South African funds gateway Ozow raises $48M Sequence B led by Tencent – •
In line with a 2019 report by Deloitte, about 80% of South Africans have a checking account however solely 24% of them make greater than three transactions month-to-month.
In contrast to different African nations, South Africa additionally has a functioning credit score system with the prevalent use of bank cards. Nonetheless, costly value-added providers like bank cards don’t essentially deal with the wants of underbanked folks.
Digital funds gateways, however, have a novel use case, notably after they will help folks use their fundamental financial institution accounts to make funds. Ozow is one such participant. Coming off a 12 months of exponential progress, it has raised a $48 million Sequence B to supply extra different fee options to its hundreds of thousands of retailers and shoppers.
Chinese language web large Tencent led the spherical, with different traders Endeavor Catalyst and Endeavor Harvest Fund collaborating.
Founder and CEO Thomas Pays began Ozow in 2014 to drive monetary inclusion by means of open banking. The corporate permits shoppers to entry their web banking platform after they make transactions on-line.
On a name with •, Pays stated that earlier than Ozow, guide EFT processes had been the favored choices to hold out transactions on-line. On the time, most fintechs and banks didn’t acknowledge the necessity for utilizing financial institution funds to facilitate on-line transactions.
Pays launched Ozow to automate the guide EFT course of shoppers used to pay throughout e-commerce, point-of-sale, e-billing or P2P strategies. In line with Pays, he wished Ozow to “make it seamless for shoppers to pay in three clicks.”
“While you checked out e-commerce, level of sale, e-billing or P2P fee seven years in the past, it was all the time a fragmented market. For instance, if I need a level of sale machine, I must go to an organization like Yoco. If I need to settle for funds by way of card on my e-commerce website, I must go to a PayU,” the CEO acknowledged in an interview with •.
“What we wished to handle was a central platform that might mainly present options to e-commerce, level of sale, e-billing and peer to look fee.”
The platform, which caters to greater than 47 million checking account holders, sometimes works this manner. First, shoppers choose Ozow as a fee choice when buying on-line or in-store.
Subsequent, they select their financial institution (from all ten main South African banks), log in with their on-line banking particulars, and Ozow automates the fee course of.
All retailers must have is a checking account and a “smart-enabled machine” to obtain funds. Ozow’s purchasers embrace main enterprise firms, reminiscent of MTN, Vodacom, Shoprite Group, Takealot and Uber.
Ozow is free for particular person customers. Retailers also can use the funds gateway free of charge within the first 12 months, or as much as $65,000 in processing worth per thirty days.
The corporate additionally works with distributors and fee service suppliers and resellers of its product. They get charged a share payment that varies between 1.5-2.5% for each profitable transaction made by way of Ozow.
EFTs represented about 4% of the amount of gross sales in e-commerce shops in South Africa earlier than Ozow got here into the image. Now that quantity has grown to a mean of about 30%, and EFTs have turn into South Africa’s second hottest fee choice (after playing cards) for e-commerce.
Pays says Ozow is creating automated bank-to-bank fee options for over 47 million checking account holders and greater than 100 industries in South Africa.
For the reason that firm’s Sequence A elevate of $2.5 million in 2019, Ozow has seen a 100% year-on-year progress of its enterprise. It processes over $100 million in transaction quantity per thirty days throughout 1000’s of retailers.
“We’re additionally seeing a progress in new customers, which is in extra of 140,000 per thirty days. That’s fairly an unimaginable progress and adoption,” he stated.
“And that is actually as a result of client and service provider training that we needed to undergo over the previous seven years because it was fairly an modern resolution that nobody was actually acquainted with earlier than.”
From 2016 to 2017, Ozow raised a mixed $1.2 million in angel and seed rounds, and up till now, its complete elevate stood at $3.7 million from backers reminiscent of Kalon Ventures. Nonetheless, this Sequence B spherical has elevated that quantity to $51.7 million.
Pays is especially excited concerning the firm’s new traders that made this occur. As lead investor, Tencent dedicated virtually half of the full raised, about $20 million, Pays tells me.
“It’s an honour to convey on board Tencent, Endeavor Catalyst and Endeavor Harvest Fund. It is a validation of our function in reworking the banking trade by means of the event of modern, handy and extra inclusive fee options for everybody,” he stated in an announcement.
On a facet notice, Reid Hoffman was additionally concerned within the spherical as he chaired the Endeavor Catalyst’s funding committee approval.
Utilizing the brand new funds, Ozow hopes to drive fintech regulation to make sure that extra folks entry fee providers.
“We’re working intently with the regulators to drive open banking, and that features our collaboration with authorities and trade companions to rollout RPP,” the corporate stated in an announcement.
Although 8 out of 10 South Africans personal a checking account, over 70% of all retail fee volumes and 89% of the nation’s transactions in its casual economic system are nonetheless cash-based.
Ozow’s plan with the RPP (Fast Fee Programme) is to create an instantaneous fee ecosystem that may give folks the power to make real-time funds utilizing easy identifiers, reminiscent of cellular numbers or e-mail addresses.
The CEO talked about that Ozow additionally plans to develop its group from 100 to 250, together with hiring staff in its new European workplace.
A portion of the funds will even be directed at mergers and acquisitions and pan-African enlargement to 4 nations within the subsequent six months: Namibia, Ghana, Nigeria and Kenya.
• reported on this piece that African enterprise capital raised through the first half of 2021 was about twice the funds raised in H2 2020. Having raised greater than $3 billion already, the continent is about to trounce historic information of enterprise capital raised this 12 months.