A lot of technology is imported into South Africa assuming the same market behaviour experienced elsewhere in the world, but we’re learning that just because something works in the USA, for example, does not mean it’s repeatable down here.
Peach Payments was founded to tackle the gaps in payments for African markets, providing solutions for online and mobile businesses so that they can easily accept payments from consumers across the globe.
According to co-founder Rahul Jain, the needs of people and businesses in Africa from a payments perspective are fundamentally different from those in the developed markets.
“In Africa, we are still working on making it easier for people to have access to financial services such as banking and to reduce the dependence on cash and move to a more cashless economy,” says Jain.
“People don’t have access to simple saving mechanisms and the cost of actually transacting with each other is extremely high. The risks associated with transactions are high as well. At Peach, we believe that economic engagement is key to helping a society progress. So our aim to develop solutions that make it easier for people and businesses to transact with each other,” he says.
Jain explains that in some aspects, emerging markets are actually more advanced than their developed counterparts.
“A great example is the implementation of the Unified Payments Interface (UPI) architecture and IMPS (Immediate Payments System) in India which allows for instant interbank electronic fund transfer service through mobile phones,” he says.
“It is also being extended through other channels such as ATM, Internet Banking, etcetera. Now contrast this to the ACH system in the US where transfers still take between 1 and 3 days!”
Getting off the ground
Rahul Jain met co-founder Andreas Demleitner in 2009 while Jain was interning in South Africa during his MBA.
“Andreas had previously started another payments company in Germany and in 2011 felt there was an opportunity to build a leadership position in payments in Africa. I was working in Strategy Consulting with a firm in Boston in Dec 2011 and Andreas called and asked if I wanted to join him as a co-founder. I quit my job, took a flight and landed in Cape Town! We also got accepted to the Google Umbono accelerator in Cape Town in the first half of 2012.”
With the hypothesis that emerging markets needed a fresh approach to payments, Peach Payments focused on where the founders believed they could differentiate.
“We started with a focus on BRICS countries but over time we have narrowed our focus to Africa. We believe that there is a significant opportunity in Africa and we are currently focussed on expanding our presence to more countries on the continent,” says Jain.
Peach Payments is now at the stage where it has a proven product-market fit in South Africa and has developed a significant base of customers.
“We have developed a blueprint for success that we can now replicate across the continent,” says Jain.
Time to scale
With a strong foundation in place, Peach Payments is now looking to expand in Africa.
“The challenges we face are around ensuring that we can scale effectively, maintain the company culture and then continue to deliver the same level of service that we are now known for as we become bigger,” explains Jain.
“It’s also a constant battle for resources,” he says.
“Hiring the right people and ensuring that we have right investors and partners on board to help to continue to invest in future growth.”
While Peach Payments is working in South Africa, the company is also challenged with the differences between African markets, which are often thought of as being similar, but aren’t in reality.
“From an operational perspective, the challenge is that the needs of each country are completely different since they have different socio-economic and social factors. People use different forms of payment ranging from mobile money to cards to cash,” says Jain.
“Also penetration of banking is completely different and in some countries mobile money is more prevalent than others. This makes it a country by country approach for us as we set up our operations in more countries.”
Getting involved with regulation
Regulation also varies from country to country and the challenge of any fintech startup is to learn how to disrupt on one hand, while maintaining compliance on the other. Peach Payments has played an active role in engaging regulators and the industry to help shape the landscape.
“Regulation is a two-sided coin,” says Jain.
“Sometimes it’s a real inhibitor, but sometimes it can really help move the industry forward. Well planned and executed changes in legislation can open up completely new industries and spur economic growth and then poorly planned measures and restrictions can completely stifle an industry,” he says.
“From our side, we constantly engage with regulators and other participants in the financial services industry, including banks, to find that balance and then where needed to help create awareness, educate and maybe even influence changes in the regulatory landscape.”
An example Jain gives is the 3DSecure mandate in South Africa, where the regulator made an exception for recurring or subscription payments.
“We are glad ... otherwise, this move could have completely killed such business models here,” says Jain.
“We were part of the working groups and continued to lobby the banks and our partners to ensure that this was not the case. We didn’t do alone but we are proud of the role we played. We have led the recurring and subscriptions billing space for online businesses since we launched these features almost three years ago now.”
A word of advice
The world of fintech is exciting with many opportunities, but getting started can be daunting, especially if you’ve got a steady income from a big company. Jain says that it’s important for newcomers to understand the challenges.
“I think my advice for someone wanting to get into fintech is to really do their homework before they take the plunge,” he says.
“What I mean is they need to really understand all the different aspects of the industry vertical they want to tackle so that they don’t spend time and resources only to discover some sort of show-stopping hurdles later.”
“Basically, know what you are getting into and be prepared to put in a few years. While fintech is a huge opportunity it also moves slow and takes time for people to trust something new, for regulation to adapt and for it to become more mainstream as a business,” says Jain.
Peach Payments currently offers payments solutions in Europe and South Africa directly, and in Brazil and Turkey through partners, with plans to move further into Africa soon.