For all the talk about emerging markets and their similarities, moves involving African startups expanding to Latin America are rare. Only two significant activities come to mind recently: Migo’s expansion to Brazil and Paga’s planned move to Mexico, their respective second markets outside Africa.
What’s rarer, however, is the reverse — Latin American tech startups extending their footprint into Africa. That makes the news of Brazilian fintech unicorn EBANX expanding operations into Africa somewhat impressive. Last September, the payments technology company, which provided local payment solutions across 15 countries before the announcement, said Africa was its first expansion outside Latin America, taking its market footprint to 18, including South Africa, Nigeria and Kenya.
The rationale behind EBANX’s African move isn’t lost on anyone. The continent presents a $115 billion digital economy, resulting from a combination of a young and digitally savvy population and increasing digital penetration, according to a report by Endeavor and McKinsey & Company. In addition, the fintech considers Africa — the fastest-growing digital games market globally, according to Newzoo — to be the “next big frontier” for e-commerce, payments and rapid fintech evolution — similar to Latin America, where it was founded about a decade ago.
“This is the moment for Africa, and it’s quite reminiscent of the Latin American landscape back in 2012 when EBANX first began its journey by providing global merchants access to sell more goods and digital services via the internet to Latin Americans through local payment methods,” co-founder and CEO João Del Valle said.
EBANX has made gradual progress since the announcement six months ago. The startup, which processes payments for brands such as Meta, Coinbase, TikTok and Garena in Latin America, confirmed to TechCrunch that the volume of transactions processed through its payment platform in the region has jumped 70% in this timeframe. The hiring of Wiza Jalakasi, ex-VP at African fintech unicorn Chipper Cash, last month to lead its operations on the continent signifies the fintech’s intentions to turbocharge this growth.
In this interview with TechCrunch, Jalakasi, Africa Market Development director at EBANX, and Paula Bellizia, president of Global Payments at EBANX, discussed what the fintech’s global merchants and African customers should expect from its expansion into Africa.
TechCrunch: For some tech observers, it’s unclear what EBANX does. Is this another Interswitch, Flutterwave, or Paystack targeting local businesses and customers, or is the company targeting a new set of customers that these payment gateways don’t serve?
Wiza: It’s very much on the latter side. So it’s global brands that are looking at emerging markets as a category and may not consider Africa as a region or the continent doesn’t make a business case or make sense from a numbers perspective. But because we have this depth of coverage in Latin America, and we already have established relationships with them, it becomes a question of, “Hey, we can also add these incremental countries,” and that becomes a bit of a more robust business case for some merchants who might not be ready to take that jump yet.
Many payment providers are servicing the continent, but a lot of their merchants are usually localized in the region, which means there’s definitely room for players like EBANX to come in to serve a different segment with different needs, and in some cases, even collaborate with local processors to make the pie bigger for everyone.
Paula: To add, EBANX, through one single API today, we integrate more than 100 payment methods, which means that for every merchant and brand working with us, with very seamless integration, they have access to all those different markets with the specificity of every alternative payment methods, that is the preferred payment method by the consumers locally.
It’s not every day you see Latin American startups expanding to Africa; curious to understand the play for EBANX, which is well known in Latin America, where it has a presence in about 15 countries, including Brazil, its home market.
Paula: Over the last 11 years, we have tried to solve the complexity of payments in Latin America while working to understand the local needs, regulations and partnerships in each of the 15 countries we’re in. We’ve integrated that into a very technological but, at the same time, straightforward solution that helps our merchants to do business and provide access to the biggest global brands on the planet.
Based on that experience, we’re looking at how Africa’s digital economy is starting to develop and unfold and seeing similarities with Latin America in the last decade. For instance, nearly 12% of the African population made a purchase online, the continent’s SaaS market is growing, the most prominent technology platforms are investing in Africa, and it holds a very young population pushing for digitization.
It’s a vast continent and we want it to be our priority. The spoiler is that we will be operating in 11 countries by the end of this year. So think about that because it took us 11 years to run deeply in 15 countries across Latin America; this is how serious, aggressive, and fast we want to be.
Considering Africa’s strictly regulated fintech market, isn’t 11 countries overly ambitious to cover in a year? And what does it matter to the merchants that EBANX is present in these countries?
Paula: We are a very ambitious company. When we started 11 years ago, we were also developing our operating model and what we learned in Latin America also positions us well to deal with the complexity of other rising markets like Africa. And the EBANX that we are today sets us in a perfect place to serve our global merchants in Africa. So that, then, I would say, is the number one.
Secondly, we are already live in three of the biggest markets in Africa: South Africa, Nigeria and Kenya. We will focus on some similarities and differences between those countries and the other smaller markets. But we believe that those three markets being live will also potentialize our learning, scale and partnerships that we are building as well in the region.
Wiza: Coverage and depth are essential for us. So for the big markets, we will go very deep, ensuring that we have an excellent understanding and all of the relevant payment methods. In some of the other markets, our merchants might not be as deep but need to be there because when they evaluate where to go next, they’re going to sum up the opportunity as a function of the size of the footprint they can get. So for our merchants, it makes a difference to say that we can give you 11 countries instead of three, especially if they don’t have any other context about Africa.
