Stafford Masie, one of South Africa’s most innovative players in the IT space has done it again with his new brainchild, the Blade device. He joined Alec Hogg in studio to talk about changing the way people do business through practical entrepreneurial innovations as needs-based products drive development. Masie’s products have started locally but are quickly going global. -LF
ALEC HOGG: This special podcast is brought to you by Sanlam Investments. Well, last time we spoke with Stafford Masie from Thumbzup, he was in Australia.
STAFFORD MASIE: Yes, we were launching the Pebble over there.
ALEC HOGG: You didn’t have to get up as early this morning, though. It’s an amazing that you have in your hand, that you’re showing us. It’s a bit difficult to explain it on audio, but we’ll put the pictures with the transcript. It does seem to be quite a shift though, from the Pebble.
STAFFORD MASIE: Well, when we launched the Pebble… The Pebble’s a great product. It’s a cheap product. It’s an incredibly, functional product but the Pebble requires you to plug it in. From a mobile sales perspective, it requires you to plug it in through a 3.5mm audio jack of your phone or your tablet, to work.
ALEC HOGG: It just plugs straight into a cellphone, which is what I thought was its great advantage.
STAFFORD MASIE: It is.
ALEC HOGG: The machine you have now looks like an oversized cellphone, and not a little Pebble device.
STAFFORD MASIE: If you take a look at the challenges associated with the Pebble, there are quite a few. 1. Expecting merchants out there, for example, the plumber and the electrician who wants to do card acceptance… The Pebble’s a great product, but we’re assuming that the merchant has an iPhone or that the merchant has a Smartphone of some kind. What we discovered in South Africa (and many of the markets out there, but specifically, statistically in South Africa) it’s quite interesting. In the merchants that we were on boarding and are on boarding, more than 65 percent of those with Smartphones don’t go into their App stores, so they don’t actually access their Apps stores. They’re not utilising their phones with the full capability, which means there’s a technology inertia in terms of the adoption of the Pebble.
ALEC HOGG: Let’s just understand this. If they don’t go into the App store, they can’t use the Pebble.
STAFFORD MASIE: Yes, they can’t download the app. They don’t even know how to download the app to use the Pebble and the Pebble is an extremely simple product. That was the one challenge. The second challenge is cost. It’s expensive to have your payments device of your business be tethered onto another device that costs R9000.00 to R10.000.00.
ALEC HOGG: I thought the idea was that you already have a cellphone so you’d just plug the Pebble in.
STAFFORD MASIE: Well, many people don’t have the right cell phones. Many people don’t have cell phones, which they keep updated so there are challenges. Secondly, the risk for a taxi driver utilising the payment Pebble plugged into the beautiful, gold iPhone6…when that taxi driver’s handing it back over his shoulder for the person in the back seat to pay him…
ALEC HOGG: He looks down and loses his iPhone6.
STAFFORD MASIE: Exactly. In an enterprise environment where people want to do card-based payment acceptance, they’d have to buy all their drivers these Smartphones.
ALEC HOGG: Has that actually happened, though? Have taxi drivers lost their smart, new phones with people absconding?
STAFFORD MASIE: Not that specifically, but we have had instances where enterprise customers have told us that they provisioned a phone for the Pebble to a driver, and the driver simply didn’t show up the next day again and was gone. Alternatively, certain drivers claim that…
ALEC HOGG: They were mugged.
STAFFORD MASIE: They claim that their big blue eye is equal to the phone that they’ve lost. I would get a blue eye if I could get R6000.00 for it. It’s a big risk and the overall complexity if you take enterprise environments… If you deploy a payment acceptance solution in your environment that requires a Smartphone suddenly, you have thousands of these devices, which means you have to put a management framework in place.
ALEC HOGG: Stafford, that’s completely different to what you told us last time. I thought you’d revolutionised the payment side of it.
STAFFORD MASIE: Absolutely. We did. Look, the addressable market is enormous. Thousands of people are utilising the payment Pebble today. Absa has north of 6000 merchants – live. It’s an incredible number.
ALEC HOGG: So it works for most, but it doesn’t work for all.
STAFFORD MASIE: The addressable market…the long tale and the rest… We want to create new markets and the Blade allows us to do that.
ALEC HOGG: This is the new machine you have here.
STAFFORD MASIE: Yes, this is the Thumbzup.
ALEC HOGG: Science fiction looking… All right, so it’s the same as the Pebble. It’s just about five times the size.
