South African-based Fintech solution Lipa Payments, has raised $660,000 in a funding round from Empowerment Capital’s Imvelo Ventures, which is backed by Capitec Bank. The new investment will enable Lipa Payments to build its contactless payment platform in South Africa.
Founded by fintech entrepreneurs Thando Hlongwane and Roger Bukuru in 2019, Lipa Payments works with banks and fintechs to enable affordable, accessible, and fast payments for merchants, even if they have low-end mobile phones.
Customers with smartphones that do not have near-field communication (NFC) capabilities mean that merchants can’t accept either phone-to-phone payments or a bank-card payment directly on their smartphones.
“We see tech as a scalable tool to solve everyday challenges. Lipa Payments solves two. First, we give small-scale merchants low-cost technology to accept digital payments at the point of sale, and secondly, we allow buyers of goods and services to pay digitally without having to worry about cash or network coverage,” said the CEO and Co-Founder of Lipa Payments, Thando Hlongwane.
To date, there is limited infrastructure to support digital payments at local shops, hair salons, or fast food stores and most micro-merchants can’t afford to purchase Point of Sale (POS) devices. For banks and fintechs, the distribution and maintenance of POS devices can be costly.
“Informal sector merchants have traditionally relied on customers having cash on hand to transact, but Lipa Payments is changing that. There are obvious constraints to trading with cash and it is only getting more difficult in a digital, cashless global economy,” said Roger Bukuru, Co-CEO, and co-founder of Lipa Payments.
Research carried out as part of Mastercard’s 2020 State of Pay report, conducted across 14 different countries, found that people are moving away from using cash with the last two years birthing fintech solution start-ups in South Africa to help move to a digital economy.
However, few fintech start-ups are focused on the potential at the bottom of the income pyramid, but for Hlongwane and Bukuru, returning to their roots and driving financial inclusion for the lower-income market was a no-brainer.
The Lipa Payment duo plans to roll out their Software-as-a-Service (SaaS) solution across South Africa and Nigeria in 2022.
“We have always wanted to solve the problems that informal sector merchants face. It’s been a journey of finding the solution to the question: ‘How can we bring them into a digital payments space,” concluded Hlongwane.
StatsSA’s Q4 2020 Quarterly Labour Force Survey shows that around 2.5 million South Africans are part of the informal economy (non-agricultural) and the number of people in informal employment has increased since 2013.
Whether selling goods and services from a taxi rank, a spaza shop or a dirt road in a rural village, Lipa’s digital solution for merchants of the informal economy allows them to be financially included in the digital economy of the future.