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A Payments Startup In South Africa Managed To Raise $16 million For Their Kwenga-Like Solution

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Last week, Yoco raised R248 ($16.4) million in a round of investor funding for their POS solution targeting Small to Medium Enterprises. This is a significant amount for Series B investor funding. Series B funds are about taking businesses past the development stage.

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Yoco builds tools that enable SMEs to receive payments and manage business more efficiently. They offer a POS machine –like Kwenga– but they also offer this with their payments and performance software at an entry cost of R1799 ($119). This means that not only can businesses accept card payments but they can also track metrics which include;

  • best selling products;
  • inventory flows and;
  • peak sales period

The problem being solved by Yoco is very relevant, which is why they have been able to and continue scaling rapidly. South Africa has a card penetration rate of 75% but only %7 of companies actually accept card payments. The figure is alarmingly low because the regulation necessary to get a POS machine is extremely rigid and once you add the fact that accessing POS machines is also costly, it’s easy to see why that percentage is so low.

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Moving away from cash and ledgers…

In most cases SMEs don’t have the funds to invest in POS systems, so offering such a complete service at the price that Yoco does ensures that they have a huge market and their numbers are a testament to this. Yoco’s solutions have been adopted by over 27 000 and they are reportedly adding around 1 500 customers a month.

Kwenga has a similar (but not exact) solution for Zim

Steward Bank already made strides in enabling SMEs through their Kwenga device, but when compared to Yoco it appears Kwenga is actually lagging behind as they don’t offer as much control to their customers. Because Kwenga has no software component in its package, the burden is placed upon the merchant to seek out finer details on their own. Yoco makes sure you get everything you need in one package.

They should take notes

In Zimbabwe, Kwenga still has a huge advantage and because they were the first to move into this space –or they were the loudest about the fact that they had this). Since Kwenga has the widest adoption among POS solution for SMEs, Steward Bank should look to add a software component to make it more compelling for business owners. If other banks latch on to this they’ll just develop what will come to be known as a Kwenga that’s better than the Kwenga.

Techzim payments report…

Speaking of payments and POS systems, Techzim Insights prepared a report on the payments sector in Zimbabwe for just that reason. In the report we explore what the payments sector looks like, considering both the essential players as well as the non-essential. We will seek to understand how payments are being made in the country and see where the opportunity for innovation is – both for private payment service providers and regulation.

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