Application aimed to be a better payment option, not only for Africans but also for other nations, went bankrupt at the beginning of 2019.
The number of unbanked people in Africa is still significant. It is estimated that about 1.7 billion people in developing countries like Nigeria, Kenya, Zimbabwe, and Tanzania, still don’t own any bank account. What’s more, World Bank Global Findex informs that 62% of sub-Saharan Africans operate their funds only in cash. This situation is even harder for emigrants traveling from one African country to another. If they want to send some money to their family staying in their homeland, they must be prepared to pay a huge fee. Especially when one or both sides don’t own a bank account, in that case, the transfer goes like a shipment, by a courier.
Wala aimed to bring an opportunity to transfer money for underbanked citizens, as well as for those who have a bank account but still pay high commissions for using it.
Wala, to good to be true?
The blockchain-powered financial services platform aimed to cut off all the restraints connected with the banking operations. If it comes to transaction costs, Wala’s creators raised money to cover the expenses through selling “dala” tokens in an ICO (Initial Coin Offering) in December two years ago. Its holders also made some capital investments, and the final amount of the collection was $2.2 million.
Wala offered services across a peer-to-peer network based on the Ethereum blockchain, and it was functioning as a factor between this technology and dala users. Based on transactions with much lower fees than African banks, it turned out to be a good alternative for them.
Generated cost via transfer was that low because Wala was using technology, similar to bitcoin’s light network, called mircroraiden. This payment channel framework allows developers, working on the decentralized application, to establish a channel receiving only payment. After receiving payments from users via this channel, Wala grouped them and located them on the Ethereum blockchain.
Thanks to gathering about 100,000 merchants, users were not only able to transfer money but also buy airtime or pay bills. Wala was meant to provide all the necessary services and be as self-governing as it could. This solution was very welcomed by crypto enthusiasts who would like crypto industry to take over the traditional economy one day.
How did blockchain-based app fail?
Application collapsed at the beginning of 2019, which has resulted in the dismissal of its employees. From the official reasons, given by CEO Tricia Martinez, it turned out that Wala was negatively influenced by the weak infrastructure of Africa. When it comes to a particular country, in Uganda the app suffered from burdensome regulations and poor internet base. Some sources connected with the company informed that Tricia Martinez spent some part of the money from Wala’s ICO on traveling and luxury accommodations.
It is also known that the real number of Wala users is much lower than Martinez claimed. One of the sources says that only a couple of hundred users were operating the app in the way it was created. It appeared that some people were setting up more than just one wallet to receive a small token reward. What’s more, even with grouping users with multiple accounts, the number of 150.000 given by Martinez is still inflated.
The information about closing Wala wasn’t spread through their consumers. It is mainly because most of their users don’t have a permanent Internet connection. This lack of information led to the situation where around 300 users were unable to recover their funds due to non functioning wallets.
Is it possible for African financial market to get better?
It is hard to give an unambiguous opinion about this startup. Many newly established businesses have crashed. In general plans don’t always work out. Wala was also confronted with difficult conditions and could not cope with the weak African infrastructure and the lack of Internet among its users.
Unfortunately, Wala lost the battle against the same obstacles banks are affected by. The app was created with good intentions, but until it could find another way to gain resources for development, there was no way for it to exist. The good side of this case is that future startups can learn more from Wala’s mistakes.
There is hope for Africa to bring more financial facilities because there are still people who are eager to modernize it. It also seems that the problem is complex. Unless African infrastructure gets better, many startups like Wala will fail because of problems generated by the conditions they meet.