This article was first published in the latest issue of the Moneyweb Investor. To read the magazine click here.
The founders of South African digital currency company Luno are striving towards a world where using money will be free (or extremely cheap), infinitely transferable, faster and safer than it is today and totally interoperable through a global currency or payment standard.
This is the world of frictionless money, says Marcus Swanepoel, CEO and Luno co-founder, and it is not as unattainable as it may seem. “Money has changed many times over the last 1 000 years. It is inevitable that it will change again.”
The concept of frictionless money – where one settles a payment on the internet without relying on physical objects like cash or credit cards – is not entirely new. For years engineers and entrepreneurs have been chipping away at the existing locked-down, proprietary and expensive payment ecosystem. The best example of this is PayPal, the global online payments system that supports online money transfers and serves as an electronic alternative to traditional methods of transferring money.
Bitcoin takes things a step further in that it is a decentralised currency, which means that no one government, individual or group holds authority over it, which makes it unique. “We believe that the future of money and banking will be driven by new breakthroughs in technology, machine learning and a much higher bar for the overall customer experience,” says Swanepoel.
Today Luno has a team of over 40 technology and finance experts, with teams in London, Singapore and Cape Town.
However, while Luno is making it easier to buy, sell and transact with bitcoin, the founders are not bitcoin disciples, arguing that the cryptocurrency is simply a means to an end. It might be of interest to note that there are 710 cryptocurrencies in existence, listed here. Their total market cap is $17.4 billion, which is a blip on the radar of the world’s financial system, but of this, bitcoin accounts for $14.9 billion.
“We and many other bitcoin companies are actually fundamentally digital currency agnostic,” says Swanepoel. “Luno is very focused on bitcoin, but purely because there is no other digital currency that is as safe and widely used at this time. Bitcoin is simply a tool to be used in pursuit of our vision to make money frictionless.”
Swanepoel and co-founders Timothy Stranex, Pieter Heyns and Carel van Wyk teamed up in 2013 in pursuit of this goal. Swanepoel, a chartered accountant and CFA charterholder had returned to Cape Town via Palo Alto after working for Standard Chartered and private equity firm 3i in Singapore and London for six years. In Cape Town he met fellow rocket scientists, Stranex, who holds an MSc in theoretical physics and was previously a software engineer at Google in Switzerland; Van Wyk, who holds an MSc focused on augmented reality and Heyns, a CA with a passion for tech start-ups.
Initially their focus was on building proof-of-concept projects for financial companies. Within their first company, Switchless, they built the first fully-integrated cryptocurrency pilot system for a major multinational bank, Standard Bank. That was back in 2013, before most banks even knew what bitcoin or a blockchain was.
The team showcased their work at Finovate in London in early 2014. “We knew that banks traditionally are slow to change, but we naively believed that the technology was so special that the banks would move faster,” recalls Swanepoel. Standard Bank never launched the pilot to the public, however Finovate generated an explosion of interest in the technology from large financial institutions and regulators all around the world.
This experience encouraged the team to focus on building an independent bitcoin platform targeted at consumers. Thus armed with a round of seed funding (USD $824 000) that was raised in 2014, they created the first (and still largest) Bitcoin company in Africa and launched their consumer bitcoin wallet.
In 2015 BitX (as Luno was then known) raised $4 million in venture capital funding in a round led by Naspers. The investment was made via the Internet giant’s global payments subsidiary, PayU, alongside the Digital Currency Group, which builds and supports bitcoin and blockchain companies and Venturra, a VC fund based in Southeast Asia.
While the company’s initial focus was on Africa, the capital was used to expand globally in line with its goal to make money universally acceptable, which is by definition global. Other markets include Indonesia, Malaysia, Nigeria, Kenya and more recently, the UK.
Luno has also partnered with payment processing companies like PayFast in South Africa and CodaPay in Southeast Asia to enable thousands of merchants to accept bitcoin from online buyers. In South Africa the likes of BidorBuy, Takealot.com, Superbalist, HPOnline and the Nelson Mandela Children’s Fund will accept bitcoin, however many of the merchant pioneers are small businesses like the trendy Alexander Bar in Cape Town. For a list of merchants, click here.
Earlier this year the company rebranded as Luno. “Luno means ‘moon’ and represents the excitement we and our customers have about this new industry,” says Swanepoel. “It also reflects our responsibility in helping people safely escape the gravity of the existing financial system. The moon is also one of the world’s few constants, and in many ways the world’s one true leveller – just like Bitcoin is meant to be a new financial system accessible to all ”
All well and good, but what about all the issues around Bitcoin? The bad reputation? The regulation? The risk of hacking? These are issues that will be discussed in another story.
“The gist of it is that Bitcoin will enable companies like ours to build truly global ‘banks of the future’ at an unprecedented pace and with unrivalled economies of scale,” Swanepoel concludes.