How Wave is surfing the economic slump

How Wave is surfing the economic slump

Wave, a leading mobile money service, gained a household name in francophone West Africa four years ago for two reasons: shattering monopoly and reducing the mobile money pricing structure by 80 percent in Senegal. Following its $200 million fundraising last year, it became the first unicorn from the Francophone Africa region, gaining prominence in the rest of the world.

But none of this would have been possible without a slew of recurring obstacles. In 2018, the fintech startup began in Senegal, charging a 1% transaction fee on transfers while providing free withdrawals, deposits, and bill payments (water, airtime, and electricity). The low fee/free concept appeared to be a false client acquisition tactic that would expire naturally. Before Wave’s arrival, telecoms firms such as Orange, whose mobile money business Orange Money controlled the market, charged 6-10% transaction fees. Orange, as expected, frowned at Wave’s foreign proposal, calling it “a risky strategy that would damage the country’s economic fiber.”

Orange’s managing director, Ndiaye Alioune, stated in a previous interview that Wave’s strategy resulted in Orange Money’s network of distributors, who used to share half of the telecom company’s turnover, losing 50% of their income. This also meant the loss of more than 20,000 jobs in Senegal and could have more damage in the future.

However, when they transferred in large numbers to Wave, the users had different ideas. After all, Wave was a market hero who had arrived to provide consumers with more affordable options. Wave’s innovative business model, which prohibits charging users for cash withdrawals, would quickly become clear that the entire mobile money industry must adopt it to remain competitive.

Wave’s innovative business strategy was thus supported and validated by the market. Since then, the company has expanded into Cote d’Ivoire and acquired millions of subscribers. Following the implementation of its effective strategy, the company expanded into Mali.

Orange CEO Alioune stated that Wave’s business model is innovative because venture capital investors fund it with little regard for immediate financial success. They invest in startups with the expectation that they will be able to dominate the industry, exit, and recoup 10 to 15 times their initial investment, according to the expert. It employs the same business strategy as Amazon, which has spent more than a decade burning money to drive out competitors.

True, the considerable venture money propelled Wave’s ambition to new heights, but it also gave it the power to compete seriously. What would happen to the francophone unicorn if significant VC funding dried up due to the global economic downturn? The solution is simple: cut expenses, find alternative funding, or do both. Then Wave attacked both of them. It cut costs by abandoning development plans, laying off employees, and obtaining a $92 million debt fund from the International Finance Corporation (IFC) and other major lenders.

The comparison of Amazon and Wave is correct. They are the true market leaders because of their long-term pricing strategy, large inventory, and significant capital investments in both firms.

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