In Africa, Yoco Powers SMES Beyond Cash-Based Commerce


In Africa, small to mid-sized enterprises are an engine of the overall economy.

As noted on the International Trade Centre’s website, more than 70 percent of Africans work for small firms with fewer than 20 employees. With expanded payments options, these merchants can more nimbly serve their customers, capturing commerce and top-line growth.

To that end, payments services provider Yoco (a truncated version of “your commerce”) said last week that it raised the equivalent of more than $16 million, and the money will be earmarked for the company’s point-of-sale (POS) solution aimed at small to mid-sized enterprises.

The product allows SMEs to accept payments and also measure company performance, eyeing metrics such as inventory and which products are among the highest selling offerings.

The backdrop is one where roughly 7 percent of small businesses in South African countries accept card payments, and yet the card penetration rate is 75 percent. Yoco said the opportunity that lies before it is a significant one: CEO Katlego Maphai has stated that there remains as much as $20 billion in commerce that is ripe to make with the shift from cash payments to digital ones. That comes as firms such as McKinsey have spotlighted $2.1 trillion in consumer spending by 2025, of which $75 billion may be tied to eCommerce.

Among factors that may be leading to that mismatch is cost, and a regulatory environment that is less than optimal in bringing payments tech to bear on the market. In reference to the former, Yoco sells its hardware and software at price points that start at roughly $100. And, in reference to the latter, the “access problem” that needs a solution is one that stems not just from the cost, but to the hurdles that are in place that ultimately wind up restricting smaller firms. The rules span everything from location to revenue requirements.

The shift toward more choices at the point of sale — using cards for example — comes as the latest iteration of the Global Cash Index shows that cash in use represents about 60 percent of that South Africa’s GDP.

But the very small number of merchants that accept card payments seems to represent a greenfield opportunity. In terms of business traction, the company has noted that it processes roughly $280 million in annualized payment volumes for about 30,000 businesses. In other publications, the firm has noted that it has been adding about 1,500 customers monthly.

The roots Yoco is putting down may follow a trend in Africa — one that bets on the ever-downward trend of tech costs as a tailwind for payments acceptance, especially among smaller merchants.  It follows the January 2018 launch in Zimbabwe, where Steward Bank has come to market with Kwenga, a POS machine that costs the equivalent of $35 for a smaller version and $200 for a larger one. The devices can also be shared across merchants, and this of course lowers the investment required for each merchant. The machines also allow for users to transact with Ecocash, a mobile-focused payments service.

In August, Stripe and Visa, among others, invested $8 million into Nigeria’s Paystack, a startup that lets developers create payments tools, eyeing payment processing services — check out our interview with the CEO. Additionally, Alibaba Group Holding’s founder and chairman Jack Ma has said in recent weeks that his firm “will do anything to share technology” with Africa.

The overarching theme, of course, is financial inclusion, and it is a theme that extends across individual African nations and companies. By making the actual technology more affordable — and even shareable — among merchants, the door opens to both connectivity and a boost in commerce.