In 2013, Chris Maurice and Justin Poiroux made over $40,000 selling bitcoin on eBay, charging buyers a 100% markup. It was going well for them until they were hit with credit card chargebacks. They tweaked their model to avoid accepting credit cards directly, effectively eliminating the risk of chargebacks.
That decision began the journey that birthed Yellow Card, where Maurice now serves as the CEO and Poiroux as the chief technology officer.
Their first idea was an in-person model that involved posting ads on Craigslist and LocalBitcoins, with the meetup location being Taco Bell outlets across the Eastern United States.
“We decided we wanted to do something more scalable, and the idea was we would put gift cards in Walmart, CVS, etc., where anyone could walk in, buy the gift card and redeem it for crypto,” Maurice said.
Yellow Card’s future would start pointing toward Africa when Maurice met a Nigerian man at a Wells Fargo in Auburn, Alabama, who was sending $200 to his family. The bank charged him $90 to send $200 to his family in Nigeria.
“I talked to the guy, ‘Hey, have you heard of bitcoin? It’s free, instant, fun and all this great stuff’,” Maurice said. “But I went home and just kept thinking about his mom; I was envisioning this elderly woman in Nigeria who probably hardly knows how to use the internet with $200 in bitcoin on her phone. All I could think is this doesn’t solve anything for anyone.”
Maurice became interested in learning as much as he could about Nigeria and its monetary system, which led him to meet Munachi Ogueke via LinkedIn. Ogueke is now Yellow Card’s chief bitcoin officer.
Yellow Card, now a Pan-African cryptocurrency exchange, with operations in 12 countries across the continent, has announced the raise of $15 million Series A funding, led by Valar Ventures, Third Prime and Castle Island Ventures.
Third Prime got a seat on the crypto company’s board.
This is the largest funding by a B2C crypto exchange on the continent.
Jack Dorsey’s Square, Coinbase Ventures and Blockchain.com Ventures also participated in the round.
Dorsey has been a staunch bitcoin supporter for years, with his companies Twitter and Square actively integrating the cryptocurrency into their products. Twitter announced on Sept. 23 that users can now tip their favorite creators with bitcoin. Dorsey also visited a few African countries in 2019, during which he learned more about Africa’s growing tech ecosystem. At the end of his tour of Africa, he tweeted: “Africa will define the future (especially the bitcoin one!)”
Jack Dorsey’s Square Joins Largest Bitcoin Investment In Africa
Yellow Card went live in Nigeria in June 2019 with the original bitcoin gift card model. It later pivoted into a crypto-based agency banking business, a model that might have been ideal for the man who sent $200 back home.
Agency banking, or agent banking, which involves the delivery of essential financial services to customers through a network of third-party agents, has been instrumental in the push for financial inclusion in Nigeria and many other African countries.
Listening to Maurice and Ogueke speak, it stands out that their primary strategy is to build an exchange that plugs into the local financial systems in the way people interact with them. This, at least in theory, reduces the difficulty to use crypto.
“Yellow Card is a very diverse product; in different countries, we have slightly different modus operandi,” Ogueke said. “But at the end of the day, the focus is still the same—we are bringing access to people that don’t have access to crypto and financial systems.”
For example, in countries that rely on cash, Yellow Card allows people to buy crypto by depositing at ATMs, bank branches or partner store networks.
In general, the company offers bespoke cash in and cash out experience depending on what’s applicable in the country.
The model of plugging into a country’s financial system natively has necessitated that Yellow Card engages in regulatory conversations more than many of its competitors.
“Yellow Card has licensing that allows us to operate in six countries, and we’re hoping to add another one very soon,” said Maurice. “On top of that, we are also registered with the financial intelligence authority, financial conduct authority or any other applicable government bodies for things like anti-money laundering reporting.”
Looking ahead, the company’s ultimate goal is to become a crypto service that allows Africans to send remittances, make payments and protect the value of their wealth against the incessant currency devaluation in many African countries. This is something that many crypto platforms do already. However, Yellow Card wants to differentiate itself by building products that doesn’t require users to understand crypto.
“The big picture is to change the way that money moves around the continent using crypto, and we want to make it easier for people to be able to just jump from their local economy into the economy of the internet and vice versa,” Maurice added.
To achieve that, Yellow Card is building an infrastructure that integrates with partners across the continent—while staying compliant, Ogueke said.
The crypto exchange intends to use its fresh $15 million funding to grow its team, launching new products and expand to more African countries.
Neither Maurice nor Ogueke were willing to share specific user counts and transaction volume.
“Our overall user growth has been 30X since the start of the Pandemic, and Uganda is currently our fastest-growing market,” according to Maurice.
A recent report on crypto adoption in Africa, published by blockchain research outfit Chainalysis, shows that the adoption rate in Africa is one of the highest globally. However, the continent’s crypto market is still the smallest, which potentially explains why big funding events for Africa crypto companies are few.
Defending his firm’s decision to lead Yellow Card’s Series A funding despite the current market reality, James Fitzgerald, a founding partner at Valar Ventures said:
“Many African countries adopted mobile phones without ever distributing landlines at scale, and many African countries adopted mobile payments without ever distributing credit and debit cards at scale,” said Fitzgerald. “We see a similar opportunity for crypto; it can enable Africans to leapfrog an entire generation of financial services technology.”
As with most things, only time will tell if Yellow Card ultimately becomes a crypto platform that delivers on its promise of helping the average person in Africa save, make payments and send remittances using crypto. Regulatory risks, especially central bank policies, are an existential threat for crypto companies that are looking to plug into local financial systems.
Yellow Card’s leadership team would know this, given that they have had to stop their agency banking model in Nigeria following the Central Bank of Nigeria’s decision to restrict financial institutions in the country from dealing with crypto exchanges.