 Thanks to you all for joining me today as I discuss product market fit from a FinTech perspective, looking back in time. I'm Leo Hurwitz, Senior Product Manager at Microsoft. This presentation is given in my personal capacity and is not related to work I currently perform at Microsoft. Let's start with an intro. In about 2007, I joined a company who worked on FinTech in South Africa. They revolutionized the ATM, credit card, and prepaid card space in South Africa. It was a gutsy company, often at the front of innovation, from self-cached ATMs to prepaid gift cards and independent credit card services. Little did I know that this FinTech journey would go from South Africa all the way to the Middle East where I am today. The anecdotes provided in the next 15 minutes or so will give a view to products that fit certain markets yet failed in others. I will also provide some evidence that products which you think may have started in one place may have actually had their seeds elsewhere. This journey will take us through South Africa, Israel, Kenya, the USA, and beyond. I hope you enjoy the ride. In South Africa, due to the median salary being particularly low, airtime or contracts for airtime and contracts for data are not accessible for the majority of the population. The Gini coefficient, which is a measure of income inequality in South Africa is one of the worst in the world. This is due in large part to historical reasons where the vast majority of the population were excluded from the broader economy based on their skin color. Due to this low median salary, instead, what they have are vouchers that can be purchased with provide prepaid airtime. This eliminates the need to budget on a contract and prove financial means to qualify for a contract. Airtime can be purchased by cash or card at a certain number of outlets. This airtime is printed on slips or receipts with a code and by using USSD prompts, the user is able to load airtime to their account for immediate use. For those unfamiliar with USSD, USSD is a method for communicating with the telecoms provider servers without needing a smartphone. In South Africa, this mode of use is common due to the relative expense of smartphones. Back in 2008, more or less, I was working at a credit card company and we decided to diversify into the airtime space. We thought it was a logical step as we had the credit card machine in place which could print receipts and we could easily develop a system to store vouchers and then pull them down to the terminal for printing a time of purchase. We developed the system with gusto and rolled out the feature at incredible pace. We engaged marketing teams, legal teams, formed partnerships to supply the vouchers to us wholesale and created new menu options on old school credit card machines. We made sure that our voucher store was fully stocked and that our devices were able to quickly and efficiently pull a voucher down on demand. The benefits to the merchants were clear too. They could sell airtime for additional revenue and increase foot traffic in the store which would invariably lead to other sales as well. We were ready to go. And at first, the results were promising. But we couldn't keep up with the pace of signups where the captive audience with people who owned our credit card machines and so sales came easily. In addition, sales of airtime were going up, orders for our machines were increasing and stores that had one machine suddenly started requiring a second to keep up with demand. But then, unforeseen issues started to arise. As word spread that our stores were selling airtime, people started buying. The issue was that people were coming to buy just airtime. Hues formed for the airtime, but people trying to buy large ticket items were stuck behind people buying a few dollars worth of airtime at a time. Eventually, after waiting in line, people gave up and went elsewhere or complained to management about the wait. Imagine the scene. You've bought expensive food or clothing or a beauty product and in front of you is a line of people spending less than a dollar at a time, each taking a minute or so to transact. Slowly, the voucher distribution system started fading as cancellations began trickling in. This wasn't sustainable. We tried to pivot going to other types of merchants on the lower income brackets spectrum and in other areas, but in the end, this failed dismally. The lesson we learned from this is that often, although product market fit can seem to be perfect, there are external factors which could impact an otherwise sound plan. Our next case study is the peer to peer money transfer markets. I'm sure most of you have heard of Zell and Venmo. These are apps used for transferring funds between users with the use of cell phone apps in the USA. What many people don't know is that a forerunner to this existed in Africa that started as far back as 2007. Impeza, the M stands for mobile and Impeza Impeza is so healing for money is a mobile phone based money transfer service payments and microfinancing service. It was launched in 2007 by the photo phone group and Safari come the largest mobile group network operator in Kenya. Impeza allows users to deposit, withdraw, transfer money, pay for goods and services and access credit and savings, all with a simple mobile device. There's no need for fancy apps or even a smartphone. The service allows users to deposit money into an account stored on their cell phones to send balances using pin secured SMS text messages to other users, including sellers of goods and services and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service. Impeza is a branchless banking service and customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agents. Impeza spread quickly and by 2010 have become the most successful mobile phone based financial service in the developing world. By 2012, a stock of about 17 million Impeza accounts had been registered in Kenya. By June 2016, a total of about 7 million Impeza accounts had been opened in Tanzania by Vodacom. The service has been lauded for giving millions of people across access to the formal financial system and for reducing crime and otherwise largely based cash based society. So