EBANX will seek to establish partnerships on the continent if that’s the case. Can you disclose some that have been struck already?
Paula: Yes, at the heart of what we do is the reach and the deepness of our partnerships in every market we operate in. And by partnerships, we also include the entire ecosystem of payments, from the startups and local payment providers to the alternative payment methods and the banks locally and internationally.
In terms of specific partnerships, we are evaluating a few but are not at the moment able to disclose, but I can tell you that we will be working with all the relevant players in the region. So far, we’ve established connections with payment providers and provide consumers with bank transfer, card processing and USSD options here in Nigeria. We have in Kenya, M-PESA, and South Africa, Ozow.
Interesting. Talking about consumers, what immediate ways are they adopting EBANX?
Wiza: There is an appetite for global services in markets like Nigeria, for example, if you look at the space of virtual cards, which wasn’t a thing before but has popped up within the last three to four years, as more Nigerians demand dollar cards for international payments. But many would prefer to pay with a simple naira bank transfer.
A lot of the work we’ll be doing is to make it easier for people to pay with the most familiar methods, for instance, local cards, so that they may not have to rely on an external or U.S.-issued card to make international payments. In Nigeria, bank transfers are big; Ozow in South Africa is similar but employs an EFT solution; there’s mobile money in Kenya. So I think they’re obvious signs that there is already demand, and if you look at that demand, combined with the growth rates, I think the story tells itself. With global merchants also trying to see high acceptance rates from payment methods in the region, we are finding a natural fit within that evolving demand.
Which global merchants are currently processing payments with EBANX from African customers? And which verticals do they operate in?
Wiza: There are transacting merchants in all three countries, although we can’t specify. But the most significant impact is that consumers will likely see more choices and some exciting merchants lined up to go live quite soon. For some of these merchants, it’ll be their first time doing alternative payment methods in some of the biggest markets, including Nigeria, South Africa and Kenya.
We have merchants accelerating and growing in e-commerce, SaaS and gaming. We’re excited about all three verticals. But I think gaming will take off massively. We’ve already seen several publishing houses starting to support gaming as a vertical. We’ve seen investment in this space, for example, Carry1st and when I look at the numbers from published sources, there is an evident upward trend.
I think we’re well-positioned to take advantage of those verticals, especially anything digital goods and content where merchants tend to have a higher “risk appetite for those verticals” because they have very low, if not zero, marginal cost of production for additional units.
From your perspective, what challenges do you foresee that an established fintech like EBANX might face in extending its services and operations into a complex market like Africa? And how does your experience help the business?
Wiza: I think one of the most significant contributions I’m hoping to make, having lived in Kenya and South Africa and spent time in many other African countries, will be centered around market knowledge, especially for the merchants and helping them understand the mental models that consumers have on the continent. Second to that is really in the process of developing those ecosystem partnerships and establishing the brand look.
Regarding specific challenges, the fact of the matter is that EBANX doesn’t have a reputation for operating in Africa because we’re setting up for the first time. For us, establishing that degree of trust and credibility that we’ve been able to do for most of Latin America in Africa will be a journey and won’t happen overnight. Still, we’re counting on the expertise that we’ve been able to develop in that region.
There are many other considerations, especially on the operational front, when dealing with fragmented markets and economies. The internal tooling I’ve seen at EBANX is quite impressive. I can imagine how that can be applied to this local landscape to make it cheaper and faster for merchants to adopt various payment methods. I think this is important because it starts unlocking Africa’s viability as a target market for some of these brands.
Africa is a big economy but not so much in the global context. When you look at some massive businesses with customers in Africa, they cannot set up infrastructure and payments to serve locally. So if we can simplify that process for them, it starts to make it a lot easier for them to begin to think about the business case for the continent.
So far, what’s being projected is that EBANX is here to stay and the company isn’t just testing the waters with Africa. However, are there plans to set up a team on the continent? If yes, what would that look like?
Paula: The short answer is yes, we have plans to build a sustainable and long-term team across the continent where we’ve been evaluating which region takes the product, partnership, and sales teams.
There will be the right moment for us to do that. We are already a global company with teams operating and based in 20 countries in the U.S., Europe, Latin America and Asia. We have been building global teams and are ready to do the same thing in Africa.
We are beyond the testing phase because we are live and operating. We are already bringing our top-notch merchants to the region, and we wouldn’t be doing that if we were testing. So it’s real and concrete. So the short answer to your question is yes, we plan to add teams in Africa and carefully evaluate where they’ll be among those 11 countries.
What will success in Africa look like for EBANX in the next five years?
Paula: We aim to be the most relevant partner to our merchants operating globally and targeting Africa. Success will be about how many new customers and businesses we will be able to provide to them; also, as in the access we give to millions of consumers and the alternative payments we onboard on our platform. There is another aspect that I think is deepening financial inclusion. In Latin America, we have been able to further financial inclusion, especially in Brazil, and we believe we can do that in Africa with our services.