Tailored Payments Solutions Unlock Growth for Underserved Self-Employed Segment in Africa

Small- to medium-sized businesses (SMBs) and entrepreneurs play a critical role in the overall development of most economies, particularly in emerging regions like Africa.

Findings from a research study on African entrepreneurs published by the Tony Elumelu Foundation in partnership with Stanford University revealed that the percentage of working-age adult entrepreneurs was higher in Africa than in any other continent in the world.

While jump-starting a new business is hard enough for entrepreneurs, many of them face challenges when engaging with mainstream financial institutions, due to their atypical work profile and the absence of regular income.

This slow — or nonexistent — access to banking services means accepting payments can often be a source of pain, leaving self-employed individuals with complicated solutions to the complicated problems they face.

“They’re [SMBs] are dealing with solutions that were designed for someone else’s use case, someone’s business, in terms of way of working, and someone else’s size in terms of their business. No one is actually building for them as a segment,” Lungisa Matshoba, co-founder and chief technology officer of African payments and software company Yoco, told PYMNTS in an interview.

Matshoba said it’s an issue that South Africa-based FinTech Yoco is looking to solve for this underserved segment, adding that they want to be the primary financial platform for self-employed individuals in Africa — “the biggest segment on the continent but also the segment that’s going to [boost] wealth creation [in the region].”

Read more: South African SMB Payments Platform Yoco Nets $83M For Expansion

As part of that goal, the Johannesburg-headquartered company provides products that help small business owners to receive payments and better run their businesses, aiming to serve 1 million entrepreneurs by 2024 through its payments software and capital products.

Since its launch in 2013, the FinTech has grown its footprint across Africa, Europe and the Middle East, raising over $100 million in venture capital. It also recently acquired a leading African FinTech and Web3 software development agency, Nona Digital, to better meet the needs of its self-employed customer base.

From Payments to Embedded Finance

In the last few years, the payments and financial system has undergone a huge digital transformation, and according to Matshoba, embedded finance is increasingly forming a significant part of that change, helping to create the next layer of financial products.

See also: Close To 6M Merchants in South Africa Still Transact Only in Cash, Says Yoco’s Carl Wazen

“Now, suddenly, you’ve got a lot of people who previously weren’t visible to the system now visible, and what’s happening now is that [with] embedded finance, people are creating products that service [other] people that they’ve bought in through payments,” he remarked.

This shift, he went on to say, has opened a whole ecosystem whereby people who previously didn’t have records to qualify for lending suddenly do now as more and more businesses go the digital route.

He said this creates a new problem — the emergence of digital products that behave a lot more like cash. Because cash is instant cash and moves around quickly, consumers are increasingly impatient in their demands for faster financial services.

“Right now, we’re talking about a customer who cannot afford to wait, because cash didn’t make them wait,” Matshoba explained, adding that when emerging trends like cryptocurrencies and Web3 are thrown into the mix, “you start to see a very dynamic picture starting to evolve.”

As a result of this, he said FinTech companies have to evolve and keep abreast with new technologies to meet consumer demands.

“At the end of the day, they’re designed to solve market needs that traditional products don’t solve, so let’s change the orientation. It’s no longer sit back-and-see — we’re actually constantly reading, changing and shaping the products that are emerging,” he said.

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