As part of the trend of banks investing in fintech start-ups, Lipa Payments, backed by Capitec, has received R10m in fresh funding to expand its service that helps informal businesses to accept contactless payments through mobile phones in SA and Nigeria.
Lipa Payments said it had secured a R10m investment from Empowerment Capital’s Imvelo Ventures, which is backed by Capitec Bank. Lipa Payments was one of the finalists in Capitec Bank’s Life 2.0 Hackathon in 2020.
In recent years, traditional banking groups have been ploughing money into technology investments as a way to avoid their businesses being disrupted by fast-growing and innovative start-ups.
“A key part of our digital strategy is to partner with fintech companies to accelerate the delivery of our offering and to create unique opportunities through partnerships,” said Francois Dempers, manager of innovation and digital strategy at Capitec Bank. “Lipa Payments was selected as one such investment through our Imvelo venture capital fund.”
Competitor Standard Bank has backed companies such as payments player SnapScan, taking a majority stake in its parent company in 2016, while FNB bought out Selpal, a fintech that operates specifically in townships and rural parts of the country, in 2021. Nedbank’s digital push has in recent years been focused on its Avo super app.
Fintech companies, in a bid to make it easier to send and receive money locally and internationally — among a growing list of products and services — are in an all-out race to increase financial inclusion for the many unbanked people in Africa, resulting in the sector booming across the continent.
Developed in 2019 by Thando Hlongwane and Roger Bukuru, Lipa Payments is an SA-based fintech start-up specialising in “tap to pay” technology for the informal sector with a software solution that enables merchants to accept contactless payments directly from a mobile phone. In essence, the platform allows small businesses that would otherwise not have the ability to process card payments to do so.
Lipa has deals in place with banks and other fintech companies to reduce costs, offering cheap and fast payments for merchants, even if they have low-end mobile phones.
“Informal sector merchants have traditionally relied on customers having cash on hand to transact, but Lipa Payments is changing that. There are obvious constraints to trading with cash and it is only getting more difficult in a digital, cashless global economy,” says Bukuru, who serves as co-CEO of Lipa.
Low access to formal financial services for consumers and small businesses has been an engine for innovation in the sector in recent years.
Much credit has to be given to mobile operators such as Vodacom, MTN, Safaricom and Airtel, whose large user bases have allowed alternative transaction methods such as mobile payments to spread quickly, from niche offerings to being the main medium of exchange in some countries.
Stats SA’s fourth-quarter Labour Force Survey in 2020 showed that about 2.5-million South Africans were part of the informal, non-agricultural economy and the number of people in informal employment has increased since 2013.
The company plans to roll out its software-as-a-service (SaaS) solution across SA and Nigeria in 2022 as part of its growth plan.
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