B2B payments in Sub-Saharan Africa, according to the World Bank, represent a $1.5 trillion market. These stunning figures, however, do not change the challenges that come with the manual process of making and receiving payments, as this has made it expensive and inefficient for businesses.
Invoices are also not standardized, and they are typically issued and received manually, which increases the administrative burden on business owners, taking more time and effort that can be invested into their businesses.
A report from Duplo, covering more than 1,000 business owners from Kenya, Nigeria, South Africa, and Egypt, highlighted that 44 percent of businesses still have to wait more than 24 hours to receive payments from business customers and partners.
34 percent take up to 7 days to receive payments, 17 percent take up to 30 days, and 3 percent take more than 30 days to receive business payments.
These and many more present a significant challenge for businesses that are often unable to maximize sales and growth opportunities available to them due to cash flow restrictions induced by complex payment processes.
We had a chat with Yele Okeloa, CEO/Co-founder of Duplo, who took a deep dive into the reports and how Duplo is reimagining the b2b challenges for African merchants.
Overview of payments in Africa
When you think of business payments on the continent, we have a lot of payment issues, from businesses getting paid late to leakages and intercompany fraud.
Business payments are also still manual. In our recent report, the data shows that 32.1% of respondents find b2b very expensive. 18.4% complained about how manual it is and 18.0% complained about the speed of payments.
These are all issues that Duplo tries to solve, as we want to make b2b payments as seamless as p2p payments.
Buyers basically want transactions fast and frictionless online payments, but right now, the business payments’ context here in Africa is incredibly behind, and there are various reasons for this.
One is each business has different parameters and payment rules, you have some businesses that can offer credit, others can’t, and some need their payment upfront.
Most of the business payments are still what we call push payments, whereby it’s not automated such that as a payer, you have to always remember to pay your supplier, thus invoices get lost constantly.
It’s a very difficult process for businesses, and we are just trying to simplify it as much as possible across the entire continent.
How do reliability, ease of use, and speed drive payment in Africa?
We found out that these are the most important factors for business payments and if you look at the reports, a lot of these businesses don’t have these three drivers right now, with the way they collect and make payments.
For example, when we think of b2b payments, speed is almost non-existent. The ease of use is still heavily on cash, cheque, or manual bank transfers, and you can’t really depend on those.
So far, African businesses have been able to run their transactions, however, these issues serve as a massive hindrance to business growth.
One can say they’ve gotten by with it, but they could be performing better if all these things were in place for payments. For businesses to make payments easy, they have to be a bit more secure, more reliable, and fast as well.
For us at Duplo, the thesis is that a business in Cape Town should be able to make instant payments with a business in Lagos securely, instantly, and transparently as well.
Has Africa been able to leverage technology to solve transaction costs and lack of automation, and how has Duplo been able to solve this?
When you think of payments, right now, in Africa, there is a lot of emphasis on customer-to-business payments, and also p2p payments.
There have been incredible advancements in that over the past few years, within Nigeria itself, and Africa at large, but when it comes to b2b payments, we haven’t seen that same innovation as well, in that space.
Currently, a lot of African-based payment systems are heavily focused on enabling merchants to collect payments from their customers, trying to improve online payments and make it make them a bit more secure.
However, on the business side, we’re still lagging, and there’s a lot of reason for that as business payments are very complex.
Also, the requirements are different as well because there are many players within the business that will have to decide on making payments or collecting payments from the customer.
All these different issues make b2b payments, very complex and quite difficult for tech companies to solve. Like I said earlier, there’s just been a lot of focus on b2c, and p2p, and we haven’t seen that transcend into the b2b space.
Has Africa fully explored the power behind digitized payments?
Not fully explored right now as a continent, however, every single year, we’re seeing an improvement in the number of customers that go in digital over the reliance on cash.
But then there are still tons of industries and businesses that are dependent heavily on cash, or cheque. In Nigeria, for example, the FMCG, industry, is literally all cash.
At Duplo, we saw that for us to digitize payments within the space, there will be tons of education needed for these customers, and secondly, as well, they also need access to digital tools to the internet as well to conduct transactions.
So no, we haven’t fully explored digital payments, we’re miles from where we can be, but the beauty about the African continent is that every single year, we’re always increasing. We’re always improving in terms of our digital goals.
We haven’t fully explored it all, but I’m very bullish that as we see more tech companies trying to solve this, as we see more central banks trying to make it easier for businesses to be more digital, that will change, however, we still have a long way to go.
With the high acceptance of cash over digital payments, coupled with challenges of internet connectivity, do you see a paradigm shift in the next decade?
Yes, I fully envision that and the reason is that the barriers to going online are reducing daily. It’s becoming cheaper for individuals to go online, and the cost of data is also reducing as well. And also the cost of mobile phones, for the masses, is reducing drastically.
Central banks across the continent want to ensure that their countries are dependent heavily on digital payments and not cash.
And the reason though, of course, is obvious, cash is expensive, bulky, it’s prone to fraud and theft. I think for me, one is we’re seeing a reduction in the prices of the internet, also a reduction in the price of internet-enabled mobile phones and the CBN is very keen to ensure that this actually happens.