STAFFORD MASIE: Well, it’s a Pebble with phone guts – links to it – so essentially, what we did is we looked at the Smartphone world and my engineers spent a lot of time in China and a lot of time with devices. What we did is we’ve built a phone, purpose-built for the Pebble, from the ground up. This is not a Smartphone, which OEM are licensing. It’s our connectivity device, specifically bound to the Pebble, and so it has no inherent value outside of what it does for the payment Pebble.
ALEC HOGG: So if the driver is mugged…
STAFFORD MASIE: It’s a useless device. He can’t do anything with it and if you do anything with it, the merchant gets money. The money lands up in the merchant’s account so it’s not a big deal. That’s the first thing. Literacy: no need for that. Switch this thing on. Think about it. What the Kindle did for books, is what the Blade does for payments.
ALEC HOGG: How many of them can you distribute? For example, people might listen to this and say ‘crumbs, I would much rather have the Blade than have the Pebble’.
STAFFORD MASIE: Right. Firstly, I’d love a problem where I couldn’t supply enough of them but we can manufacture approximately 100,000 per month.
ALEC HOGG: All right, so that’s really, not a problem.
STAFFORD MASIE: It’s not a problem but it could become a problem, considering the markets we’re in. We are in Australia now. The Australians will launch this next year – Q1 next year. Absa will go ‘general availability’ Q1 next year so we have to be careful. With this product it is a dangerous one with the price point being so low and barriers to entry being so low, technologically speaking, we could see a dam wall burst on this one. We’re being very careful in terms of how we’ll launch it and how we’ll take it to market. You’ll request an invite on our website today. You’ll got to Thumbzup.com. There’s a link, which says ‘request an invite’. Absa is going into pilot right now with about 100 merchants and then we’ll do general availability over the next couple of months.
I think that we’ll do it in a staged manner because the demand is incredible. It is big. It is really, big. If we launch in Latin America… We already have minimum order quantities there of 200,000 to 250,000 Pebbles alone.
ALEC HOGG: Is that your next trick? You have South Africa, Australia, and Latin America next.
STAFFORD MASIE: Our strategy is to attack the Southern Hemisphere and own the Southern Hemisphere.
ALEC HOGG: Why do you stay in South Africa? Is it because the people are smarter? Surely, the longer-term future perspectives anyway, might be better elsewhere.
STAFFORD MASIE: I get this question a lot. I think that in South Africa, we underestimate how far ahead we are from a financial services perspective, and a mobility perspective. Our telecommunications environment and our financial services environment is the most advanced in the world. I’ve gone to Australia. I’ve spent time in Asia Pacific. I spent time in the United States.
ALEC HOGG: So that’s a sweet spot – in that area. Financial services and mobile: if you can bring the two together, you are in a very good position, being in South Africa.
STAFFORD MASIE: Being in South Africa… I always answer this question in this way. People ask me ‘is the next Facebook going to come from Africa? Is the next Twitter going to come from Africa? Is the next Yahoo! going to come from Africa?’ I don’t think so. I think that in Africa, we deal with fundamental problems. We don’t build fun stuff and the challenges that we as entrepreneurs have to deal with in Africa allows us, through those constraints, to create products and services that have global applicability. It’s really hard, being here in an environment where literacy levels are low, telecommunications is a challenge, and cost is a massive factor. If you can build a product here in Africa that overcomes those barriers to entry then suddenly, your product has global applicability.
Yes, Africa is really hard, but Africa forces you to work on things that matter so I don’t think the next Facebook will come from here. I think the next Facebook of Agriculture will. I think the next Twitter of healthcare and the next Google of financial services will come from here. That’s what we see happening in Africa. I tell entrepreneurs this all the time. I think that if you go to the United States then yes, you go and build your Facebooks and your social media. That’s fun technology.
ALEC HOGG: Leisure time.
STAFFORD MASIE: Leisure time. However, if you look at the serious stuff being built such as MRI machines and payment Pebbles; these are South African inventions and the world’s recognising the talent pool that we have. I don’t think it’s because there’s something in the water. I think that the terrestrial challenges that we have in Africa are so unique, that those of us who are not leaving, are forced to innovate within the confines of those. If we can…if we really can then suddenly, Latin American opens up. Suddenly, Australasia opens up.
ALEC HOGG: You say ‘those of us who are not leaving’. Are you seeing people actually getting on boars and departing?
