Moving SMEs beyond cash-only payments

South Africa is both a financial and technological powerhouse on the African continent, so it’s hardly surprising to see South African companies venturing forth into the world of financial technology (fintech).   

Local fintech company Yoco, which offers smart, competitively priced payment solutions for businesses, was recently named by CBInsights as one of the Top 250 fintech companies changing the face of financial services globally. 

finweek chatted to Yoco CEO Katlego Maphai to discuss the company and what the growth of fintech in the country means for our economy.  

What did you do prior to starting Yoco?

I was most recently involved with venture development at Rocket Internet, setting up Jumia.com in Nigeria, where I met Yoco co-founder Bradley Wattrus. 

The majority of my career was in telecoms as well as in media and technology management consulting at Accenture and Delta Partners.   

Where did the idea for Yoco come from, what motivated you to turn it into a business?

The idea came about when I was having lunch in San Francisco at a small eatery that I assumed would not be able to process a card payment. 

A mobile card reader was presented to me. This encounter planted the seed that led to Yoco’s start.  

When did Yoco start operating and how was it initially funded?

We officially launched out of beta [testing] with 500 merchants in October 2015. We have since signed up over 15 500 merchants, processing over R1bn in annualised transactions a year. 

When starting out in 2013 we were initially self-funded – after a year we obtained an operating licence and managed to secure our first round of funding. 

What was Yoco’s first big deal?

Our first big deal could possibly be the very first seed round of investment we raised, which was $560 000 to help incubate the venture. 

Which investors have since come on board?

To date we have raised $7m in total. This year we managed to secure Series A funding from two international fintech-focused institutional investors – US-based Quona Capital and Netherlands-based Velocity Capital.

Biggest lesson learnt?

During this process I think that I have learnt that entrepreneurship is about identifying gaps and needs in the market, then developing solutions to meet them, and then formulating a sustainable model for such solutions, making it a business (setting up its potential to make revenue and returns for potential investors). 

That it’s not always about business plans and great ideas, it’s about building solutions for human challenges and turning them into businesses – that’s when you become fundable.

What have been the biggest difficulties you’ve had to overcome?

I can say that our biggest challenges were related to growth and reaching scale. 

We had to build a market by introducing businesses to electronic payment acceptance – when Yoco launched, only 6% of businesses in South Africa could accept card payments, mostly medium- and large-sized businesses. 

We have since increased this by one percentage point in just over a year. 

This means building out a channel to reach the market, which is an immense undertaking. There are few examples in SA of locally built products in technology that have gone on to scale in B2B segments. 

Building out a cost-effective distribution channel to a new segment of a market is immensely challenging, but it is also an opportunity to innovate and break new ground. 

As a business some of the biggest challenges for us included finding the right capital to drive our growth and growing the business and team into multiple locations and countries. 

It’s important for us to do this without compromising the company culture or losing sight of our vision to make it easier for our customers to do business.  

How tough is competition in your sector, and what differentiates your product from others?

There are a number of businesses in the country operating in the sector we are in.

But there are very few locally built products in technology that have focused their entire operation on serving a largely underserved base – small and medium-sized enterprises (SMEs). 

Our starting point: SA has a massive payment acceptance gap. There are lots of cards in the market but not enough places that accept them. 

In this we saw a massive opportunity, and in early 2015 jumped in head first, focusing on providing widespread access to payment technology through our card readers.

Now, two years on, with over 13 000 businesses using our platform, we are able to take feedback directly from a significant customer base to further drive innovation that serves entrepreneurial growth amongst SMEs. 

From this has stemmed innovation, not only in our own products, but also partnerships that we’ve initiated. 

We have a simple principle – if it serves our customer and their business success, it is an avenue worthy of exploring. This philosophy has spawned a multitude of partnerships with other brands serving the SME sector. 

From accounting providers to other point-of-sale (POS) providers. The most notable in recent months has been the partnership with one of the leading global POS providers focusing on the retail sector, Vend. We are its first, and only, African partner – a not insignificant accomplishment.

You talk about a ‘customer-centric’ approach at Yoco. Can you explain how this manifests in practice?

We take the time to listen and understand what our merchants are saying about their needs. We believe that we can only grow as our merchants grow. 

Our obsession for our customers truly sets us apart and ultimately fuels our growth. 

Very early on we understood that we were solving an access problem, not just a cost one. Getting a card machine traditionally took too long and was almost seen as a privilege. 

With this in mind, we took a long-term view and started to build out infrastructure and a brand that would remove the traditional barriers.    

Signing up for Yoco takes less than 10 minutes, with all the checks completed automatically in the background with no human intervention. 

We deliver the card reader within four business days, on average, a statistic unheard of in the industry. 

How many people do you currently employ?

We currently employ a total of 83 full-time and four part-time employees, with a recruitment view in line with our growth objectives. 

Our People team has a clear focus on recruiting nothing but A-players.

What is the best business advice you’ve ever received?

Ideas are unlimited and always attainable – a great team and execution are not. Focus on the people and execution, the rest will sort itself out.

How do you stay motivated?

Well, I believe that you need to find something you’re passionate about and go all in – and that 100% is usually not even enough. With this kind of mentality, you are always motivated. 

What is your three-year goal for your company?

Yoco aims to become the largest SME fintech venture across sub-Saharan Africa with a multi-product and revenue offering built on top of electronic payments, in the next three years.

Plans for international expansion?

We believe that enabling card payments is transformative and we want to do that for African SMEs. 

Yoco operates nationally with key offices in Cape Town and Johannesburg, and is planning to expand into the rest of Africa in the very near future.

Note: Since this article was published, we updated it to reflect an increase in the number of registered merchants from 13 000 to 15 500.

This article originally appeared in the 16 November edition of finweek. Buy and download the magazine here.