Adyen for Rising Marketplaces in East Africa: Can you help? (Outdated)

Kiriza tz
Kiriza tz
Jun 11 · 5 min read

According to a source we won’t disclose, Fintech and Agriculture are the booming areas in Africa. If you are looking for funding and your startup is in one of those, then investor’s checkbooks will smile just by you mentioning one. Add in the term BlockChain and you might even get more. He joked.

This gentleman went on to add that you shouldn’t follow this investment wind if your passion doesn’t belong to any of the two. He urged startups and small businesses to stick to their eureka moments and just like marriage, they will eventually find a right partner who will invest their money, resources, and networks to make sure they succeed.

This brings us to the topic of online payment gateways and the rising of Uber and Amazon alike in East Africa.

Kiriza Group Limited, a marketplace that uses the same business model as the two giants above, first hand experienced the challenge of finding a third-party payment gateway to integrate into its solution.

We approached the likes of Braintree, Adyen, and Stripe but sadly they don’t operate in the East Africa Space due to rules and regulations. Well, some responded, others gave us a deaf ear. The closest solutions being Atlas and Paystack in Nigeria but even they have not yet knocked on the doors of Eastern Africa.

Now like anyone else, we know you must be saying why don’t marketplaces use the likes of Mobile Money and current existing solutions to process payments?

We shall state the following reasons below:

i) Commissions: When you use a payment gateway, it must take a commission of each transaction, else it won’t be able to survive to see another financial year. When these rates are high, it means that the final consumer will face the slap in his invoice as each business involved in between will still want to make its money.

Marketplaces come with the advantage of many transactions taking place at a given time, and if only current solutions could lower their rates; the gain for them would be unimaginable. Case in point, Uber and Airbnb use payment gateway solutions for marketplaces like Ayden and Braintree to handle payments, thus ensuring the driver/passenger and host/guest respectively have great experiences that keep them returning for more.

We bet they can even use the data to project a CLV (Customer Lifetime Value) after a few purchases.

ii) Fund Splitting: current solutions cannot handle the automatic splitting of money sent by a customer. A marketplace has to receive money in one account and manually transfers it to the other stakeholders.

Remember, each transfer is charged based on the carrier used and the amount sent.

iii) Fraud Detection: before an online transaction takes place, it is vital to ensure that the following doesn’t happen, else a lot can go wrong. Fraud can happen when a normal user who usually spends close to 1000 USD per month, all of a sudden makes an order worth 250000 USD. Just to be sure, the payment gateway to be used should verify such a transaction by getting in contact with the owner, this in turn curbs identity theft which happens a lot in the digital space. Only banks can do that at the moment.

iv) Sanctions Screening: The internet has created a global village; this means that at times you might receive an order from a country your country doesn't have good relations with OR shady individuals you should not operate with. A good payment gateway should be able to sieve the good from the bad and protect you from criminalizing yourself.

v) Funds Holding: this refers to the ability to hold money transacted should any issue arise. Some of these issues may be a judge’s order to stop a certain service/product from being offered such as an order to investigate money laundering suspicions OR waiting for authorization from a parent as a child tries to purchase something.

vi) Prompt Refunding: We know some payment gateway solutions offer refunds, but the process is always abysmal, to the point that customers begin to lose hope. If the opportunity cost is not worth the agony, of having a support ticket stare at them with no response, most people count it as a loss and move on.

Again, I know your next question is, if you guys have noticed it all why don’t you build one and cater for the demand you are speaking of?

Well, if only it was that easy. The legal processes, resources, and manpower it takes to build such a solution are beyond our current capabilities.

As Greg Colton, Payments expert and consultant. AAP, BSA/AML, Compliance. TPPPs, MSBs answered How much does it cost to build an online payment gateway?

“As someone who has built and operated one, hundreds of thousands is the wrong answer. It is a several million-dollar endeavour if you bootstrap it -$2–3MM is not outside the realm.

I would advise anyone considering it, against starting one in today’s regulatory and enforcement climate. It is a fixed cost business and you can easily spend a million or more annually in legal fees without being involved in a lawsuit. Further to be successful you also need a lobbying effort of several hundred thousand dollars. But with heavy handed enforcement and regulation, you can quickly be in a ton of trouble and have a ton of legal expenses (without doing anything wrong).

Operationally, it is a fixed cost business and you will have at least $200k in fixed costs per month for a moderate sized operation, including IT/development.

Compliance is the hard part and will take extremely detailed policies and procedures — figuring 2k-3k pages is not unreasonable at all, and you’ll need them day one.

Best of luck, but in my professional opinion, you are better off staying away.”

We don’t know if this post will ever reach top leaders in the East Africa Community, but if you are in a position to just even read this to them, then we shall appreciate it so much.

A single solution like this will help so many marketplaces that are currently being built in East Africa. Marketplaces that have the potential to hire and benefit millions and millions of Tanzanians, Kenyans, Ugandans, Rwandese, Burundians, and South Sudanese.

If you can help us to get an appointment with a decision maker capable of implementing such a solution, then we shall thank you even more.

As a continent, we have come from far, from barter trade to cash and now we are on the verge of moving to something even greater. Something that will propel us to financial advancement that we have never seen before. It is just a matter of time before this happens, how great will it be if you actually played a role in this?

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