When it was acquired by Stripe in 2020, Paystack served a notice on the payment market in Africa that it was ready to play in the big league on the continent. It just did not say how much of the slice it was going for then.
On Wednesday, the payment gateway provider would finally open its doors to businesses in South Africa, after three months of intently focusing on the market and studying its strategic importance to Paystack’s ambition for the rest of Africa.
The office is just a symbol of a grander plan for the online commerce market in Africa.
“South Africa is one of the continent’s most important markets, and our launch here is a significant milestone in our mission to accelerate commerce across Africa,” says Paystack CEO, Shola Akinlade. “We’re excited to continue building the financial infrastructure that empowers ambitious businesses in Africa, helps them scale, and connects them to global markets.”
E-commerce is enjoying a time of its life thanks to the COVID-19 pandemic.
Before the pandemic struck, e-commerce on the continent had a series of challenges some of which include being dominated by young impressionable people with not enough spending income. The older generation who mostly controlled the spending power mostly stayed away leaving operators very frustrated. There was also logistics, the proliferation of social businesses, and poor customer experiences.
In Nigeria, platforms and investors who couldn’t take it anymore packed their bags and exited the market. Some notable ones include OLX, DealDey, Gloo.ng, Effritin.com, Buyright Africa, Gingerbox, Buyam.com.ng, and Cribpark. Konga and Jumia were not spared the challenges. While Konga got acquired by Zinox after a run of poor revenue, Jumia shut down offices in about four African countries.
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With the COVID-19 pandemic pushing businesses and individuals online, shopping online is no longer a vogue phrase. It is part of survival for many people. The main driver of the surge in online commerce is growth in mobile connectivity. While Nigeria accounts for the largest number of people in Africa with mobile connectivity, countries like South Africa have seen over 90 percent broadband penetration.
A January 2021 report by the International Trade Centre (ITC) showed that Africa has 631 online marketplaces, which recorded 2.2 billion visits in 2019. Ten countries are responsible for 94 percent of all online business in Africa. South Africa, Egypt, Nigeria, Algeria, and Kenya together account for 78 percent of total marketplace traffic.
Paystack already has a semblance of a continental player with teams spread across the continent. The company is currently 100 percent remote and a growing team of over 160 friends distributed across 12 countries (including Nigeria, South Africa, Kenya, Ghana, Côte D’Ivoire, UK, US, Senegal, UAE, France, and Turkey) and more than 16 nationalities.
Throughout the continent, over 60,000 organisations of all sizes — from technology startups to corporates and global brands such as MTN, SPAR, and UPS — use the company’s software to collect online payments securely from anyone, anywhere in the world.
Since 2020, Paystack has been building out its commerce business. The Paystack Commerce was launched on June 23 as a “toolkit that helps African creators bring ideas to market, beautifully.”
Then, the company said the commerce business was born because of the need and urgency for a new generation of tools to help African brands sell online.
At the time, Paystack was not the only company that felt it could address the challenges e-commerce was facing which were left glaring by the COVID-19 lockdowns. Flutterwave, Remita, GTBank, and OPay had all jumped into the fray six months earlier with ambitious plans to transform the market.
Fast forward to October and Paystack has signed the dotted lines with Stripe boosting its confidence that it can take on any competition. The company now sees beyond Nigeria and West Africa but the entire continent transacting with the rest of the world.
“Over time, we are going to expand to more countries across Africa to make it easier for trade to happen within African countries, across African countries, and between Africa and the rest of the world,” Jogbojogobo said.
By shifting its focus to the continent’s commerce space, Paystack has the opportunity to untangle the mess that is trading between one African country and another (intra-African).
The African Union says that the volume of intra-African trade stands at around 13 percent compared to approximately 60 percent, 40 percent, and 30 percent intra-regional trade that has been achieved by Europe, North America, and ASEAN respectively. According to the Union, even if allowance is made for Africa’s unrecorded informal cross-border trade, the total of intra-African trade is not likely to be more than 20 percent, which is still lower than that of other major regions of the world.
There are many factors responsible including the poor state of physical infrastructures like roads and railways, barriers to the movement of goods, people, and funds across borders.
But Paystack does not wish to be a marketplace like Jumia, Kongo, or Alibaba, at least not for the foreseeable future.
“We believe that e-commerce is the future of trade on the continent, and to that end, we are building various parts of the infrastructure to make that future possible. Part of that is making it easier for merchants to accept payments online. But at this time there are no marketplace initiatives on our roadmap,” Abdulrahman Jogbojogobo, Product Marketer at Paystack, said.
Paystack says it plans to leverage South Africa’s internet connectivity, one of the highest on the continent, to significantly drive up the adoption of digital transactions.
Today, despite South Africa’s impressive connectivity and high smartphone penetration, digital payments account for less than half of all transactions.
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