B2B Payments Hold Untapped Opportunity For African Fintech Startups

A new report that includes the surveyed opinions of more than 1,000 business owners from Kenya, Nigeria, South Africa and Egypt has revealed ease of use, reliability and speed as the preferred features for African businesses when it comes to business-to-business payment methods. 

When asked what they liked about their current payment methods, 29 percent of respondents chose ease of use, 28 percent chose reliability and 18 percent chose speed. More than digitised processes (10 percent), affordability (10 percent) and customisation (5 percent).

The State of B2B Payments in Africa report, which was compiled by Duplo, a business payment platform for African businesses of all sizes, also revealed that bank transfers are the most common medium for making and receiving payments between businesses today, more common than cash, cheques and mobile money.

When asked which methods their organisations used for making payments to other businesses, 85 percent of respondents chose bank transfers as one of the ways they made payments, compared to 60 percent for cash, 23 percent for cheques and 17 percent for mobile money. When asked about receiving payments from other businesses, 62 percent said they received payments via bank transfers, compared to 59 percent for cash, 32 percent for cheques and 15 percent for mobile money. 

The apparent transition from cash-based transactions highlighted in the report represents a major shift in business behaviour, with cash payments historically dominating B2B payments on the continent. The findings of the report also suggest that beyond the clamour for digitised payments, African businesses want payment processes that are effective and efficient, rather than digital payments just for the sake of it. 

The report also 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. This presents a significant challenge for businesses that are often unable to maximise the opportunities available to them due to cash flow restrictions induced by complex payment flows.

According to the World Bank, B2B payments in Sub-Saharan Africa represents a USD 1.5 T market. However, the process of making and receiving payments remains largely manual, which makes it expensive and highly inefficient for businesses. Invoices are also not standardised 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. 

Commenting on the findings of the report, Yele Oyekola, CEO and co-founder of Duplo, said, “African businesses, large and small, are the lifeblood of the continent’s economy, and making it easier for more to flow between them should be a priority. The data from the report highlights a much-needed transition from cash-based payments but that is just the beginning. There are still various challenges in the payment process that make it difficult for businesses to maximise opportunities to scale their operations. We need to constantly innovate around these challenges to more effectively position African businesses for the growth they need to power economic growth on the continent.”

Feature Image Credits: Dignited