New payment systems are developing fast in Africa
Africa has been in the front line of mobile payments, but now alternative payment systems like Adumo in South Africa are developing fast – especially during the pandemic.
Start-up companies are driving this development. In 2008, the start-up culture in South Africa was nearly non-existent, but now there is a boom, first of all in the fintech sector.
The reason behind this development:
- Digitalization creates new possibilities for young and small companies to make a break-through.
- Alternative payment systems have great potential on a continent with lack of infrastructure.
- The huge young population wants to use these new possibilities.
- Alternative payments have a huge potential for small companies, the SME’s.
The case with Adumo
The South African fintech group Adumo began in 2008 under the name of SureSwipe. In 2019 it was acquired by an international consortium, and the name was changed to Adumo, which is South Africa’s largest independent payments platform with a presence in 14 African countries.
Early in 2021 it got a new funding - $15 million - from the International Finance Corporation (IFC), a member of the World Bank Group, and from the IFC Financial Institutions Growth Fund to expand access to electronic payment solutions, especially for underserved small and medium businesses.
Adumo says IFC’s investments will support the company to make digital payments systems more affordable and accessible to smaller businesses in Africa, many of which currently rely on cash transactions.
Expanding
Later on, Adumo has invested in SwitchPay, a provider of alternative payment solutions for consumers, both in-store and online.
According to Adumo CEO, Paul Kent, the investment comes as consumer interest in new payment options is at an all-time high. “The impact of the pandemic and the rise of new, more convenient and value-adding payment options is revolutionizing how South Africans purchase goods and services,” says Kent to ITWeb.
SwitchPay has built a world-class suite of alternative payment solutions that brings new forms of value to consumers and retailers alike. SwitchPay provides retailers a digital platform to offer their customers alternative payment methods, both in-store and online, including purpose-based lending, customised subscription models and lay-by.
The company’s platform supports third-party payment products through API integration, and its credit-related products aggregate multiple credit providers, including banks and other fintechs.
Adumo says it services more than 50 000 active clients and 90 000 active card machines, processing more than R80 billion (5,3 bn dollar) in transaction value across 14 African countries.
The company counts some of South Africa's payment providers within its group structure, including SureSwipe, iKhokha, Innervation Pan African Payments, Innervation Rewards, Adumo Online, Humble Till, GAAP, and now SwitchPay
Small and medium enterprises in focus
Adumo is moving further into the SME sector. TymeBank, a digital bank, has partnered with Adumo to extend the newly launched MoreTyme, a buy-now-pay-later (BNPL) service, to small and medium enterprises (SMEs) in SA.
The payment service offers consumers a three-instalment, interest-free payment option at the point of sale, which TymeBank hopes will help increase revenue for the SMEs.
According to Adumo, retailers that offer buy-now-pay-later as a payment option can expect an increase in business.
BNPL is ballooning in other markets, where it has been adopted by younger demographics as a preferred payment method to purchase items ranging from fashion to electronics.
The global BNPL transaction volume is predicted to grow 10 to 15 times in value by 2025.
Paul Kent, CEO of Adumo, says South African businesses and consumers are hungry for new and convenient payment services.
"We have seen a transformation in the local payments landscape, with new contactless and cashless payments and alternative credit solutions transforming the retail landscape,” he says.
"Retailers that offer buy-now-pay-later as a payment option can expect a 20%-30% increase in retail conversion rates and a 30%-50% increase in ticket size based on current industry benchmarks and drive greater footfall to their stores. This is especially significant in light of the challenging operating environment and constrained economy many retailers are currently contending with."
The impact of SME’s
Supporting small businesses to access finance and financial services is a priority for the World Bank and IFC because of their potential to not only grow the economy but also to create jobs.
According to the fintech group, in SA micro, small and medium enterprises employ over 50% of the workforce and contribute around 34% of GDP, but many companies don’t have access to key services that would help their business grow.
(Sources: ITWeb, World Economic Forum)