Competition in South Africa’s payment gateway space is heating up as cash gradually becomes less popular, and more businesses head online to sell their goods and services.
South Africa has several payment gateway companies, some of which process billions of rands every month.
These providers typically charge merchants a commission on transactions or monthly subscriptions.
Having a reliable payments platform is particularly important during lucrative shopping periods like Black Friday.
Without the necessary resources to support massive traffic volumes, a payment provider can suffer an outage that could cost a retailer dearly.
One of the major success stories in South Africa’s payment space is PayFast.
That followed DPO buying another prominent South African payments company — PayGate — in 2016.
Both payment platforms support various online payment methods — including debit and credit cards, Instant EFTs, Masterpass, and Zapper.
Another established player is PayU, which is the product of Naspers combining multiple payment gateways worldwide into a single group.
South Africa contributed PayJar to the PayU family.
PayU operates in more than 50 countries and processes around 10 million transactions.
The newcomers step up
Several smaller payment companies are now staking their claim in the industry.
In the past year, billions of rand in funding have been injected into growing payments providers.
In July 2021, Yoco raised $83 million (R1.3 billion) in a Series C funding round, the largest single investment into a South African payments company.
The company is perhaps most recognisable to South Africans for its affordable payment terminal machines, similar to those offered by iKhokha.
These devices are popular options for small businesses, such as those that sell their goods and services at festivals or events.
But it also offers an online payment gateway that allows businesses to accept payments online.
Yoco said it would use the capital injection to accelerate product development and reach 1 million merchants in South Africa and other countries by 2025.
Yoco was founded in 2015 by Bradley Wattrus, Katlego Maphai, Carl Wazen, and Lungisa Matshoba.
Another successful South African payment startup, Callpay, was sold to a global fintech provider for over R100 million in the following month.
Callpay specialises in call centre-assisted payment services, with products like Callpay Assist and Callpay Request.
Customers can type their details on the dialling pad instead of entering card details using an online form while talking to a service agent.
Alternatively, Callpay Request lets agents send a widget to the customer’s device using NI-USSD technology to complete payment.
Callpay also offers the mPOS app, letting merchants take card payments using a mobile device and the Android or iOS mPOS app.
The company counts DStv, Telkom, and Sun International among its clients.
In November 2021, Instant EFT specialist Ozow announced it had raised $48 million (R748.8 million) in Series B funding.
Tencent led the investment round and included Endeavour Catalyst and Endeavour Harvest Fund.
The company said it would use the money to continue growing with new products and expand into Africa.
Originally founded as i-Pay in 2014 by Thomas Pays, Mitchan Adams, and Lyle Eckstein, Ozow has become a familiar option on ecommerce sites offering instant IFT payments.
Ozow automates the EFT process on online stores, point-of-sale, e-billing, and peer-to-peer methods, making it easier for people with basic bank accounts to transact.
Ozow’s clients include MTN, Vodacom, Shoprite Group, Takealot and Uber.
In January 2022, cloud-based point of sale solutions startup TallOrder raised R47 million in additional Series A funding.
The funds came from existing investors, including Investec Private Capital and a consortium led by Nurture Investment Management.
TallOrder offers integration with various other payment platforms, including SnapScan, Zapper, MasterPass, Yoco, MTN MoMo, DPO, and PayFast.
It is specially geared towards small businesses with little IT expertise and resources to deal with online security. Its primary clients are hotels and guest houses.
Outside of its home base of South Africa, it has installations in Uganda, Ghana, Kenya, Tanzania, Malawi, Zambia, Zimbabwe, Mozambique, Botswana, Seychelles, and Indonesia.
On the more modest end of the scale are companies like Nomanini, which offers payment rails aimed at Africa’s informal retail ecosystem.
Last year, it received $500,000 (R7.8 million) in a convertible loan from Dutch development finance institution FMO’s MASSIF fund.
Nomanini raised $4 million (R62 million) in a funding round led by Standard Bank and completed by Goodwell Investments in 2019.