This week Flutterwave, the African payments company announced that it had signed a deal with PayPal. According to the deal, registered businesses that use Flutterwave’s platform will now be able to receive PayPal payments. The receipts can then be processed into the respective business’s account. Soon the facility will be extended to informal businesses which use Fluttewave.
Not being able to receive PayPal payments is a pain that Zimbabwean businesses and individuals are all too familiar with. We have been waiting for PayPal to fix this since 2014 when they came to Zimbabwe with their current incomplete experience. Up to now, all you can do is link your card and make payments. Anyone who tries to send money to your PayPal account will see an error.
Now here is something self-absorbed sadza eaters are not familiar with: It’s not just Zimbabwe, a lot of countries in Africa have such limited accounts. Notable among these is Nigeria seeing as it has a booming eCommerce sector its’s a rather surprising revelation. In other African countries, PayPal is not even available. Also, remember a bank account is often required to sign up for PayPal and Africans don’t do banks. Most of us prefer mobile banking.
These are a few of the things global entities like PayPal just don’t get about Africa. They try to apply concepts from the developed world onto our continent and they fail miserably in the process. I recently gave up applying for a 2Checkout account because for some reason the powers in charge of this service associate prepaid airtime and electricity vouchers with fraud. In developed countries, cellphone plans are the norm here prepaid is our way of life.
It’s not always about sanctions
Sanctions… It’s a word Zimbabweans are painfully familiar with. A favourite go-to catchall-excuse for our inept authorities. When it comes to online payments in Zimbabwe it is also often given as an excuse and reason for why international fintech companies shun Zimbabwe but often things are more complicated than they first appear.
PayPal is a famous example. In a lot of countries where they have a full PayPal experience, PayPal is the easiest and most popular way to get paid. All you need to do is sign up for an account, verify the account and you are good to go. You can start receiving and sending money to all parts of the world without a care, so long as the person on the other end has a PayPal account.
It all looks so easy until you think about what’s really happening beneath the surface. PayPal acts as an abstraction layer on top of the complex banking systems and rules. In order for the service to work, it often requires a local international bank as a partner. In South Africa and Botswana for example all PayPal receipts go through FNB Bank even if the PayPal account holder has an account with another bank.
Each country has it’s own complex set of financial regulations. In Zimbabwe, those sometimes change by the minute. One minute something is perfectly legal then our mercurial overlords pop up on TV or social media banning said legal activity with immediate effect. That tends to put the fear of God in would-be investors. Stability is the credo of a thriving financial sector. That’s the opposite of what we have here so let me be blunt, PayPal receipts are never happening unless there is a radical change in that arena.
There is also the issue of risk and perceived risk versus potential returns. In addition to being unfamiliar with the quirks of Africa’s fintech industry, Africa’s fintech sector is relatively small compared to the perceived risk of doing business in that sector. Then there is real risk. For example, there are murky laws stemming from sanctions.
Even though not everyone is technically banned from US financial systems there is always the risk that person X who is banned will access your system and you will have the U.S Department of Justice to contend with. The DOJ loves to levy fines that will wipe away any profit you would have made. So in the end the question gets down to: How much profit will we get from Zimbabwe versus a potential multi-million dollar fine we will have to pay if we inadvertently run afoul of US laws? Or what will the monthly cost of us implement a system that will ensure we don’t run afoul of these rules?
For a small country like Zimbabwe and most African countries, the answer is usually it’s not worth the hassle. PayPal figures they will probably not make enough money for it to be worthwhile for them to operate here so they just either turn it all off or they enable risk-free limited functionality.
Flutterwave was made in Africa for Africans by Africans who are intimately aware of the ins and outs of the African fintech landscape. The deal with PayPal will allow Flutterwave to abstract these complexities from PayPal. From PayPal’s point of view, there is just Flutterwave to deal with instead of a multitude of services such as MPESA and a dozen other mobile money agencies.
In fact, PayPal may just need to do a simple ACH transfer into Flutterwave’s US bank account so in essence, PayPal will just be remitting to a US company from its point of view. They will not have to worry about the complex banking rules of each country. Flutterwave will then handle the rest and they have shown they are more than capable of doing this. They already allow businesses to receive ACH payments from the US.
It’s a match made in heaven. PayPal gets access to the hard to crack the African market and Flutterwave gets access to PayPal’s growing ecosystem. It’s a win for everyone. Except for Zimbabweans that is.
Flutterwave is not available to Zimbabwe. Not yet anyway but the whole setup with PayPal is a step in the right direction. It’s an easy way to solve the PayPal mess and bridge the gap between Western, Eastern (Flutterwave supports Alipay) and African fintech solutions.