When it comes to B2B payments, the mobile device has limited traction.
In some markets, like in the U.S., adoption is typically limited to contexts in which an individual may be making a purchase in a retail setting on behalf of a company: a professional on a business trip paying for lunch, for instance, or a delivery driver refueling while on the road. Adoption remains limited largely by the decision of card issuers and banks to support the use of commercial and small business credit cards within mobile wallets.
In various markets throughout Africa, however, mobile payments penetration is some of the highest on the planet. And while in some markets, like Nigeria, reliance on cash remains by-and-large the norm, the majority of consumers in the region use a mobile phone, presenting a massive opportunity for mobile money.
For mobile money FinTech MFS Africa, that opportunity extends into the B2B payment space as well. Dare Okoudjou, the company’s CEO, recently told PYMNTS why small- and medium-sized businesses are particularly ripe to embrace mobile payments not only to accept funds from consumers but to send and receive payments between each other — even across border.
Friction At The Border
With 54 countries across the continent, Africa’s need for efficient cross-border payments remains high. According to Okoudjou, however, friction remains the norm.
“Cross-border payments in Africa present challenges due to the complex and fragmented financial services institutions and telecoms systems across the continent,” he said. “There’s not only a variety of banks to deal with when sending payments back-and-forth but also different regulatory regimes.”
While he highlighted the continent’s “cutting edge” mobile payment technology ecosystem, one country is not the same as the next in terms of mobile payments usage, either.
A report released in March from EY, for example, shed light on this spectrum. Senegal, for instance, is considered an “emerging” market for mobile payments, with cash still king. However, elsewhere, like in Kenya, that country’s mobile money penetration is more than 100 percent thanks to the use of multiple SIM cards by a single consumer.
And even when mobile payments adoption is high, transactions can stumble over a lack of market cohesiveness and adoption when funds move across borders — with significant implications in the B2B context.
“This results in a massive patchwork of different requirements that need to be fulfilled with making a cross-border payment,” said Okoudjou. “For businesses looking to establish a pan-African presence, this presents a major obstacle to reaching new markets.”
Driving Small Business Growth
To overcome these challenges and drive mobile payments penetration in the B2B arena, MFS Africa recently announced its acquisition of Beyonic, a digital payments FinTech servicing small businesses and FinTechs across east Africa. By combining the two firms, Okoudjou explained that the united entity would have an even larger footprint in Africa, enabling consolidation of its network of mobile money operators, banks and other financial services partners.
While these partners were connecting their consumer clients to MFS Africa’s mobile payments capabilities, the takeover of Beyonic expands the offering into the small- and medium-sized business base — a particular underserved market, said Okoudjou.
“Africa is home to many exciting and dynamic businesses and entrepreneurs, people taking on new challenges and coming up with creative solutions to longstanding problems,” he said. “These are businesses that will drive Africa into the 21st century with their innovative spirit — yet they are currently underserved when it comes to their financial needs.”
That combination of a lack of SMB-tailored solutions with inherent friction in cross-border payments has largely stifled a small business’s ability to expand from one country in Africa into another. Yet, as SMBs are key to economic growth, the ability to support B2B payments between small business traders and service providers is critical.
With consumers continuing to elevate their use of mobile payments, enabling individuals who also operate small businesses to make cross-border B2B transactions the same way they make C2B or peer-to-peer payments could be an especially effective strategy in this market.
That said, cash continues to be the dominant payment method in many parts of the continent. With limited consumer adoption of mobile payments in those markets, driving digitization and mobilization of B2B payments could be even more difficult. But by taking a pan-continental approach to the small business payments arena, Okoudjou said solution providers could help drive penetration while supporting growth for SMBs and their economies.
“Enabling businesses of all sizes to easily send and receive payments across borders lifts major financial barriers to economic growth,” he noted. “This is about developing capabilities [to] enable the growth of African cross-border businesses, which can expand beyond their domestic markets and drive innovation across the continent to the last-mile.”