Wala As A Great Case Study For Africa’s Crypto Market Situation

News, Opinion | October 24, 2019 By:

Crypto-based trading is one of the most lucrative undertakings in today’s financial world. However, it takes a lot of knowledge and experience to create a financial model that can work for both providers and customers.

Wala was a crypto-based e-wallet company that operated in Africa, mainly in Uganda. Its financial model was so explosive that it quickly gained traction in the African consumer market. 

But after this promising start in 2017, the company went immediately broke at the dawn of 2019, laying off its whole staff and closing down the app in February.

In this article, we’re going to take a look at what the company’s business model was and how it contributed to its demise.

An emerging app on an emerging market

Africa is rising in the crypto market. The brokers, who offer diversified trading and other financial services are quickly emerging on the continent. Not only do they feature competitive trading and financing conditions, but they also work to educate the African population in crypto financing, as this Trading Bitcoin in South Africa tries to achieve.

Wala was yet another financial company that was trying to reach the underbanked population. These people are getting their income in cash and have never had bank accounts.

Using the Wala app, Africans were able to conduct many financial operations. Plus, there were no boundaries to account for. For example, a man in South Africa could pay his mother’s power bills in Uganda using a cryptocurrency.

The company has quickly gained popularity, with its own estimates of 150,000 users. However, after a short-lived success, the company quickly died out of its fame.

Wala’s CEO Tricia Martinez published a blog post, explaining some of the main reasons for the company’s demise. According to her, Africa’s poor infrastructure was the main culprit in bankrupting Wala. 

Wala’s co-founder, Samer Saab also claims that the external reasons are to blame here. Saab thinks that slow internet speeds and hefty Ugandan regulations limited the possibilities for the company.

There’s more to Wala’s demise than just ‘poor infrastructure’

However, anonymous sources have quite different opinions regarding the issue. Namely, three sources are claiming that insufficient revenue and faulty business model were the main reasons why the company couldn’t really go on like that.

Initial coin offerings

In an anonymous interview with CoinDesk, these sources have claimed that Wala’s CEO, Martinez was spending too much money on incremental offerings and accommodations that, at the end of the day, wore the whole investment base down.

The sources claim that the initial coin offering which was initiated right from the beginning in 2017, had a budget of $1.2 million. In addition, too much money was spent on accommodation and travel costs, as well as fancy, pricey hotel apartments in Cape Town.

As a result, Wala quickly used up its initial $1 million investment base collected earlier. 

The insufficient revenue-yielding business model

In addition to that, the company had a business model that didn’t quite yield sufficient returns. As we’ve mentioned above, Wala focused on initial coin offerings and accommodation costs, while didn’t account for the revenue-producing strategies.

Even though Martinez has claimed the company had around 150,000 users, the anonymous whistleblowers have revealed that the number was actually way smaller. The actual number of users revolved around 2,000 and even from those 2,000, many of them had multiple accounts with separate e-wallets.

As was expected, these users created numerous accounts to receive an initial coin reward. This way, only a handful of users were actually using the platform, instead of registering on it for rewarding purposes. In fact, the source said that only several hundred people have used the app for its intended purposes.

Besides, at the moment of the shutdown, there were around 300 accounts who didn’t get notified and as a result, got their wallets defunct. It also took their funds which revolved somewhere around 20 dollars.

According to Martinez’s tweet of June 23, there are still hopes of reviving the company. Martinez claims that they’re raising money for recapitalization and preparing for a relaunch with a much more sustainable economic model.

A precedent for the start-up community

Overall, the case of Wala goes to show that just by concentrating on incremental customer rewards (initial coin offerings) and discarding the economic model for offsetting the costs associated with tokens, the start-ups are doomed for bankruptcy.

Even though those tokens appealed to the customers, enabling the company to gain traction, it proved insufficient and even damaging to the revenue base.

With the new, resuscitated Wala coming up, let’s hope that their business model puts more emphasis on yielding returns rather than just satisfying the customers with small gifts.