UK’s PawaPay, Fresh With $9M Seed Funding, Eyes Africa Expansion

Like many founders in the African mobile money space, PawaPay CEO Nikolai Barnwell sees endless opportunities for growth as people increasingly embrace mobile money as a safer and more efficient alternative to cash.

“There are very few things that you can do with mobile money that you can’t do with cash,” Barnwell told PYMNTS in an interview. “On the flip side, there are more and more things that you cannot do with cash that you can do with mobile money because cash is expensive. Businesses don’t like to handle cash, cash gets stolen, cash gets lost,” he said.

His U.K.-based and Africa-focused payments company recently secured $9 million in a seed funding round to help expand in new markets across Africa, where “there’s a very strong ask for a reliable and transparent mobile money gateway” from both global and pan-African merchants.

But with over 200 live mobile money systems on the continent, it remains a difficult sector to cover because of how fragmented and opaque African markets are.

He referenced the challenges a global freelancer platform like 99designs would have to go through to try and set up operations on the continent. “I have to set up an office in Douala [Cameroon] and then I need some documentation that’s maybe not quite up to date, or maybe it’s in French,” he explained. The result is that merchants “just tap out” because of the many complications involved.

And that’s the problem his company is trying to fix, by connecting individual telcos across the continent and their unique integrations, into a single API. Through the company’s payment rails, global merchants working across Africa can connect with millions of mobile money wallets by tapping into pawaPay’s alternative financial structure.

In just over a year since launching, the company has partnered with over 20 mobile network operators and processed $10s of millions of monthly mobile money transactions.

East and West Divide

When speaking of Africa’s tech scene, the discussion tends to center around technological hubs in English-speaking countries like Nigeria, Kenya and Rwanda, with very little focus on Francophone Africa.

The U.K.-based Pan-African FinTech startup for example, operates across 10+ countries including Nigeria, Ghana, Kenya, Tanzania, Uganda, DRC, Rwanda, Mozambique and Zambia, and in only one Francophone country, Cameroon.

However, French-speaking West Africa alone has 100-plus technopoles, including tech hubs in Côte d’Ivoire and Cameroon and, incubators like Jokkolabs that support startups in Senegal, Mali, Burkina Faso, Benin and The Gambia, according to a report by the African Union and the OECD.

Barnwell said navigating the language barrier can be both tricky and daunting, and it plays a huge role in Anglophone Africa receiving more attention than its French-speaking neighbors.

He also attributed the divide to the fact that countries in English-speaking Africa, particularly in East Africa, had a head start with mobile money. But he said West Africa is catching up very fast, as Cote d’Ivoire, Senegal, Cameroon lead the charge with skyrocketing mobile money growth rates year on year. “I don’t think it will be that long before mobile money will be as ubiquitous in West Africa as it is in East Africa,” he noted.

Read more: PawaPay Raises $9M To Expand Payments Infrastructure Across Sub-Saharan Africa

Flywheel Effect

As the company looks to expand, Barnwell said mobile money adoption travels a similar route across all countries in the region, making it easier to determine countries that are ripe for business.

In the very early stage, people are quite skeptical of mobile money and they don’t really trust the operators so there are a lot of peer-to-peer transactions where money sent to a family member across the country is immediately withdrawn and kept as cash.

Then as the volumes and numbers grow, people “start to realize it might even be better to have in my mobile money wallet, because when I have the cash, my kid will buy candy with it, or I might get tempted to buy some extra tomatoes or something and it just disappears out of your hand,” he said.

At this stage, companies have likely hit the 1 to 2 million active subscribers mark and the flywheel starts to move as people put “more and more cash into the system and take out less and less cash.” Once that starts to spin, it’s very, very hard to stop because the compounding effects and the positive feedback loop just runs,” he said. Merchants who have a lot of customers using mobile money suddenly see the need for it as well “and then it kind of builds up from there,” he explained.

According to Barnwell, “it almost holds true for all the markets that we’ve seen, once that flywheel starts, you just can’t stop it, it’s too powerful. It’s just such a good product, it is so superior to credit cards and bank accounts.”

The FinTech launched in the East African nation of Kenya, where Barnwell has been living for over a decade and knows the ecosystem there very well, but he’s now turning to West Africa, where all the next couple of markets that PawaPay will be opening will be located.

“And then our goal is to cover all the countries where mobile money is relevant. And that list grows every month, with new countries in that range, and more and more countries passing that 1 million [active subscribers] mark.”