The second wave of eCommerce, Whatsapp payments in Africa & Regulation


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Welcome to the second half of 2020.

Recently. Beyonce’s new visual album sparked a debate online about how parts of Africa (a continent not country) should be depicted. 

I totally agree that if you must show the villages in African countries then it’s only right to show the cities too.  Culture is the way of life of a group of people and it’s ever-evolving. 

Unto this week’s update

Paystack’s response

2 weeks ago in South Africa opens up physical Retail Stores & Flutterwave's store, writing about the launch of Flutterwave’s store I commented that:

The next thought that came to mind [when I heard of the launch of Flutterwave store] was, what of Paystack, the other big player in the payments space? What would be their response? Well, it didn’t take too long to realise that Paystack had launched its own ‘store’ more than a year ago, they just didn’t call or see it as a store, but a payment page with multiple products. 

It doesn’t look like Paystack is interested in launching a store as it’s busy with it’s Merchant App which gives it’s Merchant better analytics on their business performance. 

Well, I might have been too hasty to conclude on Paystack’s response as last week they rebranded their existing payment page with multiple products and launched it as Paystack commerce. But unlike Flutterwave’s store, it appears to be more than an experiment as they’re ready to go full steam based on their product roadmap, which has tons of ideas for features and integrations. According to Paystack, they’ve been thinking about this since last year, I don’t doubt this because they must have seen the different ways customers were using their payment page with multiple products and thought, we must be up to something here. 

Although I think the launch of Flutterwave’s store might have made them launch theirs earlier, It’s clearly not too late as there’s enough space for two or more in the market.

The 2nd wave of eCommerce

This response by Paystack spotlights a bigger movement -- the 2nd wave of eCommerce in Nigeria. The first wave occurred in the early 2010s, with the rise of companies like Jumia, Konga, Yudala, Efritin, OLX, DealDey.

And what happened to these companies?

OLX, DealDey & Efritin shut down and left the country. Konga was likely soldat a loss for its investors despite pulling in over $70 million in investment since it was founded in 2012. Yudala merged with Konga when it was sold. The most successful out of the pack, Jumia has been on a loss-making streak since inception, an indication that most existing players are equally making a loss or barely getting by.

The handwriting on the wall from the first wave was that running an eCommerce company is expensive and barely sustainable.

The rise of the 2nd wave raises the question, What has changed? In answering this I agree with Techcabal, that Payments, Logistics and change in expectations are major changes that have occurred.

Payments: Before 2015, integrating a payment gateway was expensive and technical. It cost ₦150,000 to integrate payments using QuickTeller in the early 2010s. Now it costs nothing to set integrated payments using multiple options.

Logistics: With the proliferation of delivery companies & bike hailing companies forced to become delivery companies, it’s easier to transport orders to customers. 

Change in expectation: Most people are used to shopping online now. It’s normal to expect that anyone selling products to have an online front


But What hasn’t changed?

Business Model: Fundamentally eCommerce is still a business of small margins, it’s a game of who’s selling it for the cheapest reasonable price. This means any small wind could wipe out profits as customers are most loyal to the seller with the lowest price in the case of commodity products. 

Delivery option: Although there are many delivery options, the cost of delivery is still significant (for low-value items often as high as 30% - 50%) and bad road networks increase the instances of delays in delivery. The options for delivery might have increased but I don’t think the road network now is better than that of 5 years ago.

Payment: Gladly, online payments are easier to integrate and people are more confident in them, however, many people are still offline using feature phones (Nokia 3310) or unbanked. This means payment of delivery has to be accommodated, a payment avenue which is often abused by customers who can in a whim decide to reject products or decide not to pay the full amount required. 

It’s still too early to conclude on what might be, the second wave of eCommerce still faces many of the constraints faced during the first wave, and as such, I don’t think setting up a storefront for people to sell is all there is to enabling more commerce (although a good step). I look forward to seeing how the second wave would be different, at worst these payment companies can opt-out -- to focus on their core business anytime -- if it stops making sense for them. 

Whatsapp payments in Africa & Regulation

Last week, Brazil suspended Whatsapp’s payment service because it hadn’t had the opportunity to properly look into the arrangement properly. This makes it the second “hold on” response Facebook is getting, first India (since 2018) and now Brazil. Last week I wrote about the possibility of Whatsapp payments coming to Africa, the suspension of Whatsapp payments services reminded me about a part I thought of but left out: What type of regulatory issues could Whatsapp payments face in Africa and now how these two experiences (India & Brazil) would prepare them for Africa.

As in any other continent, the government is heavily interested in how money moves around and who controls it.

Over the weekend, I attended a conference where a representative from Palm Pay - Africa focused Chinese backed payment company - said in hindsight one thing they’d have done differently is to be less optimistic about how many markets in Africa they hoped to start with. They started 2 years ago with the intention to be in 5 countries but are currently only in 2 (Nigeria and Ghana), due to the inability to secure the necessary licenses from regulatory bodies. 

Palm Pay is only one story out of many and a hint that getting licenses or approval could be difficult. Facebook would most likely have a tough time getting in, depending on how they choose to come in. Already local players like Flutterwave, Paystack, M-Pesa would love to integrate with Whatsapp but they can’t.  A more certain way for Whatsapp payments to get into Africa would be to work with local partners who have influence with regulatory bodies, but this could involve sharing revenue and giving up some of its powers. 

The role of the regulators

What is notable about the ban of Whatsapp payments in Brazil and other similar moves of regulators is that regulators are often too concerned about "controlling" the impact of big companies like Facebook, at the expense of the positive impact that WhatsApp Pay will have on merchants & consumers. Remember, the regulator's role is not only to protect consumers or police companies but also to grow markets. 

Have a delightful second half 💚