how did it work in South Africa? In September 2010, Vodacom and Nedbank announced the launch of the service in South Africa where they were estimated to be more than 13 million economically active people without a bank account. Impeza was slow to gain a foothold into South African market compared to Vodacom's projections that it would sign up 10 million users in the following three years. By May 2011, it had only registered approximately 100,000 customers. The gap between expectations for Impeza's performance and its actual performance can be partly attributed to differences between the Kenyan and South African markets, including the banking regulations at the time of Impeza's launch in each country. Despite efforts as of March 2015, Impeza still struggled to grow its customer base. South Africa's lag behind Tanzania and Kenya with only about 1 million subscribers. On further investigation, this came as no surprise as South Africa is well known for being a head of financial institutions globally in terms of maturity and technological innovation. This may be interesting to hear considering the low means of the vast majority of the population, but as an anecdote, checks have not been accepted in South Africa for years and bank to bank transfers are common across all banks. According to Genesis analytics, 70% of South Africans are banks, meaning that they have at least one bank account with an established financial institution which have their own banking products which directly compete with the Impeza offering. This is in contrast to Kenya and other African countries which have much lower penetration. Taking this all into account, even though there were a number of similarities between the markets in Kenya and South Africa, the product market was not right in South Africa. Now a little about impulse. Square was founded in 2009 by Jack Dorsey and Jim McKelvie. The Square Reader was the firm's first product. It accepted credit card payments by connecting to mobile phones, device audio jack. The original version consisted of a simple read head directly wired to standard three and a half millimeter audio jack through which unencrypted analog card information was fed to smartphones for amplification and digitization. Even though it wasn't secure at the time, this innovation started a revolution. Small merchants throughout the USA were able for the first time to accept credit cards as a form of payment. This reverberated around the world and we in South Africa at the time followed suit and introduced an impulse offering. While the concept was the same, due to the fact that South Africa had already started planning for the EMV shift, our devices connected via Bluetooth and accepted EMV or chip and pin cards through a different card reader. Following our release, the banks were quick to follow as well as a major competitor called the Open. Today, South Africa has hundreds of thousands of micro merchants for whom this is a great solution to accepting their card payments. The merchant in impulse in South Africa was a game changer. Everywhere you went, you could now pay with card and everyone everywhere was able to accept card payments. Even buying a newspaper on the side of the road or apples in a market, the merchant was now accepting this form of payment. The demand for this product kept growing and some banks had been caught flat footed, even approached us to white label the product for them. We had struck oil. We were offering in an in demand service with reports fraud prevention and portals with easy access and viewing of transactions. It was about this time that I decided to relocate my family and I packed up our bags, our house and our lives and we relocated to Israel in the Middle East. Here, impulse was also taking off and it made sense. There were plenty of micro merchants with stalls at markets or similar schools or smaller schools. Due to my experience in the market in South Africa, I was hired by a company here to help with their credit card business and the impulse offering. After a few months of working on the product, it was clear there was something that wasn't working. The market was stagnating. Why? Well, I'm not 100% certain, but I can only surmises due to the following. In Israel, the population size and addressable market are too small. Israel has about 10 million citizens in total. Two, the cost of owning a traditional credit card machine is low. So the cost of saving on an impulse terminal is limited. Three, unlike in South Africa, the vast majority of Israel is banks and have access to smartphones, so people pay with P2P applications with ease. And four, Israel's fraud cases are very low, meaning there's a high trust factor in payments, reducing the need for a secure payment mechanism with the card. People again fall back on P2P applications for their businesses. We then pivoted to offer gift cards, gateway services and other financial services while keeping the impulse offering as a value add. As can be seen, what worked well in the USA due to demand and share population size and South Africa due to informal sector being so large was not a fit for the market in Israel. So, as we close out, there are three takeaways from our presentation today. One, innovation is everywhere, as can be seen with EMPESA. A startup in Africa, which is not often seen as the hotbed of innovation, revolutionized payments in 10 countries. It is still going strong and is a great fit for the market where smartphone penetration is low and banking access is limited. Two, innovation doesn't work everywhere, as we saw with EMPESA and EMPOS. What seems to work in one place won't work elsewhere necessarily. EMPESA failed in South Africa and EMPOS is struggling along in Israel, even though at first glance, the market seemed perfect fits for these products. And three, product market fit has an element of art, as can be seen with the EVD. Even the best research solutions may fall at the unseen hurdle, like foot traffic for low cost items being higher than the demand for higher value ticket items. Thanks so much for joining today. It's been a pleasure presenting to you. And should you want to reach out, these are my contact details. I look forward to hearing from you.