The Glorious Exit of Brother Paystack
On the business of payments and payments processing in Nigeria — how does it all add up?
Highlights:
My Silver Grows Like Grass
“Obiageri”
Peter Thiel, Hulk Hogan, and Digital Payments
The Glorious Exit of Brother Paystack
Footnotes
My Silver Grows Like Grass
Spanish dollar, also known as the “piece of eight” or Real de a ocho. By Numismática Pliego - Numismática Pliego, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=57742304
When Isabella I of Castille and Ferdinand II of Aragon got married in 1492, both of them knew exactly what they were doing. They were trying to create the world’s most powerful empire, and they did. From 1492-1976, the Spanish empire controlled territories in five continents — America, Asia, Europe, Oceania, and Africa. From 1519-1682, the empire was at peak dominance, to the point that it was described as “el imperio en el que nunca se pone el sol”, or “the empire on which the sun never sets” — meaning that it was so big to the point that when the sun was setting in one of its territories, it was rising in another one.
But with great power comes great billing1. As the world’s first superpower, and because of the scale of Spain’s ambitions, to wit: exploring and conquering ‘new worlds’2, fighting religious wars (or Reconquisitas), controlling the politics of Europe, and investing in sophisticated military technology, the empire needed a lot of money. It also didn’t help that Spaniards had a special palate for luxury goods and imported items, all of which only contributed to an impending economic crisis.
Under King Phillip II, for instance, the Castille Monarchy was the first country with a large public debt. The country managed a budget that was as large as that of the Roman empire, but its debt was 50% of its entire economy, and its large public borrowings through short and long-term debts, or asientos and juros, meant that the economy was highly unpredictable [PDF]. Eventually, the empire faced a financial crisis three different times, and couldn’t pay back its loans four different times.
But the reckless debts are only a symbolism of Spain’s financial impertinence. In 1492, Isabella and Phillip had sponsored Christopher Columbus’ journeys to the Americas, and what happened next is known as the “Columbian exchange” — an exchange of people, plants, animals, culture, technology, diseases from the new world (Americas) to the old world (Western Europe).
Including an exchange of silver.
When Spain began colonizing new territories in the Americas, they found large deposits of silver in colonized territories. For example, in Bolivia (then a part of Peru), Spanish colonial authorities created a mining town called Potosi and forced indigenous people to extract silver from mines, in some of the most horrendous working conditions, from which they then minted silver coins called the peso de ocho, or the “Spanish pieces of eight”3. This coin was the official currency of the Spanish empire and many other countries.
But what happens when you literally have mines in your backyard that can print money for you, as much as you wanted? You guessed right — ballership4. Spain was spending money with reckless abandon, importing foreign goods and living Lavida Loca5. At its peak in the late 16th century, 170 tons of silver were shipped from the Americas to Seville, Spain, 44% of which was dedicated to the royal expenditure that financed and continued to finance the conquests.
In fact, in 1675, a high ranking foreign official was quoted as saying:
Let London manufacture those fine fabrics of hers to her heart’s content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens…so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody.
But two, no three things are certain in life; death, taxes, and sapa6. And while death and taxes have no alternatives, economic disaster can be averted with proper financial planning. Except that in the middle ages, people had no idea about the “quantity theory of money” and the fact that ceteris paribus7, if there is an increase of money in circulation, the inherent value of money will decrease and the prices of goods will increase, because currency (either coin or paper), like every other item, increases in value through scarcity, and is governed by the forces of demand and supply.
And so from the 15th-17th century, Western Europe faced one of the most significant periods of price increases or inflation. Known as the “Price Revolution” or the “Spanish Price Revolution”, the price of items rose about six times within 150 years. Specifically, the price of goods increased about 1-1.5% per year, and even though that is small in today’s world, that price increase is very high considering the scale of the human effort that was needed to produce one single peso de ocho, from mine to mint.
Ariel view of Potosi. By Grullab - https://commons.wikimedia.org/w/index.php?curid=3766167
In short, it was not until French Philosopher Jean Bodin, through his reply to a royal councilor Jean de Malestroit, pointed out that the influx of American “treasure” was the cause of the steady rise in prices that people finally realized that more coin or paper money does not actually make society richer — if the money is not backed by a corresponding value or productivity.
Of course, many of these economic theories are still hotly debated by economists and historians, but nonetheless, the fundamental characteristics of money remain the same, to wit:
Money is a medium of exchange;
Money is a unit of account that helps to value and calculate things; and
Money is a store of value.
