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This Cape Town-based Startup is Banking on Africa's Growing Mobile Market

Electrum co-founder Dave Glass on how they are servicing big clients such as Pick 'n Pay and Clicks


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IMAGE COURTESY ELECTRUM

Some of the best performing companies in Africa are mobile money transfer startups.

Safaricom, the company behind M-Pesa, is the most profitable company in East Africa and Zoona, a Cape Town-based mobile money platform, is one of the fastest rising startups on the continent.

This is driven largely by the growing mobile penetration on the continent, which according to Ericsson's Sub-Saharan Africa Mobility Report, is expected to reach 105 percent by 2022.

In Africa mobile is king. At the end of 2015, more than half a billion people in Africa had subscribed to mobile services, according to GSMA's The Mobile Economy Africa 2016 report.

"Mobile has emerged as the platform of choice for creating, distributing and consuming innovative digital solutions and services in Africa," the report states.

A new player on the scene 

New kid on the block in the mobile services sector is Cape Town-based fintech startup, Electrum.

Founded by three payments tech experts, Eon Joubert, Dirk Potgieter and Dave Glass, the startup provides retailers and banks with a cloud-based platform that allows them to sell virtual products and services such as prepaid airtime, prepaid electricity, gift cards, bill payments, money transfers, e-tickets and loyalty transactions, which are known as Value Added Services (VAS).

According to Electrum co-founder and managing director, Dave Glass, this is a market that's worth billions.

A major coup for retailers too

Glass says, when they started the business, they realised that retailers needed a solution for processing virtual products and services.

Retailers such as Pick n Pay and Clicks are now using the platform to process billions of value added services transactions per year, which in turn is helping them grow their bottom line and increasing their revenues by hundreds of millions of Rands, according to a press release by Electrum.

Jason Peisl, executive of customer applications at Pick n Pay asserts in the press release that value added services are a major growth area in their business.

"We are continuously adding new value added services to meet consumer demand for these products, and drive revenue growth," he said.

Glass speaks with SME South Africa about why they saw the VAS market as one they could potentially corner and how they see themselves doing so.

IMAGE COURTESY ELECTRUM

Dave Glass, Electrum Managing Director

Why we chose to focus on this sector
As the Electrum founders, we all have strong backgrounds in payments technology, and so it was natural for us to apply our skills in the fintech space.

We chose the VAS market after recognizing that banks and retailers were dealing with ever increasing complexity around VAS, and we could develop solutions to help them reduce this complexity. 

Banks and retailers are supporting ever increasing numbers of new channels (eg. mobile), emerging payment types (eg. Masterpass QR Codes), and settlement partners (eg. VAS providers). Using legacy technology, it is very difficult to provide consumers with seamless omni-channel experiences, support new payment types, and quickly integrate with new VAS vendors. Electrum's platform has been built to address this.

The slice of the market we're gunning for
Electrum already works with some of the biggest banks and retailers in South Africa, such as Pick 'n Pay and Clicks, and so we have a sizeable market share. Right now we are still focusing on the South African market, but are starting to look at opportunities in other markets.

How our solution gave us a strong start
Electrum has a very compelling market offering and so we were able to win major customers such as Pick n Pay and other large retail customers very quickly, and we have been profitable from year one.

Our growth strategy was all about our customers and our people. We delivered what we promised for our customers, and hired excellent people for our team.

To date the business has been profitable enough not to require funding. There were some tough months when the business was started, but the startup has done really well very quickly. We are not averse to taking funding, but right now we have no requirement for doing so.

How South Africa compares to the international market
VAS is seeing much higher growth in emerging markets such as South Africa due the prevalence of prepaid products, and the huge numbers of unbanked customers who make use of Value Added Services such as bill payments and money transfers. In developed economies, the adoption of prepaid products has been much lower, and most consumers have easy access to banks.

What makes our technology unique 
Our platform has been designed to help banks and retailers grow their VAS revenue. Our platform allows them to connect to as many VAS providers as they wish, and offer a vast range of products to their consumers. Our technology also makes it very quick to add new VAS vendors, and bring new revenue streams online.

We provide a pure technology solution that the retailer or bank effectively owns, and uses to run their VAS business.


See also: 9 mobile trends for 2017 that all entrepreneurs need to know about

 

Why retailers choose us
There are a number of value added services aggregators in SA that offer a range of VAS that retailers can sell. However, they only offer a limited range of services, [they] take a cut of each transaction, and don't provide comprehensive national coverage for services such as electricity. 

Our platform enables retailers to pick and choose which VAS providers they wish to use, and swap them out when required. This means that they don't end up getting locked-in to a VAS provider on a technology level. If they have a situation where a competing provider offers them better rates on a specific service, they can easily switch providers without having to make costly and time consuming changes to their infrastructure. Electrum allows the retailer to connect to whoever they wish, so they can provide full coverage of services for their customers.

The platform currently offers over 30 different integrations to VAS providers.

When a new VAS offering comes to market, retailers are able to implement the new service much faster than is typical for these types of integrations. Shoppers thus spend less time waiting for the services to become available in-store. It typically takes about four weeks to get a new integration up and running.

The consumer benefits as our solution makes it much easier for the retailer to offer a wide range of Value Added Services (VAS), so the shopper has access to more services in-store. 

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