Online and mobile payments are steadily deepening their roots into the African continent. Several startups in Africa are involved in online payment with the aim of simplifying online transactions for customers. Aspiring to become a giant payment tool in Africa, Paystack recently raised $8 million in a Series A funding round.
— Techloy (@techloy) August 28, 2018
Paystack is a Lagos-based payment startup that offers online payment facilities to thousands of businesses and merchants in Nigeria through an API.
Launched in 2016, the startup currently processes over $20 million in monthly transactions. This represents about 15% of all online payments in Nigeria.
The Nigerian startup is the first to enter Y Combinator, an American seed accelerator that provides seed funding for startups. The latter had invested $120,000 into Paystack.
Paystack had previously raised 1.3$ million seed investment led by Tencent, Comcast Ventures, and Singularity. Participation for this investment round came from local investors like Spark, M&S Partners, Tokyo Founders Fund, and Blue Rinc Capital, among others.
Encouraging online payment startups like Paystack in Africa
The world is now a global village, a village where things happen online. Almost every aspect of human life has gone digital. It is only normal today to go digital in order to reach a wider audience. Thus, as a digital marketer, businesses and merchants have to fully adopt online payment tools.
With the increasing exposure to e-commerce in Africa, companies now have the opportunity to reach as many customers as possible. Africa has one million customers with a growing middle class. Thus, most retail investors in Africa are increasingly realizing the importance of this population and the easiest way to go international is to embrace online transactions.
Africa’s growing population is made up of youths under 25, guaranteeing the future of online commerce and the adoption of online payment tools. This is so because these youths make up the online world of today. As a result, the presence of online marketing will also mean the presence of online payment tools.
Setbacks of online payment in Africa
Though online payment tools are steadily gaining grounds in Africa, its adoption, however, lags behind in other regions. It is obvious that any innovation will always have laggards. This is especially true with the adoption of online payment tools in Africa.
Generally, online shoppers use debit cards, credit cards and electronic wallets for their purchases. However, some regions still find it uncomfortable to use online payment tools for their transactions.
Countries of the UAE are more comfortable with Cash on Delivery (CoD) against other online payment methods. Another reason is that countries of this region do not trust the security of other online payment methods.
On the other hand, the use of online payment methods varies among African countries. In South Africa, for example, customers prefer debit and credit cards for their online transactions while Egypt’s customers will rather go for Cash on Delivery. However, according to non-online shoppers, lack of trust in online payments is a barrier to the use of digital payment tools.
Despite these streams of challenges, startups like Paystack have decided to be aggressive in the online payment business. The startup plans to extend to Ghana and it is also looking forward to being the Stripe of Africa.