To perform all these functions, money also has to be available, affordable, durable, fungible, portable, and reliable.
“Obiageri”8
In the 1970s, some European communists outlined their vision for a world without money. In the Socialist Standard, they stated9:
Money will disappear … Gold can be reserved in accordance with Lenin’s wish, for the construction of public lavatories … In communist societies goods will be freely available and free of charge. The organisation of society to its very standards will be without money … The frantic and neurotic desire to consume and hoard will disappear. It will be abusurd to want to accumulate things: there will no longer be money to be pocketed nor wage earners to be hired … The new people will resemble their hunting and gathering ancestors who trusted in a nature which supplied them freely and often abundantly with what they needed to live, and who had no worry for the morrow …
In essence, these communists were actively looking forward to a world without money. Yet, till today, “no communist state — not even North Korea — has found it practical to dispense with money”. After all, the same holy book that told Christians to cast their cares upon the Lord also warned that the person who did not work is not entitled to eat — and that a husband who did not provide for his wife is worse than an infidel.
So why can’t humans live without money? The simple answer would be that it is because money is at the center of value, and humans are always adding value to things — if not we would be still be hunting and gathering.
Money is something, anything, that allows people to exchange what they have (or have created) for the value they think it is worth. Money also allows people to preserve what they have, allows people to fairly measure the value of what they have, and it allows people to purchase and pay for valuable things, including effort. Loans, credits, and overdrafts also help people to afford to pay for value when they ordinarily can’t, practically multiplying the ease of creating value (or of doing business).
Curiously, some form of money has been around for the longest time. In ancient Mesopotamia, around 5,000 years ago, people used clay tablets to record transactions, which they then presented as evidence of a transaction when trying to receive payments in agricultural products like barley or wool.
And funnily, the Nukak-Makú, a forgotten tribe of nomadic hunters in South America that had no idea about money and subsisted solely on monkeys and fruits refused to go back to the jungle when they wandered out of the wilderness and saw how abundant food items were — many thanks to civilization’s use of money as a medium of exchange
Peter Thiel, Hulk Hogan, And Digital Payments
Terry Eugene Bollea, or “Hulk Hogan”. By Steve Nesius/AP
It is 2006. The year Germany hosts the FIFA World Cup and Zinedine Zidane headbutts Marco Materazzi in an emotionally charged final. Off the pitch, however, Zidane is not the only person that was not using his heading properly. Hulk Hogan, the professional wrestling maestro, was losing his head too.
Hulk Hogan had gotten married to TV personality Linda Claridge in December 1983, but 24 years later, in November 2007, the marriage had dissolved. Hulk Hogan’s manic cheating is most certainly one of the reasons why the marriage hit the rocks, with Linda admitting to E! in November 2008 that Hulk Hogan’s affair with their daughter’s BFF, Christiane Plante, was the straw that broke the union’s back.
But the marriage crash was building in phases. By 2006, Hulk Hogan’s wife already hated him and told him he was too old, and she moved out of their home in Florida to another house in Los Angeles. Amidst the chaos, Hulk Hogan decided to talk to his best friend, Todd Clem, a popular radio show host, also popularly known as “Bubba the Love Sponge”. Todd was a shock-jock with some of the most obscene opinions, and when Hulk Hogan called him amidst an emotional breakdown and explained his marriage problems in detail, Todd enthusiastically tells him to come over to his house.10
When Hulk Hogan got to Todd Clem’s place, the most insane thing happened. Todd and his wife, Heather, maintained an open marriage, and as Hulk Hogan walked to the front porch, Heather softly grabbed his hands and led him slowly to the bedroom. Heather seductively slipped on the canopy bed and as she did so, Hulk Hogan felt a throbbing erection within him, after which he momentarily weighed all the options available to him and voiced out weakly, “Bubba, you’re not filming this, are you?”. Todd stiffened his face before replying, “what is wrong with you, I am your fucking (sic) best friend. Your best friend. How could you even ask me that?”.
Except that Todd Clem was lying.
Six years later, the filmed sex tape would be the subject of a most notorious court case. But this time, a secret financier by the name of Peter Thiel was also at the center of it all, along sides Gawker — arguably the nastiest blog in blogging history.
