African financial institutions typically scale their solutions using a combination of local and foreign technology. Appzone is one of the unique local fintech software providers for banks and fintechs, providing better pricing and flexibility.
For over a decade, Nigeria’s staple Appzone has acted as an enabler (in payment rails and core infrastructure) in the banking and payments sector, building custom software and software-as-a-service products for over 18 commercial banks and over 450 microfinance banks across Africa, including Ghana and Kenya.
In 2022, the fintech software provider, founded by Emeka Emetarom, Obi Emetarom and Wale Onawunmi, decided to self-innovate by delving into blockchain technology and integrating it with legacy banking and payment systems. Hence, it was renamed to Zone, a licensed blockchain-enabled payments infrastructure company – and spun off its initial banking-as-a-service business into a separate standalone company, Qore. Today, Zone, its blockchain network that enables payments and acceptance of digital currencies, announces that it has raised $8.5 million in a first round.
Zone’s idea is simple: It recognizes that Africa’s current payment infrastructure may not be suitable for the transition to a cashless future (which may take some time). Therefore, fintech is developing an interoperable payment infrastructure using blockchain technology – known for its ability to scale infinitely – to connect banks and fintech companies, facilitating the flow of transactions without intermediaries.
In an interview with TechCrunch, CEO Obi Emetarom says Zone is the first controlled blockchain network for payments in Africa and has already signed up more than 15 of the continent’s largest banks. It currently processes domestic transactions for seven of these banks through ATM channels, one of the many payment channels through which transactions originate in Nigeria, including POS, funds transfer, online and direct debit.
According to the CEO, eight banks are in various stages of implementation as onboarding processes can take up to six months due to internal processes such as setting up staging environments, testing and getting management approvals.
Zone, prior to its launch, received a switching license from the Central Bank of Nigeria (CBN), the country’s leading bank, leveraging Nigeria main switch (Nigeria Inter-bank Settlement System), which is responsible for interoperability between various players in the country’s financial system and the rapid movement of money between bank accounts.
Since the central switch mainly handles the switching of funds transfer, some fintechs such as Moniepoint and OPay have used direct card routing (DCR) to establish direct connections with card issuers, leading to faster transactions with fewer failures for POS transactions, which is the next of the Zone I gather.
“We’re introducing and releasing some new use cases this year. The ATM use case didn’t incorporate fintechs because they don’t develop ATMs,” Emetarom said. “But with POS, that brings a use case that fintechs are very familiar with – and for that, we’re also bringing in some of the big fintechs in the country.”
Emetarom explains that Zone aims to empower banks and fintechs to replicate the achievements of OPay and Moniepoint without the need for individual integrations. He said Zone already has these integrations and operates as a licensed switch, thus avoiding the risk of breaching regulatory guidelines. The architecture of the blockchain, he added, is such that when a fintech connects to the Zone network, it is provided with a gateway that serves as an environment through which its transactions are sent directly to the bank, to the issuer for authorization and back.
“The bank or fintech becomes a switch because they now have something in their environment that connects them to all the destinations they need to reach instead of going through a third-party switch,” notes the CEO. “So reliability increases significantly because we don’t have any scenario where they have to rely on a middleman and the fintech has control of their switch because it’s in their environment on their servers or in the cloud.”
The Zone team
Emetarom stated that reconciliation and direct settlement are other upcoming applications of Zone’s blockchain technology.
For example, when a transaction fails and a customer is charged, there is a lengthy reconciliation process before a refund is issued, often taking days or weeks. Zone’s decentralized architecture will enable automatic reconciliation and adjustment when discrepancies occur, leading to immediate refunds to customers without the need to report the issue. In addition, its blockchain technology should provide transparency, allowing the terminal and the issuer full visibility of the transaction status.
Similarly, merchants face settlement delays when receiving funds. With Zone’s instant settlement feature, funds are delivered to the merchant’s bank immediately after the transaction, addressing liquidity challenges and ensuring smoother operations.
“Decentralized routing improves reliability and scalability and provides automated reconciliation to resolve chargeback fraud. With Zone, we can harmonize our transaction processing and settlement system, which will be supported by a settlement token,” the CEO said, adding that these functions will be developed pending approval from the CBN.
The payment switch and financial network landscape in Africa is typically based on consortiums of banks to own the infrastructure. Private initiatives have met with mixed success, with few gaining significant traction outside of traditional banking. Zone, which is one of them, stands out because of its founders who are banking industry veterans, live processing client base and central bank licensing.
So far, Zone has processed transactions at more than 6,000 ATMs for more than 10 million cardholders. Within three months of launching the ATM wallet, the fintech processed over $1 million.
This attraction has gathered excitement among its investors. Flourish Ventures, a global fund focused on financial technology, and TLcom Capital, a pan-African venture capital fund, co-led the funding round, which Zone says will help it launch additional operations and expand its network coverage to other payment channels. catering to a wider range of customers. Additionally, the company, which charges no implementation fees, hopes to reduce the time it takes to onboard its customers (fintechs and banks) in the coming months.
TLcom Capital’s Ido Sum said Zone’s Blockchain technology solves a critical payment system challenge and can potentially reduce costs for hundreds of millions of consumers and businesses that rely on digital payments in Africa every day, hence his company’s support.
“For the first time in Africa, Zone’s technology enables direct communication between participants in the payments ecosystem. We believe this is a fundamental leap that will enable customers to experience a whole new standard of reliability, speed and cost efficiency across ATMs, POS machines and online,” added Ameya Upadhyay, Partner at Flourish Ventures. “We are excited by the potential for Zone’s technology to be replicated across borders to drive payments innovation globally.”
