By the time Safaricom launched M-Pesa payments in 2007, the market for digital payment in Africa was barely scratched. With poor internet connections, defragmented payments systems, and a non-existent online-based customer base, the continent was in darkness.
In 2006—prior to the launch of M-PESA, the leading local mobile money transfer service—only 18.5 percent of Kenyans used formal services (i.e., mostly bank accounts), 8.1 percent used semi-formal services (such as those provided by microfinance institutions), 35.0 percent used the informal sector (rotating savings and credit associations), and no less than 38.3 percent were completely excluded.
A decade later, the industry has expanded rapidly, giving birth to new entrants who have pushed the worth of this sector to billions of dollars and other billions exchanged through various platforms. These include the use of mobile money, credit cards, virtual cards, instant bank transfers, and QR codes.
The global digital payments market size is expected to reach USD 132.5 billion by 2025, registering a CAGR of 17.6% from 2019 to 2025. For Africa, the mobile money market reached a transaction value of US$ 200.5 Billion in 2018. Looking forward, the market is projected to reach a transaction value of US$ 1,011.3 Billion by 2024, growing at a CAGR of around 30% during 2019-2024.
Africa has the largest mobile money market across the globe with telecom operators embracing innovative practices that allow customers to pay bills and access services including loans, insurance, and savings.
The scene in Africa has evolved greatly to be more than M-Pesa and also to be beyond mobile-based payments. Though Africa is greatly connected via mobile phone, there are corporate companies who have sought digital payment solutions that enable them to reach more customers and act like a net that traps more digital opportunities.
Africa adopted digital payments attracts UAE-based Network International
Just last week, Network International Holdings plc, the Dubai headquartered enabler of digital commerce across the Middle East and Africa announced that it has entered into an agreement to acquire DPO Group (DPO), an online commerce platform in Africa. The acquisition is valued at a total consideration of approximately $288 million.
DPO is the largest online payments platform operating across Africa. The company has an annual revenue growth of about 40 per cent from 2017-2019 and a compounded annual growth rate (CAGR) of about 30 per cent from 2017-2019. This coupled with a revenue of $16 million in 2019. it provides e-commerce and mobile money services for more than 47,000 merchants across high-quality brands.
This is arguably one of the highest acquisition in the fintech industry in Africa, which showcases the potential that is held by the regional digital payments market. There have been others like the 2018 Cellulant when it raised $47.5 million for its expansion.
The movement has moved beyond mobile payments to the development of platforms that will aid new entrants into the African market to meet its growing clientele base. For example, both Uber and KFC have contracted DPO group to develop platforms that either helps them reach out to more customers or plow in revenue from sub-contractors.
The London Stock Exchange-listed payments company, Network International is expected to use its global reach and its Middle East experience to grow the DPO group growth.
The ground is not near even. In most of sub-Saharan Africa, only a small percentage of upper-income households enjoy the convenience of card-based, online, and mobile banking and payments, while most consumers still pay with cash. One study shows that more than 90 percent of retail transactions in parts of Kenya remain cash-based, and Gallup’s survey of 11 countries in sub-Saharan Africa found that more than 80 percent of adults there have made bill payments or remittances with cash.
Most of the companies providing fintech solutions for digital payments in Africa are involved in building infrastructure. These include enabling banks to seamlessly and securely pass cash from different entities, while others have been building infrastructure to enable companies to collect revenue from commerce sites.
There is also an increasing number of buyers who are shopping on online platforms requiring the need to have a system that can order, receive payments and promote the items on sale. Such is the model taken by KFC in South Africa when they engaged DPO to develop a platform that will incorporate both card payments as well as mobile money.