Peter Thiel
Peter Thiel. By Nelson Barnard/Getty Images
Peter Thiel is a Silicon Valley titan, and that’s that on full stop. Bloomberg estimates his net worth at $6.64 billion, and a contributor on Wikipedia puts his net worth at $6.82 billion. Either way, you get the point — he’s worth nine figures in six figures. More interestingly, he was the very first investor on Facebook, putting in his personal $500,000.
But Peter Thiel did not wake up a billionaire in the same way that Beyoncé woke up flawless. In the summer of 1998, he went back to his alma mater, Stanford University, to give a speech on globalization and political freedom. In the audience, however, was a 24-year-old programmer who was thoroughly impressed by Thiel’s speech. His name was Max Levchin.11
In no time, the pair hit it off. They went for lunch on several occasions, and after some time, they decided to launch a company that allowed people to store encrypted information on Personal Digital Assistants (or PDAs) — an earlier version of smartphones. They called the company Fieldlink, and Peter agreed to finance the company, as well as to become the company’s first CEO.
Over the course of two years, however, the company would change its strategy several times. First, the company changed its name to Confinity, now allowing people to store encrypted information only on PalmPilot, a range of Personal Device Assistants (PDAs) developed by Palm Inc.
PalmPay Professional, released by Palm, Inc. on March 10, 1997. By Letdorf - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=9801671
And then, Peter Thiel and friends struck idea gold. They realized that people needed to make payments, but there was no existing technology to address that need. Yes, credit cards and ATMs were widely available, physically, but that was exactly the problem — those were physical financial solutions in a rapidly growing digital world.
And so, in 1999, the company set out to create a payment system that would allow someone to email money to another person. This time, they changed the company’s name to a name you’ve heard many, many times — PayPal.
In “The PayPal Wars”, Eric M. Jackson, Confinity’s Vice-President of Marketing, at the time, puts it clearly;
Without exact cash at hand, a customer’s only option was to write a check, a cumbersome form of payment that required a trip to the bank and a wait of several days before the check cleared and the recipient could take possession of the funds. Peter and Max surmised that technology had yet to offer a viable alternative to cash for person-to-person payments.
Eventually, PayPal’s money transfer software came to life. Eric M. Jackson captures the moment, again;
It was when I opened the inbox of my personal e-mail account that I came across an unusual message. The e-mail’s subject line curiously exclaimed “PayPal User Beamed You Money!”. The title sounded like spam — I had never heard of PayPal before. But given the lack of competing demands for my time at that moment, I opted to see what it was about. “Ken Howery has just Beamed you Money!”, the message’s text read. “You now have $1.00 waiting for you at PayPal. Visit www.PayPal.com to set up your PayPal account today!”
At this point, I realized this had to be the money transfer service that Confinity was developing.
Eventually, PayPal would expand to 200 countries, becoming a payments giant in the process, while processing over $712 billion in payment transactions as of December 2019.
Gawker
As for the confluence of Peter Thiel, Hulk Hogan, and Gawker, this is an abridged version of the story: Gawker was certainly the evilest blog from 2003 when it started, to 2016, when it went bankrupt. It specialized in hawking stories about celebrity gossip, particularly exposing sex tapes, lewd pictures, and contrarian celebrity choices they thought would be a soft sell.
On December 19, 2007, Gawker’s tech blog covering Silicon Valley, Valleywag, published a post with the headline: “Peter Thiel Is Totally Gay, People”, effectively outing Peter Thiel as gay. The story angered Peter, deeply, and he determined to bring down Gawker by any means possible.
Afterward, Peter Thiel specifically created a $10 million legal fund to finance his revenge against Gawker, and in 2012, the right opportunity came. Hulk Hogan’s sex tape leaked to Gawker and they ran the story under the headline: “Even for a Minute, Walking Hulk Hogan Have Sex In A Canopy Bed Is Not Safe For Work But Watch It Anyway”.
Hulk Hogan got delirious when he found out this news, and he sued Gawker for violation of privacy. Similarly, the news got to Peter Thiel, who knew at that moment that the right opportunity to take down Gawker had come. Hulk Hogan’s legal team filed a lawsuit seeking $100 million in damages from Gawker Media, including claims against the invasion of privacy, the intentional infliction of emotional distress, and a violation of the Florida Security and Communications Act.
The case — Bollea v Gawker — dragged on for four years, but in 2016, a Florida jury eventually awarded $150 million in damages to Hulk Hogan, a huge figure that bankrupts Gawker. However, everyone soon realizes that Peter Thiel has been secretly and anonymously sending money to Hulk Hogan in a bid to help him cover his legal fees and win the case against Gawker.