STAFFORD MASIE: I won’t speak to other people. I’ll speak to myself – my personal experience. Yes, absolutely. Venture capitalists are always trying to steer you out of the country. They’re always trying to pull you to countries where there’s massive scale. We have enormous strain on us to move to the United States. If you look at my strategy, in the Southern Hemisphere I’ve tied up (well, we’ll announce it soon) our Latin American partner and you’ll see I’ve tied up the largest financial services institutions on those three theatres. In Australasia, we have ANZ – massive bank – leading. It’s kind of the FNB of their territory. Then we have Barclays Africa on the African continent. Then we’ll have this financial services institution in Latin America.
What I’m attempting to do is take these three institutions that have no geographic commercial heads butting at all (they don’t compete with each other), and we will have our first meeting in February. In the first week of February, all three of those, are coming together with us and what we’re trying to do is drive economies of scale. We have similar problems in the Southern Hemisphere. They see us as a leading, innovative partner and with those economies of scale; they’ll drive further innovation so that’s my Southern Hemispheric strategy. If someone had to say ‘what’s next’, it’s Japan and the United States. Japan, simply because it’s an extremely sophisticated market. The card volumes are very, very high. Commercially, that makes sense. The United States is now swopping from mag-based. If you look at the U.S. credit cards, there’s no chip on them so they never implemented all the security standards (these things, which we call EMV and PCI).
Well, we have and we’re way ahead. What’s happening in the United States now, based upon the Act that Obama signed into law about a month ago, they’d have to swop over to EMV middle next year. That’s the largest card market in the world so it makes absolute sense that we’ll go there, and our model fits this market. We’re not a business to consume a company. We’re a company that enables financial services institutions to take next generation innovative products to market.
ALEC HOGG: When you say you’ll go there, presumably you’ll go there with a South African base always intact.
STAFFORD MASIE: The fact is we are Thumbzup International, so we have a BVI. That’s where all our intellectual property resides. Thumbzup South Africa is our R&D hub. This is where the minds are. This is where our competitive edge is and our competitive edge is not in our products. It’s our team. We have incredible people in South Africa.
ALEC HOGG: Are you alone? Do you think that there are other Thumbzups being built?
STAFFORD MASIE: The challenge that we have is so big in front of us, in the financial services space. Financial services and healthcare is very similar. When things don’t work in healthcare, people die and it’s more tangible because it’s healthcare. Guess what…in financial services. It’s the same thing. If payment doesn’t work, people die. Payment is effective service delivery changes. People’s lives change. You have a better opinion of things. Payment is one of those fundamental substrates to society so we hope that there are innovators out there. We hope that there are other Thumbzups. We hope there’s another 12-year old sitting in garage, doing something better.
ALEC HOGG: But are there? Do you see them? Do you have any engagement with them?
STAFFORD MASIE: I’ll come back to that. I see them. They’re there, but I think there’s a naivety when it comes to the financial services space because it’s very similar to the healthcare space. Money and health are thousands of years old from an industry perspective. Bartering, trading, money, and financial services are ancient industries that have immense barriers to entry. They have laws and regulations. They have banks, which stand in your way. Political frameworks are built around it. It’s beneficial, because if you look at the way your card works…if you take your card… That’s why credit cards work so well and everyone underestimates credit cards. It’s the best form of payment in the world. It’s better than cash. You take your card, get on a plane and go to Italy, shove it into a machine and you know exactly how that machine works.
The standard employed here, is employed globally so global usability is a big value for us. The second thing is, if you put your card into that machine and you say ‘it wasn’t me’ and you claim, there’s a global legislative framework that mitigates all risk and liability from you as a cardholder that no other form of payment has. That is deeply entrenched. Innovators that are innovating in the financial services space have the same challenges that the folks are facing in the healthcare space. You have to overcome these laws and regulations, and not overcome them by disintermediating them or obviating them, but working within the confines of those annals of laws and regulations. That’s what we’ve done. We see much of the innovation happening in the financial services space, but it’s naïve innovation. It’s great, but the problem is it doesn’t fit the rules, laws, and regulations, and you have to. Banks control a lot.
Federal reserves control a lot. There is legal and legislative verbiage and documentation that is applied by lawyers who are paid lots of money around the world. Your barriers to entry are high but if you start understanding how to navigate this maze and you innovate within the rules, you create an enormous opportunity and that’s what we’ve done with Thumbzup.
ALEC HOGG: And that’s what entrepreneurs do – have a look at what the rules are, and innovate within. Well, today we were talking with Stafford Masie who is the man from Thumbzup – another world first, innovated here in South Africa. This special podcast was brought to you by Sanlam Investments.