Going mobile: Cards could soon dethrone cash as king
Technology has turned everyday mobile devices into powerful point of sale terminals, and card processing machines into mobile devices. Thousands of local small businesses can now accept electronic payments virtually anywhere. Local start-up success Yoco proves how such mobile payment acceptance is helping emerging merchants gain big and save more.
It is an entrepreneur month in South Africa in November and running between the 18th and 24th is Global Entrepreneurship Week (GEW), a global initiative that celebrates the world’s most disruptive innovators and job creators.
In the spirit of the moment and the movement, it seemed rather fitting when local start-up success Yoco announced on Tuesday 19 November that it hit the 58,000 client mark in the use of its mobile payment terminals. As a matter of fact, in a short five years it has become the largest mobile card payment machine provider in the country.
Yoco provides a point-of-sale payments solution and processes more than R6-billion in annualised card transaction volume for small and medium-sized businesses in South Africa.
Katlego Maphai, co-founder and CEO of Yoco, says the formation of the company was inspired by the US-based fintech outfit Square, which mostly allows merchants to accept mobile credit card payments via a plastic dongle that can be inserted into the port of a phone.
Maphai was born into a household of academics, and his parents’ jobs took him from Soweto to Cape Town, Cambridge, Princeton, Palo Alto, Pretoria and eventually back to Cape Town.
After completing his degree in Business Science at the University of Cape Town, majoring in Information Systems, he worked for Accenture’s Communications and Hi-Tech industry practice and later joined TMT Advisory and Investment firm in Delta Partners. It is at the latter where he met Carl Wazen (Yoco’s chief business officer).
He also had a stint at Rocket Internet, forming part of the team that set up Jumia.com.ng in Nigeria, and it was while working there he came into contact with Bradley Wattrus (Yoco’s chief financial officer).
Maphai’s childhood friend, Lungisa Matshoba (Yoco’s chief technology officer), rounds of the founding foursome, who together developed the company head’s brainwave into the tangible business model it is today. The operation was officially launched in 2014.
“The prototype testing process took a year to complete,” says Maphai, “and was conducted with 500 merchants in South Africa. It gave us critical feedback to design the ideal device for local service providers.”
By the end of 2015, Yoco was already 5,000-merchant strong, despite a market dominated by the big four banks.
But despite it not being a core business to the banks, and mobile card machines of yesteryear a very expensive solution for the smaller fry, from both an access and cost perspective, Maphai says it took a while to persuade the banks to relinquish that control.
When the card processing company overcame that obstacle, they took the plunge in redefining the market for mobile payments. Mobile credit card processing has been on the rise since.
“The first problem we want to solve for the small business owner is access,” says Maphai.
He says one major benefit to mobile credit card processing is the convenience and accessibility that it offers both merchants and customers. No matter where you are, you can conclude a transaction if you have a Yoco mobile card reader.
“That means a construction worker or hairstylist, for instance, can accept payment for a service onsite,” he says.
Yoco’s less-expensive easy-to-use solution, which basically turned a smartphone into a point of sale terminal, immediately stole market share from the notoriously unreliable, expensive and clunky mobile terminal providers.
Yoco Tap uses Near Field Communication technology to communicate wirelessly with other NFC enabled cards or devices. The NFC chip in the Wireless Pro “talks” to the chip on Visa and MasterCard contactless cards as well as Samsung Pay and FNB Pay on mobile devices.
The second part of the solution comes down to cost, says Maphai. The company levies no monthly fee on the owners of its terminals or users of its platforms. It charges 2.95% per transaction.
In September, Yoco launched its new, R799 POS terminal as it looks to double its customer base from 50,000 to 100,000 in 2020. It has already hiked the numbers by 8,000 since the launch.
Yoco plans to continue growing its network of small businesses and expand into other African markets. It is already in talks with various foreign financial organisations in this regard.
There is also the issue of security. When it comes to credit and debit cards, consumers have become increasingly nervous with the increase in identity and transactional fraud.
Maphai says the problem with the traditional model is that the banks relinquish control of risk as soon as the terminal is issued to a merchant. “What happens from there is out of their control,” he says.
Where Yoco is concerned, all transactions are managed via a cloud platform, which has additional security measures in place.
“Our clients’ customers can pay with a single touch and their card never has to leave their hands,” Maphai says.
The world is changing fast. We live in a mobile society where commerce takes place almost everywhere. We also live in an age of rising customer service expectations when it comes to how they want to transact.
Mobile payment acceptance makes payments easy, virtually anywhere, says Maphai.
“It also offers your customers more ways to pay while offering flexibility for your business to grow.” BM