• Monday, July 15, 2024
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Further downsizing could hurt Jumia Pay’s prospects in Africa’s payment space

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AliPay, the world’s largest mobile payment platform with 870 million users needed over 50 countries to overtake PayPal in 2013. Today, AliPay is one of the platforms vying for a share of Africa’s mobile payment market.

This is an indication that while the mobile payment space may be evolving the level of competitiveness has come to mean that players must prioritize scale to nurture hopes of profit.

Jumia, the largest e-commerce company operating from Africa recently said during the presentation of its second-quarter results that it is turning its attention to the mobile payment market on the continent gave the impressive performance of its fintech platform, JumiaPay.  The platform which houses Jumia Group’s financial services such as payment processing for items purchased on the platform was easily the company’s fastest-growing category in the third quarter of 2019.

The company, in the period, processed 2.1 million transactions, with total transaction volume at $35.3 compared to $18.1 million it recorded in the third quarter of 2018. JumiaPay processed an equivalent of 11.6% ($35.2 million) of Jumia’s entire Gross Merchandise Volume (GMV) during this period. Jumia’s customer base also went up by 700,000 to reach 5.5 million.

The growth nonetheless, Jumia‘s operating losses are widening. The African e-commerce giant has accumulated over $1 billion in losses mostly due to its warehouse operations model ensuring that its presence in more than ten African countries is more than what it can handle at the moment. Observers also say Jumia faces competition from companies that ship to Africa from overseas, such as Amazon, and local small businesses that are increasingly offering online shopping. The one-time unicorn has also seen its share price dropped nearly 90 percent from its high after listing.

By the time it was listed on the New York Stock Exchange (NYSE) in April, Jumia was in 14 African countries. As at the time of publishing this article, the company has shut operations in 3 countries and has offloaded its Jumia Travel unit to a competitor, Travelstart.

Jumia closed its business in Cameroon and Tanzania and set a January 2020 clock to exit Rwanda. Meanwhile, a statement from the company confirmed it has suspended food and drinks delivery service Jumia Foods in Rwanda effective December 9. The company is also reported to have laid off 6 percent of its workforce in the Kenyan market as part of efforts to cut costs.

“This means that some of our colleagues will no longer have a role at Jumia from 5th January 2020. We are making this decision to support our path to success and help put our focus and resources where they can bring the best value and help Jumia thrive,” said Sam Chappatte, CEO of Jumia Kenya in a statement.

The company is hoping that the downsizing would enable it put its focus and resources where it can bring the best value and help the company return to profitability. The exits could in the short term help Jumia rechannel its energy in areas where it has the most competence.

“It’s a continuity of recent changes and the strategy is very much for us, it’s very simple, we are engaged in taking Jumia to profitability and drive the penetration of JumiaPay,” Sacha Poignonnec, co-chief executive said in an interview with the Financial Times.

But if Jumia plans to see profitability through JumiaPay, diminishing its presence in countries where its potential competitions are vying for would not help it.

OPay, the Chinese mobile payment platform that raised $200 million and taken the Nigerian payment market by storm plans to expand countries like Kenya where it originally launched in 2017. PalmPay, a payment platform owned by Transsion Group manufacturers of popular mobile phone brands Tecno, Infinix, and iTel is also looking to add more African countries to its market share beginning starting from Nigeria and Ghana.

JumiaPay would also need to worry about AliPay and its sister platform Wechat Pay regional encroachment strategy. In 2018 partnered with Equity Bank in Kenya to be connected to the latter’s payment gateway. That partnership also gives the payment platforms access to the bank’s reach in Uganda, Tanzania, Democratic Republic of Congo, South Sudan, and Rwanda. The regional bank also controls about 60 percent of e-commerce transactions in the East African region.

According to Poignonnec, JumiaPay is live in six African countries and has similar features like a PayPal wallet, which can be linked by the consumer to many different payment methods. Like OPay, Carbon and AliPay, the JumiaPay offers loans and insurance services. While JumiaPay may hold a lot of potential given the rising adoption of the mobile payment systems on the continent, the continued cut-backs from existing markets could also force existing customers in those markets to panic and leave the payment platform.

In other words, the more markets Jumia plays in the more adoption it drives to its payment platform. On the flipside, the more it continues to downsize, the more panic it creates for potential adopters of JumiaPay.