The Nigerian Online Payments Giants Place a Bet on E-commerce
Nigerian Payment Companies like Flutterwave & Paystack are exploring an e-commerce vertical.
Welcome to another issue of Tabbing. There is a lot going on in the African payment space but the wave of Nigerian payment companies crossing into e-commerce has been my favourite bit in the last couple of weeks.
Let’s dig in!
Using Flutterwave stores, a woman opens a digital one-customer-store, where she sells food to her husband. Contestants on Nigeria’s biggest TV show order their weekly supplies online. Elsewhere, a few Beyonce fans are desperate to find a payment option to renew their subscription to a streaming service.
Flutterwave has joined th3le new trend of digital payment companies in Nigeria that are making quite the splash in e-commerce waters. They’re doing this by creating free e-commerce solutions for merchants.
For these payment companies, long-term survival is the target. And the way to hitting the target is through reinvention and differentiation.
Sitting on a heap of consumer spending & habit data, these companies recognise the potential of the insights available. So they are consistently expanding product offerings, adding extra value to merchants, and bringing delight to consumers.
The Nigerian payment landscape is notoriously competitive. This is perhaps why in the last 18 months, massive capital has been injected into the industry. In November 2019, Interswitch achieved unicorn status following Visa’s minority equity stake acquisition.
In the same month, Opay raised $120 million with a view to boosting growth in Nigeria and other parts of the continent, right after raising $50 million 4 months earlier. Then there’s Flutterwave who raised $35 million in January 2020 to grow market share and expand towards offering more payment services.
It is not enough for these companies to facilitate payments, or be payment providers, or even compete for checkout pages on websites. If they are to transform and survive in the long term, they must pursue a new play.
For this survival and transformation to happen, Nigerian payment companies must know and meet both the expressed and unspoken wants and needs of merchants and consumers. For them, building E-commerce platforms is a huge part of how they do it.
The Challenges of the Nigerian E-commerce Industry
The online shopping experience for Nigerians is still very underwhelming.
E-commerce in Nigeria has become a meat-grinding industry. Pioneers, Konga and Jumia both have battle scars to show.
In 2013, positive predictions of the Nigerian consumer market began to emerge based on assumptions of a rising middle class and growing internet penetration. These predictions fueled the first phase of e-commerce in the country. These expectations never came to fruition. The rising middle class never arrived. A recession hit in 2016. and it was clear the Nigerian consumer market growth rate had been exaggerated. The much-heralded Nigerian e-commerce boom was held up.
Today, the challenges that plagued e-commerce in Nigeria during the Konga and Jumia reign still exist. The “middle class” is mostly mythical and the whole population is poorer than it was five to seven years ago. Both Konga and Jumia haven't succeeded in deepening the market.
They never truly hacked customer service and fulfilment (the entire process behind getting an order successfully delivered to a customer after an online order). So what next then?
E-commerce Acceleration: A Window of Entry?
Since the pandemic, more people have been shopping online than ever before. Amazon recorded 40% sales growth as per its 2020 Q2 earnings call. While Jumia stock rose more than 300% in the last 3 months as the company briefly attained unicorn status again. This e-commerce acceleration has given payment companies the window of opportunity to enter into the e-commerce space.
As consumer behaviour evolves, the merchant needs are also changing. Merchants do not only crave more visibility, they want solutions that will keep and grow their customer bases.
In Nigeria, the decentralisation of logistics, a growing number of logistic companies, as well as the threat of a “platform play” from companies like Facebook, have all forced Nigerian companies to rethink their strategies.
Facebook’s platform play involves merging its social and community elements with its payments platform and then integrating commerce functionality throughout its entire stack (Facebook, Instagram and WhatsApp). Launching both Facebook Shop & Instagram Shop has revealed the company’s plans to optimise for its massive user base; to find merchants and make in-app payments the norm.
In rethinking their strategies, Nigerian payments companies have come to the realization that they have to offer more services around their payment functionality. That is why they are betting on e-commerce in different ways.
Flutterwave, for example, launched Flutterwave Stores, a dedicated digital store for merchants to sell products online with ease. The company also partnered with Sendbox, a logistics company to help its merchants deliver their orders.
Paystack has also created Paystack Commerce, a toolkit for merchants to sell physical and digital goods online. Merchants can set up product links and payment pages for selling their products in just a few clicks.
Like Flutterwave, Remita launched its own e-commerce solution, Paylink. This platform allows users to easily set up online stores and accept payments from anywhere in the world.
Opay also launched Omall and Otrade. e-commerce channels dedicated to individual consumers and businesses respectively.
For each company, it is an attempt to catch up with the global pace. This trend of payment companies expanding into the e-commerce space is not just happening in Nigeria. It is happening in China, the US, Europe, and even Kazakhstan.
How Will the Payments/E-commerce Crossover Pan Out?
The ultimate ambition of Nigerian payment companies is to control transaction infrastructure as much as they can.
The play to facilitate each crucial layer and process involved in shopping is understandable. After all, building a direct and long-lasting relationship with consumers and merchants gives them so much leverage.
If these companies must indeed progress and effectively compete in the e-commerce space, then they must ensure they efficiently power merchants and continuously hold customer attention. Removing the bottlenecks in the Nigerian e-commerce industry might be their biggest test yet.
As the lines between industries get blurred even more, and the barrier to entry gets lower, everyone will try to become something they were not. This is the environment that businesses operate in.
This entire process is driven by competition; the desire to differentiate creates the novel, the desire to keep up with others makes it commonplace.
I am convinced that the Nigerian payment companies that will truly win in this new e-commerce arms race must build custom solutions that will solve the challenges in the space.
They must develop a merchant ecosystem that will have an unbeatable advantage over the competition including the global big-time players while delivering a well personalised and curated experience to consumers.
The reinvention and transformation of Nigerian payment companies are inevitable, as they must stay relevant and survive in the future. I reckon their future success will be highly connected with e-commerce.
Stuff we've kept a tab on
Provat, Nigeria's first Digital Property Verification & Valuation System has just been launched by Houseafrica.io in partnership with Nigerian Mortgage Refinance Company (NMRC).
Brass just launched. Brass is a bank-backed modern current account provider for Nigerian businesses. Brass does not charge any fees and it provides up to N10m financing to businesses.
Pedro's is creating Africa's first premium ogogoro (Local gin).
Eko Kitchen, San Francisco's only Nigerian restaurant was caught in a fire. 24 hrs later, Eko kitchen founder worked out a plan to keep the company running.
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This edition of tabbing was written by @_fosi and edited by @ngbede.