The Glorious Exit of Brother Paystack
Paystack founders, Ezra Olubi and Shola Akinlade. Brent Franson/Paystack
As it can be seen, money, and by extension, payments have come a long way. At every point in time, people have made payments considering the prevailing resources and economic situation at the time. In the 16th century Spain, silver coins were used to pay for goods, a medium that was unsustainable, given that a rise or fall in the supply of silver means that the value of the coins will be affected, and the corresponding prices of goods will either increase or decrease.12
As the economic activity began to happen more frequently on computers, smartphones, and on the Internet, it became more important to find solutions that allowed people to pay seamlessly across these web channels (as seen in the thinking behind the way PayPal was founded).
Now, given that computer systems are run by software, the challenge was how to incorporate a payment network into that software.
Enter API-based payment services.
An Application Programming Interface (or API) allows two different pieces of software to exchange information. In essence, an API is like a waiter that listens to requests from one computer program and relays them to another one. APIs can be used to do a lot of things, including accessing data from software, simplifying a software process, extending the functionality of the software, and securing access to software, or not.
Remember that APIs allow the software to do more, or extend its functionality. Payment processing companies then create their own APIs so that companies can integrate these payment processing tools into their websites or mobile applications and people can pay them through that website or application.
The checkout process via paying through cards online usually lasts a few seconds, but the process is fairly straightforward: when a customer puts in their details to make a payment on a website powered by a payment processor like Paystack or Flutterwave, the payment processor authenticates the card details and confirms the customer trying to make the payment. The payment processor then asks their bank partner to collect the inputted amount from the customer’s bank, after which the payment is deemed successful.
Payment Processing In Nigeria — The Market
Payments are something that is always constantly happening, and as more Nigerians conduct more businesses online, paying via online channels will become more inevitable. Indeed, this is the exact reason why payments giant, Stripe, believed it was a sound business decision to acquire Paystack for $200 million last October.
In fact, according to Stripe’s co-founder and CEO, Patrick Collison;
Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast (in Africa). Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050”.
In fact, as of 2018, Paystack’s CEO, Shola Akinlade admitted that digital card transactions made up only 2% of Nigeria’s total consumer spending of $150 billion. Of course, consumer spending in Nigeria has increased to well over $300 billion, but payments via cash are still high, and key metrics like increasing mobile penetration and a predominantly young population mean that digital payments will win, in the long run.
— NC
Credits and Yarns
I’m so glad you made it to the end of this long-ass piece. Even me sef dey wonder when e go finish. Please Follow National Cake on Twitter.
In other news, the EPL is back! And in anticipation, here’s a video of “Senior Man Kelz” doing what he knows how to do best — cooking Harry “The Fridge” Maguire like proper burial jollof.
A slang in Nigeria that translates to payment. E.g: “That guy wan kill me with billing; Meaning: That guy wants me to pay for everything.
Isabella and Ferdinand sponsored Christopher Columbus’ journey to the ‘New World’, where he came in contact with places like Antilles, Venezuela, and Central America.
The natives or Incas could not understand why the Spaniards had an insatiable appetite for gold and silver. “Even if all the snow in the Andes turned to gold, still they would not be satisfied”, complained one Manco Capac. The natives did not know that, for Francisco Pizarro and the colonial forces, “silver was more than shiny, decorative metal. It could be made into money: a unit of account, a store of value — portable power.”
Balling is slang that means to spend money extravagantly. Ballership happens when balling has become a culture or a way of life.
A Spanish word for “the crazy life”.
A slang in Nigeria for poverty or economic hardship.
A Latin phrase that generally means “all other things being equal”.
“The Ascent of Money: A Financial History of The World”, by Niall Ferguson.
Eventually, countries would shift to paper money, which proved smoother in conducting trade and financial transactions.
The Glorious Exit of Brother Paystack
Hi guys. So I included links to all of facts alluded to in this piece, in detail, but they didn't show up when I published. Perhaps, I made a few tweaks to settings of embedded links, unconsciously.
I'll go over the piece again and colour the parts where links are, but in the mean time, and if you really want to click the links, you can go over the piece line by line. You'll find links there, and you'll be surprised at how almost every line/important fact is backed up by a reference.
Heck, you can even turn this into a game. Cheers!