And then we’re seeing more businesses accepting digital payments as well, getting also more comfortable relying less on cash, and we’re seeing that in the FMCG Industry.
For example, when Duplo launched most of our businesses, we’re collecting all cash, and that was reduced month by month.
I think all these factors in place will definitely ensure that we can go off cash over the next decade, and if you compare what we are currently, with the last decade, we’ve made massive strides as a continent, of course, you have some countries that are a bit more advanced.
For example, Kenya is a bit more advanced than Nigeria in terms of digital payments. Same thing with Ghana as well. But we do have great case studies that we can copy and emulate as well, and that will ensure that we can definitely go off cash in the next decade.
The Duplo report also indicates that mobile money transfer is widely accepted in Ghana and Kenya, but Nigeria still prefers Bank Transfers, what do you think is responsible for this?
I stayed in Kenya for a bit, and there are many reasons for this here in Nigeria, one is cultural, and then the banks are not as competitive as well.
Lastly, I think it’s just a government intervention as well. We have the NIBBS that makes payments easy between banks, while the CBN is ensuring that banks are competitive in terms of transmission and can go digital themselves.
But I think the wave is past Nigeria, the way for mobile money is quite late for us to basically pick up that right now, I think mobile money in Kenya has been over 10 years or 12 years. Now in Nigeria, we’ve seen advancements in the way bank-to-bank payments have been made.
NIBBS is a very effective tool for making these instant payments, so there’s no need for mobile money right now in Nigeria, and we’re seeing more telcos trying to make advancements in that space and that would ensure that we see advancements in mobile money.
Well, I just think the reason is the innovation wasn’t picked up in Nigeria early enough and the banks we have here in Nigeria are powerful and also making great advancements rapidly as well, thus making it redundant to ensure that mobile money works in Nigeria.
Your report mentioned the dangers of “wait time”, shed more light?
The way lots of businesses in Africa collect payments is to send an invoice, and most of these businesses spend at least one day for the invoices to get paid, while some may take up to 7 days. This is a real killer for businesses.
The report said 39.5% of people get paid within a week. About 14.8% Get paid within a month, so as a business, you already have plans and investments to make and having to wait this long for your cash can literally be the difference between life and death, and I think for Duplo, we are trying to also see how we can reduce the wait time for a lot of these businesses.
There are many tools that we can use here, including invoice factoring, business b2b Buy now pay later, or automating the way invoices are sent to their clients or their partners.
That’s what we mean by wait times, of course, the faster payments happen between businesses, the more transactions can actually happen, and for us where we see our mission is to power or simplify business-to-business payments to power global trade.
How will Duplo simplify B2B Payments?
The first thing we were trying to do locally is enable Nigerian businesses to automate their collections. Secondly, we’re trying to automate the way they make payouts to their suppliers and vendors.
A lot of them currently would not do that to check everyone’s cash and the issue with that is that it’s incredibly risky if payments are delayed, and we’re trying to automate and simplify that for these businesses.
When it comes to international payments, we have had some clients that would have to travel with bags of dollars or cash to pay their supplier in a new country, so we also try to take away this risk and simplify cross-border payments for businesses in Africa.
Thirdly, we ensure that businesses get access to the funds they need to grow as we’re currently piloting with a b2b BNPL product, which means that you as a Duplo customer can get access to goods upfront and then pay later.
The idea is that it helps you solve any cashflow issue you might face in the future, and finally, we are providing more insight into how money goes through your business, and we are doing this, by partnering with various accounting, software and ERP solutions within across the world that our businesses use.
Any of your payment that goes to the globe automatically sync with your accounting software, your ERP, and that’s a great value proposition for enterprise businesses on the continent, because they will spend a lot of money on manual reconciliation and accounting teams, and we are trying to basically automate all those processes for them.
Duplo’s value proposition is around ensuring the seamless flow of money both locally and internationally, and thus saves you the employee, time and cost, it takes you to track or reconcile a payment.
How will your last funding help you to scale the functionality of your business and also improve the status of b2b payments markets in Africa?
The funding we’ve received will be deployed in 3 ways. One is to expand and improve the product, and right now, we are strong and simplifying accounts receivable for businesses in Africa.
As it stands, Duplo businesses cannot meet the accounts receivables, but on the payable side, it’s still lagging, and we have to make some improvements there.
Secondly, we want to expand into two different industries and verticals, as we have seen massive growth within the FMCG industry in Nigeria.
Now we’re seeing more demands in the telecoms, medical and construction industries, so, we are trying to expand these new industries and simplify payments with them. We also want to provide the foundation for international expansion beyond Nigeria.
So we are very bullish on countries like put the CIV, South Africa and Egypt. If you can expand this in your industries, you’re basically increasing the number of businesses across different verticals that will have access to digitize payments and simplify payments.
And then lastly, if you can move into new countries, that would mean you’re providing the business payment tools that will connect businesses across the continent, and that’s how we see Duplo evolve over the next few years, whereby we are providing the payment tools to connect two businesses together to bring business and scale as well.
That’s how we plan to use the funds, and in the super early days, we’re very bullish on the opportunity that we have in front of us.
Featured Image: Yele Oyekola, CEO/Co-Founder, Duplo
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