Southern Africa’s informal trading market has seen an exponential rise in digital transactions since the lockdowns of the COVID-19 pandemic, with merchants embracing digital payments and acceptance as a means of embracing efficiencies, serving their customers and growing their businesses.
This, in turn, has helped to drive financial inclusion and access to key products and services for consumers in townships, peri-urban regions and rural areas. That’s according to Martin Wright, CEO of Kazang, the prepaid value-added services (VAS) and card acquiring business within JSE-listed fintech Lesaka Technologies.
Creating access for the excluded
He says that merchant-enablement is the key to improving access to financial services and digital offerings within the informal market. Although this segment was traditionally seen as resistant to making use of card and digital payments instruments, the picture has changed significantly over the past few years.
Kazang, with its heritage in prepaid VAS for the informal market, is leading the charge in digitalisation of South Africa’s informal sector. The company enables merchants to offer VAS such as prepaid electricity, prepaid airtime and data, DSTV subscriptions, bill payments and gaming vouchers. Merchants are supported with face-to-face onboarding and training for all VAS products.
With a footprint of approximitaly 90,000 merchants, Kazang is perfectly positioned to help informal traders embrace digital payment acceptance and supplier payments. Over the past four years, Kazang has enabled more than 50,000 informal traders in South Africa to accept card payments and offer card withdrawals at the point of sale with its Kazang Pay card acquiring solution.
From nought to more than R1 billion monthly
Since the launch of Kazang Pay roughly 2.5 years ago, Kazang has seen a large transition from cash transactions to card transactions. The majority of these transactions are from Debit Cards.
One of the key success factors is that it has become more affordable for merchants to accept card payments, with low acceptance fees as well as free terminal hardware with no monthly rental for those that meet a modest transaction threshold each month. Merchants receive training in how to use the Kazang device to accept card payments.
Another secret of Kazang’s success lies in the merchant wallet linked to the card terminal. Card transactions are instantly settled in the wallet, then merchants can use these funds immediately to pay around 600 FMCG suppliers. This reduces the security risks associated with cash delivery and merchants have working capital for purposes such as stock purchases.
“Our differentiator in the fintech arena is the breadth of our platform,” says Wright. “Not only do we enable card acceptance and supplier payments solutions that streamline transactions, we enable our merchants to offer a complete suite of VAS to their customers. With over 50,000 Kazang Pay point of sales devices that act as an ATM – we have effectively put the bank in our merchants’ store, allowing people to conveniently draw money from a nearby merchant. As we extend this solution into the informal market, we anticipate making a real difference in our merchants’ lives, entrenching our ability to enable them to compete and grow.
“Consumers don’t have to travel or draw money to buy the data they need to look for a job or support their child’s online learning, pay for their DSTV subscription and electricity, or buy a lottery ticket. From the merchant perspective, we can also support larger traders with financing and cash vault services from our sister company, Connect Group.”
Rewards platform accelerates growth
Innovation and finding new ways to add value for merchants is an ongoing focus at Kazang. The company recently launched a rewards platform on the Kazang device to reward merchants for growing their business with Kazang and its partners.
The platform offers Kazang’s supplier and product partners access to the merchant base, offering rewards and incentives based on merchant purchase and merchandising behaviour, surveys, competitions and general promotions direct to the handheld device. To date, over a third of Kazang’s merchants have signed up, and 30,000 offers have been claimed since the launch on 1 February this year.
In March, Lesaka announced the acquisition of Touchsides, a data analytics and merchant services company it acquired from Heineken International. The acquisition significantly expands Kazang’s footprint in the tavern industry in South Africa’s informal market. It also creates the potential to drive revenues from data monetisation.
Says Wright: “Digitalising the informal economy is key to enhancing financial inclusion and growing microbusinesses in southern Africa. We’re helping small merchants to serve their customers better and provide easier access to essential services. Creating prosperity in this segment of the market by solving merchants’ pain points is key to catalysing economic growth in South Africa.”