame.

Enter Stax. The company, founded by Ben Lyons, Jess Shoreland and David Kutalekget all these codes from various accounts bundled into one app that users can access offline, allowing them to transact without dialing a USSD code. The game here for Stax is to improve the user experience.

“Stax is all your bank accounts, mobile walletsrypto in a single app that works without mobile data. What was trying to answer is to leverage this recognition that you have around 300 million smartphone owners across Africa, who have a strong preference to transact via USSD over apps because they keep their mobile data off the Lyon CEO told TechCrunch..

“And so what we do is build for them, because despite their smartphone, they want to be offline. And it’s really the sweet spot where Stax comes out.

Stax describes itself as a remote team with employees working in the US, UK, Nigeria and Kenya. Its platform is active in 10 African markets; However, he fully supports six countries – Kenya, Uganda, Tanzania, Nigeria, Ghana and Ethiopia, where over 100 banks and mobile money accounts are available to customers.

The platform came out of beta last May. It had less than 3,000 monthly active users in its first month, but has since become to acquire over 170,000 customers, of which only 40,000 are active monthly users.

While the USSD is greeted for its ease of use and offline functionality, experts have pointed out over the years that poor technology validation can lead to hacker attacks tending to leak sensitive information.

Lyon recognizes this problem and draws attention to the lack of unified data regulation, which he believes is somewhat responsible for these problems. “For any company that wants to go pan-African, then it will be intensely difficult to comply with all these local regulations. And so my take on that is the only way to win this game is to play a different game,” he said.

When users download Stax, they are only required to allow app permissions to send and view messages, access contacts, and make and manage phone calls. According to Lyon, these authorizations do not disclose the personal information of customers. Thus, in case of hacking, for example, hackers cannot harm users, do anything with stolen data, or move money.

“We would like to know as little as possible about our users individually; we do not want to know their personal and identifiable data. So fair saying this is a utility app for your money, no ads or cross-selling, we will never sell your data, we will never try to restrict ads to you,” explained the CEO on how Stax is combating this situation.

Cross-selling users with data-driven insights would have presented Stax with an opportunity to get advertising dollars. But having designed its app for a different purpose, the company – which currently generates no revenue – intends to charge commissions to partner brands that provide Additional services to its users all along the line.

Prior to Stax, Lyon, Shorland Product Manager and CTO Kutalek, met in Kenya while running different fintech-related businesses. Mobile money is used more in Kenya than anywhere else in the world. So when it came to starting a new project, they thought about the technology that powers it and saw an opportunity to optimize USSD rails for future use cases.

“We recognized that almost all digital financial services on the continent use USSD as their primary channel. So we set off initially with the question “how can we make the USSD programmable and how can we open it so that we can effectively some kind of screenshot of USSD services to create new experiences on it? said Lyon.

The company’s first iteration was Hover. It was an API platform that allowed developers to build applications on USSD rails. Two years later, after the platform failed to generate enough revenue from developers, the team opted to go vertical to what it is today, Stax, a universal money app on USSD rails for African users. The parent company remains Hover.

Stax plans to include several features on its journey, including a self-custody crypto wallet starting with USDC so users can purchase airtime when dialing non-financial codes.. Startup expansion allows Stax to expand these features and expand its services from 10 African countries to 50 when it closes its Series A.

Lyon said Stax also envisions an emerging market where it will expand beyond Africa into other markets where USSD is prevalent, such as South and Southeast Asia. But that will come much later.

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