Harvard Case - Abra: A Global P2P Payment Solution
"Abra: A Global P2P Payment Solution" Harvard business case study is written by David Charron, Denisse Halm. It deals with the challenges in the field of Finance. The case study is 17 page(s) long and it was first published on : Jul 1, 2018
At Fern Fort University, we recommend Abra pursue a strategic growth path focused on expanding its global reach, leveraging technology and analytics to enhance its platform, and building strategic partnerships to solidify its position in the burgeoning fintech landscape. This strategy will involve a combination of organic growth, strategic acquisitions, and a focus on leveraging its existing strengths in financial technology, international finance, and emerging markets.
2. Background
Abra is a global peer-to-peer (P2P) payment platform that allows users to send and receive money in any currency, anywhere in the world. Founded in 2014, Abra has experienced rapid growth, driven by its user-friendly interface, low fees, and innovative technology. The case study focuses on Abra's decision to expand its operations into new markets, particularly in emerging economies.
The main protagonists of the case are Bill Barhydt, Abra's founder and CEO, and the company's leadership team, who are grappling with the challenges and opportunities presented by rapid growth and international expansion.
3. Analysis of the Case Study
Financial Analysis: Abra's financial performance is strong, with significant revenue growth and a solid customer base. However, the company faces challenges in managing its cash flow, particularly due to its rapid expansion. Abra needs to carefully manage its capital structure, debt financing, and working capital management to ensure sustainable growth.
Strategic Analysis: Abra operates in a highly competitive and rapidly evolving market. The company needs to develop a clear growth strategy that differentiates it from competitors and leverages its core competencies. Abra's financial technology and international finance expertise are key differentiators, allowing it to offer unique value propositions to customers in emerging markets.
Risk Assessment: Abra faces several risks, including regulatory uncertainty, competition from established players, and the potential for fraud. The company needs to implement robust risk management strategies to mitigate these risks and ensure the security of its platform and customer funds.
Technology and Analytics: Abra's success is heavily reliant on its technology platform. The company needs to continue investing in technology and analytics to improve its platform's functionality, security, and user experience. This includes developing new features, enhancing data analytics capabilities, and staying ahead of the curve in the rapidly evolving fintech landscape.
International Business: Abra's expansion into emerging markets presents significant opportunities but also challenges. The company needs to understand the unique regulatory environments, cultural nuances, and economic conditions in each market. Abra's success will depend on its ability to adapt its business model and operations to these local contexts.
4. Recommendations
- Expand Global Reach: Abra should prioritize expansion into key emerging markets with high growth potential and a large unbanked population. This could be achieved through a combination of organic growth and strategic acquisitions of local fintech companies.
- Leverage Technology and Analytics: Abra should invest in developing its platform's capabilities, including enhanced security features, improved user experience, and advanced data analytics to personalize services and drive customer engagement.
- Build Strategic Partnerships: Abra should seek partnerships with local financial institutions, mobile network operators, and other players in the emerging market ecosystem to expand its reach and access new customer segments.
- Focus on Profitability: Abra should carefully manage its expenses and optimize its operations to ensure profitability in each market. This may involve implementing an activity-based costing system to understand the true cost of serving different customer segments and markets.
- Strengthen Corporate Governance: Abra should establish robust corporate governance practices, including a strong board of directors, clear internal controls, and compliance with relevant regulations. This will enhance investor confidence and build trust with customers.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Abra's core competencies lie in financial technology, international finance, and emerging markets. These recommendations align with Abra's mission of providing affordable and accessible financial services to people worldwide.
- External Customers and Internal Clients: The recommendations address the needs of Abra's diverse customer base, particularly in emerging markets, while also supporting the company's internal stakeholders, including employees and investors.
- Competitors: Abra faces intense competition from established players and new entrants in the fintech space. These recommendations help Abra differentiate itself by leveraging its unique strengths and building strategic partnerships.
- Attractiveness ' Quantitative Measures: The recommendations are expected to drive significant revenue growth, improve profitability, and enhance shareholder value. While specific quantitative measures like NPV and ROI are difficult to estimate at this stage, the strategic direction outlined in these recommendations is expected to lead to long-term success.
6. Conclusion
Abra has a strong foundation and a clear opportunity to become a leading global P2P payment platform. By focusing on expanding its reach, leveraging technology, building strategic partnerships, and ensuring profitability, Abra can capitalize on the significant growth potential in emerging markets and solidify its position in the rapidly evolving fintech landscape.
7. Discussion
Alternatives: Abra could choose to focus solely on organic growth, delaying acquisitions and partnerships. However, this approach would likely slow down its expansion and limit its ability to compete effectively in the rapidly evolving market.
Risks and Key Assumptions: The recommendations are based on several key assumptions, including continued growth in the global P2P payment market, Abra's ability to successfully navigate regulatory hurdles in emerging markets, and the availability of capital for expansion. These assumptions carry inherent risks, and Abra needs to carefully assess and mitigate these risks through robust risk management strategies.
Options Grid:
| Option | Description | Advantages | Disadvantages |
|---|---|---|---|
| Organic Growth | Expanding operations through internal resources | Lower risk, controlled expansion | Slower growth, potential for missed opportunities |
| Acquisitions | Acquiring existing companies in target markets | Faster expansion, access to local expertise | Higher risk, integration challenges |
| Partnerships | Collaborating with local players | Access to new markets, reduced costs | Dependence on partners, potential for conflicts |
8. Next Steps
Abra should develop a detailed implementation plan with clear milestones and timelines for each of the recommendations. This plan should include:
- Market Research: Conducting thorough market research to identify the most promising emerging markets for expansion.
- Financial Planning: Developing a comprehensive financial plan that outlines the required capital, funding sources, and expected returns on investment.
- Technology Development: Investing in technology upgrades and developing new features to enhance the platform's functionality and security.
- Partnership Development: Identifying and engaging with potential partners in target markets.
- Regulatory Compliance: Ensuring compliance with all relevant regulations in each market.
By taking these steps, Abra can effectively implement its growth strategy and achieve its goal of becoming a leading global P2P payment platform.
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Case Description
Abra is an application that allows users to buy, store, and send more than twenty types of cryptocurrency. Founded by Bill Barhydt in 2013, the company initially set out to create a seamless way for people to send money anywhere in the world, without relying on financial intermediaries. Barhydt saw an opportunity in the decentralized peer-to-peer model for an electronic cash system first implemented by Bitcoin. Because Bitcoin relied on a distributed network of computers to validate transactions, it was uniquely capable of processing the transfer of small amounts of money between countries - something that was costly and inefficient using traditional banks and services like Western Union and Moneygram. One particularly strong use case was sending remittances - money earned by workers living in abroad that is transferred on a regular basis to families living in another country. This insight led the company to test its initial product in the Philippines before global launch. This case focuses on Abra in March 2017, examining the origins of the company, and its market position during a critical moment in time and a significant inflection point for the cryptocurrency space.
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