Tunisian post tests African digital currency market

Tunisia is the smallest North African country, with a population of 11 million. The world bank considers it an upper-middle-income country, with GDP of approximately $48.61 billion in 2014.

The World Bank also sees significant demand for financial services from both private individuals and businesses, especially micro business and very small enterprises, and it is clear that supply has not adapted to meet existing demand. Extensive research by the Bank revealed that Tunisians “have active financial lives, yet are forced to resort to informal financial services that may be risky and costly.”

The 2014 Findex study shows that 16% of adults have borrowed from family or friends in the last 12 months, while only 8% of adults have borrowed from a formal financial institution. The study also shows that only 27% of adults reported having an account with a formal financial institution.

An independent 2015 study from the World Bank and the Center of Arab Woman for Training and Research found that two-thirds of adults are excluded from, or underserved by, the formal financial sector. The study also finds that 81% of Tunisians are interested and seeking products in microsavings, which are currently unavailable in Tunisia.

For basic banking services, the Tunisian banking market has 21 commercial banks. Tunisians can also open an account at the Tunisian National Post Office which is a popular option.

La Poste Tunisienne, or The Post, is a public industrial and commercial enterprise, and the only non-bank institution authorized to collect savings. The company also provides a range of payment options in Tunisia, although it is not authorized to grant credit. Postal current accounts have existed since 1918 whereas the national savings bank was created in 1956.

"La Poste is a very important and trusted institution and is at the heart of financial inclusion efforts in Tunisia. At La Poste we are on a transformation journey to modernize our services with innovative technologies and power the digital economy. Digital, Mobile, and Internet, are all key components in this transformation. Monetas and Digitus help us to bring these ingredients to the table."
— – M. Moez Chakchouk, La Poste Tunisienne CEO

With 1,051 branches (offices and mobile branches) in 2014, the World Bank states that the postal network is almost as extensive as that of the entire banking sector, but far more evenly spread across Tunisia. This network makes it a key player when it comes to financial inclusion.

While Findex shows that 90% of Tunisians who have a bank account are actually banked with La Poste, the World Bank also states that over 50% of postal accounts are inactive (no movement for 2 years). Nevertheless, with its reasonable fees and rates for the low-income population, the Post still has a 45% market share in terms of account numbers.

In October, La Poste partnered with Swiss smart contract platform Monetas and Tunisian technology startup DigitUs.

“We are delighted to be working in partnership with the Tunisian Government, National Post, and DigitUs to increase financial inclusion with an open mobile money platform that is able to operate across mobile networks. This is an important first step towards a freer and more prosperous world.”
— – Johan Gevers, Monetas CEO

Using the Monetas platform, a La Poste app will offer its clients nationwide access to instant, secure, and affordable merchant payments, and remittances. Customers can make instant mobile money transfer using eDinar, pay for goods and services in person and online, pay bills, as well as manager government identification documents.

“The Tunisian Post is the backbone of the current payment infrastructure and together with Digitus, will address and acquire customers into the ecosystem, initially transitioning the existing 600,000 users of national digital eCurrency (eDinar) onto the new technology after due diligence is complete.”
— – Gevers

The partnership with Monetas should boost the use of eDinar, which is one of the challenges La Poste faces as outlined by a case study by the Universal Postal Union (UPU). In its report, UPU explained that despite the success of La Poste’s efforts to increase mobile service customers, such as MobiFlouss and MobiDinar, the number of users of mobile services is still limited.

The increase in mobile service usage will also reduce the disadvantages that La Poste has compared to banks. As outlined by the World Bank, La Poste has only 178 ATMs, a quarter of its branches are not connected to a central server, relatively limited opening hours, and minimum payment amounts, the Post does not yet offer easy-to-use micro-savings solutions (regular withdrawals and deposits of very small amounts) or payment means.

The pilot program for the Monetas eDinar began in early October, with a plan to be completed in March. If success, the Tunisian Post will then launch it nationwide, allowing any Tunisian to start using the new service. “The Monetas deployment in Tunisia is the first application for a full ecosystem of digital payments,” Gevers said.

According to Monetas, the platform does not require any infrastructure upgrades for vendors, and will offer the lowest fees of any network available to Tunisians.

While the maximum fee is set at 1 dinar, typical fees will be negligible, “less than a fraction of a dinar, and in most cases fees are paid by merchants,” Gevers confirmed in a forum interview. “In the Monetas system, transaction costs will never exceed 0.9% of transaction or $0.30, whichever is less. This allows individuals to remain within the digital ecosystem, avoiding a costly exit into cash.”

In an interview with Techmoran, Gevers cites financial inclusion or “Banking the world’s Unbanked” as the primary reason for choosing Tunisia. In a country of about 11 Million, “more than 3 million adults in Tunisia lack access to basic financial services.” Gevers went on to explain how Tunisians are “forced to resort to informal financial services that may be risky and costly.” While other African countries also have a high percentage of unbanked population and high mobile usage, Gevers believes that timing is “just right” in Tunisia for the project to take off quickly.

An independent report by the GSM Association (GSMA) finds that the number of registered mobile money accounts globally grew to almost 300 million in 2014, representing only represent 8% of mobile connections in the markets where mobile money services are available. “There is still huge potential for future growth,” the report reads.

“The primary limiting factor to mobile money services currently is that costs are highest where transaction number is greatest; 80% of transactions in Kenya are under $5. After money is received on M-Pesa, people cash out. To go to the shop, pay for a taxi, or complete any transaction under $5 is prohibitively expensive.”
— – Gevers

“Nearly ¾ of the population of Kenya has a M-Pesa account, despite this, 99% of transactions are still executed in cash adding friction to transactions and stifling economic growth,” he claims, and Monetas has already approached twelve other African markets with the platform.

"We’re working on rollouts in additional countries in Africa and Eastern Europe. By mid-2016, we expect to cover half of Africa, connecting 500 million unbanked users to the global economy… And potentially some early forays into Latin America and Asia as well… And a global digital gold currency later in 2016.”
— – Gevers

The Monetas platform uses a cryptographically secured digital notary to enable all kinds of financial and legal transactions, public or private, worldwide. Institutions, individuals, and businesses can conduct transactions with all types of trade instruments, including all national and digital currencies. "The Monetas platform executes transactions about 1,000 times faster and 1,000,000 times cheaper than the Bitcoin network,” Gevers states. “And we have no upper limit for transactions per second.”

“Our technology is so efficient that we’ve calculated we can run the entire world’s transactions – literally trillions of transactions – on a single tower of servers that’s the size of a large refrigerator… By integrating blockchains with the Monetas system, they can offer both secure storage of digital assets, and secure, extremely fast, extremely cheap trading of those assets with unlimited scalability. This way, you have a system that does not need to compromise on secure storage or efficient trading.”
— – Gevers

Gevers also states that there are no plans for bitcoins to be traded on the Monetas platform in the near future, "we are integrating the Monetas platform with the Bitcoin blockchain in 2016, thereby adding crucial functionality to the Bitcoin ecosystem.” He is also personally invested in the digital currency, with “the vast majority” of his non-Monetas assets in bitcoin.

"Our system is open and works with all types of currencies, instruments, devices, networks, etc. Our initial focus is on traditional currencies, because that’s what the vast majority of people still use today. However, we will roll out commodity currencies (gold, etc.) and cryptocurrencies on our platform as well. In fact, Bitcoin integration is coming in 2016.”
— – Gevers