The time is ripe for FinTech companies in Africa, says Wirecard South Africa's Peter Stenslunde.
E-commerce in countries north of South Africa is growing rapidly, as the ability to make and accept online payments improves, creating significant opportunities on the continent. Advances in internet access and widespread mobile penetration in Africa, combined with increased availability of sophisticated financial systems, are all spurring demand for online and mobile payments services. Yet challenges remain, principally around risk and settlement.
E-commerce and online credit card payments are high-growth industries in Africa, as are mobile wallet technology and mobile money. However, many banks on the continent are new to e-commerce and don't have the experience or the necessary systems in place to handle risk and settlement. In many cases, the technology used by financial institutions is reaching the end of its life – or these organisations simply don’t have the required technology at all. For these reasons banks are happy to outsource services to FinTech companies, particularly those with a global acquiring platform. This gives them access to new markets, merchants, customers and opportunities.
The African travel and mobility sectors in particular, as well as the digital and consumer goods markets, are great candidates for new FinTech solutions. The appetite for cross-border business in Africa is strong and growing. More people are travelling to and within Africa, and businesses like hotel chains and airlines require payment systems that are flexible and secure enough to deal with payments. Hotel chains, for instance, might have 20 properties in 20 countries and need a single platform to settle credit card and online payments, either locally or internationally. These facilities are now becoming available to them.
Mobile wallets are another huge growth opportunity in Africa. A mobile wallet allows you to store, send and receive money from a mobile phone. It is usually linked to an electronic wallet which is essentially an electronic bank account that you use to transfer value to merchants for the payment of goods from your phone. You can therefore use your phone to buy services like electricity and pay various bills at merchants who accept mobile wallet payments. It is a way for people who aren’t traditionally banked with a bank account to be financially included in the broader economy by making payments on their mobile phones rather than with cash.
A recent World Economic Forum report on Global Trade states that in sub-Saharan Africa, 12 percent of adults (64 million) have mobile money accounts (compared to just 2 percent worldwide), and 45 percent of them have a mobile money account only.
As the newly-banked population becomes connected to mobile payments, it’ll be much easier for them to participate in global trade, either as consumers or businesses.
Another growing industry – especially in South Africa – is the issuing of prepaid cards. Prepaid cards are like private debit cards that organisations can brand and use to do anything from paying employees to issuing dividend payments. For instance, SAA uses this system to pay pilots their daily per diem allowance. Using a prepaid system, money is loaded onto the cards by the merchant and their customers can use them at ATMs, over the internet or on point of sale (POS) machines.
At Wirecard we are concentrating on growth in Southern African Development Community (SADC) countries and we have plans to expand further into east and west Africa. Last year we acquired MyGate – a South African FinTech firm that enables merchants across Africa to accept a wide range of different e-commerce payment options, particularly online card payments, thereby helping them to serve millions of African consumers.
We expect to make further acquisitions in South Africa, as well as eastern Africa and western Africa in the next six to 12 months. Africa is now open for e-business.