Lee Fixels Addition leads $6 million seed round in Egyptian fintech Flash

Image credits: Fast

Promoting financial inclusion through digital payment methods is among the top priorities for governments in Africa’s largest tech ecosystems where cash is still king. Several initiatives launched by these governments have increased the number of banking citizens in their respective countries. In Egypt, for example, platforms such as Fawry and InstaPay have leveraged apex bank policies to reduce reliance on cash and are responsible for the spread of e-wallets and cards in the North African country, where 64% of Egyptians have increased l ‘adoption of digital payment solutions last year. The number of cell phone wallets has reached 46,500 per 100,000 people, according to a Mastercard report.

As e-wallets and cards dominate the digital payment landscape, Egypt’s Apex bank is keen to promote another method: contactless payments, after recently issuing regulations governing the tokenization of payment cards on mobile apps . However, with services such as Apple Pay, Google Pay and Samsung Pay allowing customers to make contactless payments with digital cards in mobile wallets using NFC (near-field communication) technology mostly absent in Africa, platforms such as Flash provide a 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 led by former Tiger Global executive Lee Fixel. Flourish Ventures and other strategic angel investors have participated in the round, which will help the startup accelerate product development and customer and business acquisition in Egypt.

Flash, having obtained 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 which is presented from a business, in-store or on delivery. This way, businesses can accept payments without needing the technical tasking integration typical of expensive NFC-enabled POS systems.

We’re eliminating the need for cash or transportation cards for our consumers and the POS machine on the merchant side, said Erik Gordon, co-founder and CEO of Flash, in an interview with TechCrunch. With QR codes, businesses don’t have to worry about integration, installation and maintenance costs and its low technology, so anyone with a camera on their phone can pay this way.

The inefficiencies that exist in a very cash-based society like Egypt are something Gordon noticed during his time at Uber as head of market for the North African country and later the MENA region. According to the CEO, 90% of Ubers rides were paid for in cash. When collected by drivers at the end of each day, this turned into piles of cash that were counted in warehouses, leading to fraud and theft.

Finding ways to stop this leak, which has hurt consumers and businesses across Uber’s product ecosystem, has been a huge headache for his team. While they came up with interim solutions, Gordon, along with co-founder Sherine Kabesh (another Uber alumnus who worked as head of marketing for the transportation giants in Egypt), decided to take on a new challenge to build a platform they thought would address the problems faced at Uber and was also online with the Egyptians 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’s obtaining license approval and partnering with banks strengthen our commitment to developing the cashless ecosystem, introducing new products and diversifying our portfolio. of digital payments, including, for example, automated bill payments and behavioral spending insights. Flash has several competitors in its product range, including Telda, Khazna and Paymob.

L-R: Erik Gordon and Sherine Kabesh (Flash co-founders and Uber alumni)

E-commerce platforms and businesses whose payment methods include pharmacies, restaurants, fast-food chains, and cash-on-delivery grocery stores are major customers of Flashs. According to one report, around 80% of goods purchased online in Egypt are paid for by cash on delivery; among other factors that determine this, consumers prefer to receive the product before paying. The problem, however, is that many companies don’t 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 collection point. While executives declined to disclose how many merchants (and end customers) are using its platform, they say the two-year-old fintech aims to serve more than 100 companies over the next 12 months. Some of his current corporate clients include Homzmart and Rabbit Mart.

Meanwhile, payments made on delivery or in-store are settled next day, which Gordon says is the best in the market. The CEO says that in addition to being cheaper than other forms of digital payment, next-day settlement gives Flash an advantage over current digital payment products, whose settlement times take longer (up to a week in the 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 doing business will be lower with Flash than something with Apple Pay because Apple and the card companies and the banks are taking a cut of the kind of direction Egypt is taking, which is similar to what happened in India where QR codes, cheaper for businesses, have multiplied and become the standard, Gordon said, further emphasizing the benefits of QR codes over NFC technology. The central bank is also opening up this instant payment network to third parties, which would also allow for instant settlement. So over the longer term, I think we can also do instant settlement and reduce transaction costs.

That’s not to say that QR code technology doesn’t have disadvantages, some of which include tampering with codes or inserting fraudulent codes over real ones to divert payments. So how does Flash avoid this? Typically, businesses on the platform are enrolled in compliance with regulations set by the CBE and Banque Misr, allowing Flash to determine if they are legitimate. Next, only Flash-generated QR codes (for businesses) will work with the Flash app (for customers), Gordon said. Any money paid to a QR code can only end up in that company’s account. Flash never touches the money; it goes directly from our partner bank to the corporate bank account, the CEO noted. So if someone stole a QR code, it wouldn’t make sense because the money paid could only go to the company.

Andrew Miskiewicz, an investor at Addition, looking at why the New York-based firm backed Flash, said fintech is transforming the payment landscape in Egypt, simplifying the complex transactional process for consumers and businesses with a secure application and easy to use. The fintech, which claims to process 50,000 transactions, is closing in on more than 10 million Egyptian pounds (~$324,000) in cumulative transaction value. At the same time, its revenue, derived from charging companies a processing fee, is growing 30 percent month-on-month, Gordon said in the interview.