When companies create digital payment solutions for African countries outside of Nigeria and South Africa, the key is to build around mobile money.. It is literally a no-brainer.
The concept is ubiquitous in East Africa, but since mobile money is an initiative led by telecom operators, there are technical complexities in creating a unified infrastructure for businesses that need it..
PawaPay, a UK-based payments company focused on Africa, is one of the few that addresses these complexities. The company takes the technical integrations of telecom operators such as AirtelTigo, Econet, MTN, Safaricom, Orange and Vodafone and brings them together in an API for companies..
Today, the company announces that it has closed $ 9 million in seed funding to scale its operational presence, recruit talent, and expand into new markets..
UK-based fund 88mph co-led the round with China-based MSA Capital, with participation from Zagadat Capital, Kepple Ventures and Vunani Capital..
PawaPay spun off last year from online sports betting company betPawa. The company is directed by CEO Nikolai Barnwell, former Director of New Markets for BetPawa, Africa. It also sits on the 88 mph dash.
According to him, starting with pawaPay was to help people send and receive money internationally using mobile money.
An interesting example would be freelancers in Côte d’Ivoire trying to receive payments for services on a global payments platform.. Typically, they would be required use a bank account or card. But in places like the Ivory Coast, where mobile money is prevalent, that becomes a problem.
How big is mobile money in Africa?
According to 2015 figures from the World Bank, there are more than 350 million unbanked people in sub-Saharan Africa. Several shortcomings are responsible for this statistic, but from the perspective of banks, no incentive drives them to actually deposit these people..
Most unbanked people rarely win minimum dare in their respective countries, making it difficult for banks to make money with these people. Also, opening a bank account involves a lot of KYC (Get to know your customer) processes for this population subset.
But one thing is for sure: the unbanked have mobile phones and there are more than 850 million mobile connections in Africa.
This huge market is the reason why mobile money is prevalent across the continent. Telecommunications operators using powers bypassed banks and created their own systems to allow people to transfer money. in a safe way use mobile phones for low or no transfer fees.
So people with phone numbers can have basic financial services like savings and transfers.
Now, up to $ 500 billion flows through the mobile money market in sub-Saharan Africa annually through the accounts of narrowly 300 million monthly active users. This alternative financial infrastructure is one of the largest in the world.
But it is also one of the most underdeveloped because Each telecom operator that has its own unique mobile money product has created a fragmented infrastructure.. For merchants, fragmentation means it can be exorbitant expensive to use at scale.
Card payment gateways and mobile money
PawaPay wants to position itself as the market leader in high volume mobile money payments while providing reliability and transparency to merchants.. Its API enables these merchants to access the mobile money systems of telecom operators to receive and send payments to millions of mobile money accounts..
“We are making a very strong bet on the rise of mobile money and all the complexities that arise from mobile money and all the infrastructure it needs be built around mobile money payments at its core, “Barnwell told TechCrunch.
“And the way we look at the continent, we are seeing mobile money adoption rates growing at an incredible speed. It has become quite obvious that this is a very important financial infrastructure and that a lot of it is missing if you want to work with large volumes and mobile money businesses.. “
PawaPay handles local operations, compliance, regulatory coverage, and bank accounts, making it easy to receive payments in a new market..
The company claims to be handling more than 10 million transactions on its rails per week, with beta operations in 10 African countries: Cameroon, Democratic Republic of the Congo, Ghana, Kenya, Mozambique, Nigeria, Rwanda, Tanzania, Uganda and Zambia.
Barnwell tells TechCrunch that while these transaction volumes seem impressive, pawaPay would have done more if not for the regulatory hurdles and licensing approaches in each market..
“In each country, we have had to start from scratch with the correct data to understand how they see space, on the license sheets, what kind of companies want to license, what kind of requirements are they looking for, how can we work a lot closely with them to make sure they feel comfortable with us, “he said.
However, the CEO claims that while regulation slows down processes, it is important to pawaPay because many unregulated companies operate without licenses and unstable technologies, some with the intention of committing fraud.
“WWe went in and decided that we want to be fully regulated. We want to be fully covered in all markets, with full licenses and to be a very stable and reliable premium product in these markets ”, he added..
There are several payment gateways that facilitate payments for businesses in Africa, such as Flutterwave, DPO Group, Yoco, MFS Africa, and Paystack.. But in terms of Pure mobile money game, MFS Africa is a clear competitor to pawaPay. Both platforms are largely focused on addressing the unique challenges that accompany mobile money, while others drive innovation around bank and card payments.
MFS Africa connects more than 300 million mobile money wallets, enabling a variety of banks, telcos, money transfer operators and other financial institutions to interoperability at scale in Africa through a single point of integration..
PawaPay isn’t far off, Barnwell says the company connects to almost the same number of wallets and expects to go live on 30 to 40 telecom integrations soon.
While East Africa (driven by Kenya’s M-Pesa) has largely has been the critical market for mobile money, West Africa is catching up well. Last year, West Africa registered 198 million mobile money accounts compared to 293 million in East Africa.
The West African region also grew more in terms of the transaction value by 46%, to more than $ 178 billion, and countries like Ghana, Senegal and Ivory Coast are leading the charge, presenting a huge opportunity for these payment gateway providers, unlike the card payment market where two countries are prominent.
“Although most of the attention is focused on card payments, the great payments giant in Africa Really it’s mobile money, ”said the CEO.
PawaPay’s mobile money approach was a key reason Kresten’s Book, founder of 88mph and president of pawaPay, led the round. Said when 88 mph actively invested in Africa a decade ago, “one of the key factors was that mobile money was a superior payment method than credit and debit cards when used for online payments. ”
For Zagadat Capital, this is what the founder Oluwatosin ajibad (also know as Mr. Eazi, singer-songwriter and popular entrepreneur on the African music scene), who is also on the board of pawaPay, had to say about the investment:
Be investors enormously focused on Africa and very familiar with the landscape, we believe that fintech focused on mobile money is not only one of the most exciting places to invest, but also one of the most important bridges to ensure the financial inclusion of billions of people across the continent.. The trick for us was that we believe in the clear mission, vision and strategy and we are sure that the pawaPay team is the best team to achieve it.