Bespoke payment solutions unlock growth in Africa

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Small and medium-sized enterprises (SMEs) and entrepreneurs play a vital role in the overall development of most economies, especially in emerging regions like Africa.

Search results study on African Entrepreneurs published by the Tony Elumelu Foundation in partnership with Stanford University revealed that the percentage of adult entrepreneurs of working age is higher in Africa than on any other continent in the world.

Although starting a new business is difficult enough for entrepreneurs, many of them face difficulties when engaging with traditional financial institutions, due to their atypical work profile and lack of regular income.

This slow – or non-existent – ​​access to banking services means that accepting payments can often be a source of pain, leaving the self-employed with complicated solutions to the complex problems they face.

“They are [SMBs] are dealing with solutions that have been designed for someone else’s use case, someone else’s business, in terms of how they work, and someone else’s size in terms of of business. No one is actually building for them as a segment,” Lungisa Matchobaco-founder and CTO of an African payments and software company Yo cosaid PYMNTS in an interview.

Matshoba said this is a problem that South Africa-based FinTech Yoco seeks to solve for this underserved segment, adding that it aims to be the leading financial platform for the self-employed in Africa – “the most large segment of the continent but also the segment it’s going [boost] wealth creation [in the region].”

Read more: South African SME payment platform Yoco wins $83m for expansion

As part of this goal, the Johannesburg-based company provides products that help small business owners receive payments and better manage their businesses, aiming to serve 1 million entrepreneurs by 2024 through its payment and its capital products.

Since its launch in 2013, the FinTech has expanded its presence in Africa, Europe and the Middle East, raising over $100 million in venture capital. It also recently acquired a leading FinTech and Web3 software development agency in Africa, Nona Digital, to better meet the needs of its freelance clientele.

From payments to integrated financing

Over the past few years, the financial and payment system has undergone a huge digital transformation and, according to Matshoba, integrated finance is playing an increasingly important role in this change, helping to create the next layer of financial products.

See also: Nearly 6 million merchants in South Africa still do cash-only transactions, says Yoco’s Carl Wazen

“Now all of a sudden you have a lot of people who weren’t visible before to the system now visible, and what’s happening now is that [with] integrated finance, people create products that serve [other] people they bought through payments,” he remarked.

This change, he continued, has opened up an entire ecosystem where people who previously had no records to qualify for a loan are now doing so as more and more businesses go the digital route.

He said this creates a new problem – the emergence of digital products that behave much more like money. Because cash is instant cash and moves quickly, consumers are increasingly impatient in their demands for faster financial services.

“Right now we’re talking about a customer who can’t afford to wait because money hasn’t kept them waiting,” Matshoba explained, adding that when emerging trends like cryptocurrencies and Web3 are thrown into the mix, “you start to see a very dynamic picture that starts to evolve.

As a result, he said FinTech companies need to evolve and keep abreast of new technologies to meet consumer demands.

“At the end of the day, they’re designed to meet market needs that traditional products don’t, so let’s change direction. It’s no longer about sitting and seeing – we are constantly reading, changing and shaping the products that emerge,” he said.

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