Startups in Nigeria, others see growth as investment rise to $2.1b
• Global economic slowdown impacting SSA development
Investments into digital transformation are paving the way for growth across markets in the Central Europe, Middle East and Africa (CEMEA) region, a trend, which has been reflected in the increasing share of consumers and retail merchants making transactions online.
According to Visa Inc, which revealed this, prospects for new businesses are encouraging, especially in sub-Saharan Africa (SSA), while start-ups across CEMEA are seeing triple-digit growth rates for investment, where the figures for SSA are particularly strong, with investment up by 285 per cent to $2,120 million and deals up 26 per cent to 392 in number in the last year.
Senior Vice President and Group Country Manager, SSA Visa, Aida Diarra, in the article, titled: “Destination Digital: A Spotlight on Sub-Saharan Africa’s Prospects,” noted that three-quarters of small businesses indicated that accepting digital payments was essential to their growth, with 90 per cent reporting that pivoting to eCommerce, which relies on digital acceptance, had helped them survive the pandemic.
Diarra said: “If there is going to be a digital payment evolution, it cannot be limited to large businesses. In solving this segment, we need to address the complexities, drive lower cost, and innovate to create more frictionless ways for SMEs to begin accepting payments.”
With this goal in mind, he said Visa has launched Tap to Phone, mobile POS (point of sale) technology – where sellers download an app to enable their smartphones to accept payments – in several markets in the region. He said the process has underlined the importance of a robust Internet infrastructure, with connectivity (and the related costs) and integration with other business management systems both key to success in this area.
On economic challenges, Visa observed that the global economic outlook turned gloomier in recent months amid rising energy and food prices, and aggressively tighter monetary policy in advanced economies, with interest rate hikes in America E.U. and Britain.
As such, he said the impact of the global economic slowdown is being felt throughout SSA, adding that the region has been quite sensitive to the rise in food and energy prices, weighing heavily on households’ budgets, who often allocate a large share of their income to food purchases compared to other regions – around 40 per cent of income.
Visa observed that higher consumer prices and rising public debt remain key challenges for the region going forward.
Nonetheless, Diarra said: “Our region is open for business and the volume of activity we encounter in conversation and in the news demonstrates how dynamic our industry is. More players are entering the market in response to the wealth of opportunities that exist.”
Diarra revealed that in SSA, as seen around the world, reduced movement and an increased wariness of handling cash have encouraged a shift from in-person to digital transactions – which can present new risks to manage.
Diarra explained: “There has been an accelerated growth in e-commerce as more consumers have become comfortable with transacting online and that necessitates a need to secure those transactions.” Indeed, the Global Cyber Security Outlook reports a 31 per cent increase between 2020 and 2021 in terms of cybercrime accelerated by the pandemic.
“In response, and pioneered by Visa, tokenization – where a customer’s card number is replaced with a 16-digit equivalent, or token – continues to be a simple but powerful concept to protect sensitive payment data, secure digital payments and thereby accelerate eCommerce acceptance. Through Visa Token Service (VTS), Visa has already issued more than tokens surpassing the number of physical cards in circulation globally. Some 8,600 issuers and 800,000 merchants now use the service worldwide, leading to a 28 per cent reduction in fraud rates and a 3-point increase in transaction approval rates –so helping to boost sales for merchants, while also saving them money on fraud-related expenses.
“In SSA specifically, Visa issued nearly 1.2 million tokens, across 17 countries, in the month of August this year alone. This clear appetite among issuers, acquirers, merchants, and consumers to use Visa tokens reinforces that the future of money is truly digital – and that digital money must, as with any form of currency, be built on trust. That is why Visa will continue to prioritize enabling tokenization in the region, working with local eCommerce partners with the goal of taking tokenization to 70-80 per cent of local transactions.”