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There are plenty of South African startups looking to disrupt how people pay for goods and services in the physical world. Some, like, SnapScan and FlickPay are built with the view that everyone will eventually pay for everything on their mobile phones. Others, in the mould of Jack Dorsey’s Square, take the view that people still have bank cards, feel safe using them, and should be able to pay with them anywhere. Yoco, which officially came out of Beta on Thursday, falls firmly into the latter camp. Except that it believes it’s built something very different.
The startup, which has been in Beta since 2014, is the brainchild of a diverse founder team comprising Katlego Maphai (previously with Rocket Internet), Carl Wazen (previously with Delta Partners and Citi), Bradley Wattrus (also a Rocket Internet alumnus), and Lungisa Matshoba (a co-founder of Yeigo, one of South Africa’s big startup success stories).
“We’ve been underwater for the past three years,” said Mahai at the launch, “and now we’re coming up for air”.
Coming out of that Beta programme, the company says it’s processing more that US$1-million in payments a month.
Launched with a well-coordinated PR campaign, Yoco offers its customers two card-reader options: a plug-in reader (iOS only) which attaches to an iPhone or iPad’s headphone jack and a wireless card reader, which connects via Bluetooth.
The card readers work in concert with a companion app, available on iOS and Android, which the company claims allows you to process payments instantly, track your sales, and send digital receipts.
It also offers businesses a cloud-based portal which allows them to view their payments and settlements on the fly. It is this offering which Yoco reckons sets it apart, given that it provides real-time transaction monitoring and provides its customers with business insights.Another important thing that sets it apart is that it allows business owners to track and accept cash payments using the companion app.
That differentiation will be important, given that card-reader technology doesn’t really seem to have captured the public’s attention the way mobile payments solutions such as SnapScan, Zapper, and FlickPay have. While those companies dominate headlines, the likes of Absa’s Payment Pebble and iKhokha seem to have faded into the background.
There are a couple of potential reasons for that. One important reason is that South Africans are paranoid about card payments at the best of times (anyone who’s worked in the ecommerce space will confirm this) and may not feel comfortable handing a credit card over to a stall trader with an iPad.
Despite that Yoco reckons there’s still a massive opportunity for its offering in South Africa, citing the fact that more than 75% of South Africans have cards capable of making payments while just 6% of retailers have facilities for accepting card payments.
Yoco also says there’s more than enough space for it to exist alongside mobile payments solutions such as SnapScan. Those, it believes, are aimed at payments on less that R200. Yoco meanwhile is aimed at retailers doing more than R30 000 in transactions a month.
It is worth noting however that while solutions like SnapScan may not offer quite the same level of management as Yoco does, it’s also far easier for ordinary retailers people to access (all they need is a QR code and dumb phone). That said, there’s no reason to suggest that there isn’t space for both, especially given that with Yoco, customers don’t pay a monthly fee. Once a customer’s bought a card-reading device, the revenue Yoco gets from them comes from the fees on individual transactions.
Yoco takes a 3.5% charge on debit and credit card transactions, with a fixed R3.50 fee charged on credit card transactions below R100. Delivery, setup, and access to the app and portal are included with the purchase of a card reader.
A solution like Yoco does mean that restaurants, cafes, and service professionals have a way of accepting card payments without having to tie to themselves to the card-reader technology or network provided by a particular banks. And at this stage, it seems to be getting its merchants setup a lot faster than banks do too.
It’ll be interesting however to see how long solutions like Yoco continue to play a role, especially as smartphone prices continue to fall and people become increasingly comfortable with mobile payments.