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South African-based fintech start-up Lipa Payments has secured a R10 million investment from Empowerment Capital’s Imvelo Ventures, which is backed by Capitec Bank. The company is bringing its Tap-to-Pay experience to Africa’s informal sectors with its software solution that enables merchants to accept contactless payments directly from a mobile phone to enable affordable, accessible, and fast payments for merchants, even if they have low-end mobile phones.
Lipa Payments duo plans to roll-out its SaaS solution across South Africa and Nigeria in 2022.
The product was developed in 2019 by Thando Hlongwane and Roger Bukuru and this latest R10 million investment comes from Empowerment Capital’s Imvelo Ventures, which is backed by Capitec Bank – Lipa Payments was one of the finalists in Capitec Bank’s Life 2.0 Hackathon in 2020.
“We see tech as a scalable tool to solve everyday challenges. Lipa Payments solves two,” explains CEO Thando Hlongwane. “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.”
There is limited infrastructure to support digital payments at local spaza 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.
“We have always wanted to solve the problems that informal sector merchants face” – Thando Hlongwane
Lipa’s payments solution allows merchants to even accept payments from phones that don’t have near-field communication (NFC) capabilities by using Bluetooth technology, or a bank-card payment directly on their smartphones (using NFC technology). Apple is rumoured to be readying a similar capability for iPhones to accept tap-to-pay payments directly.
“A key part of our digital strategy is to partner with FinTech companies to accelerate the delivery of our offer and to create unique opportunities through partnerships,” said Francois Dempers, Manager of Innovation & Digital Strategy at Capitec Bank.
“Lipa Payments was selected as one such investment through our Imvelo venture capital fund. They are a young, dynamic, and agile team of tech entrepreneurs who have an intuitive grasp of the unique operating environments in Africa and how to apply technology to enable people to live better.”
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. The last two years have been fertile years for fintech start-ups in South Africa with the move to a digital economy accelerating at the start of the pandemic.
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 an easy decision.
“Informal sector merchants have traditionally relied on customers having cash on hand to transact, but Lipa Payments is changing that,” says co-CEO Roger Bakuru. “There are obvious constraints to trading with cash and it is only getting more difficult in a digital, cashless global economy.”
Lipa’s founders believe that their digital solution empowers merchants of the informal economy and allows them to be financially included in the digital economy of the future.
Images supplied by Lipa Payments