South African Startup, Lipa Payments Brings “Tap to Pay” to Africa’s Informal Sector, Secures Millions

Lipa Payments, a South African fintech startup, has raised R10 million ($659 thousand) in funding from Empowerment Capital’s Imvelo Ventures, which is backed by Capitec Bank SA.

Lipa Payments was a finalist in Capitec Bank’s 2020 Life 2.0 Hackathon.

With its software solution that allows merchants to accept contactless payments directly from a mobile phone, the fintech is bringing the “Tap to Pay” experience to Africa’s informal sectors.

The Lipa Payments solution, created in 2019 by fintech entrepreneurs Thando Hlongwane and Roger Bukuru, collaborates with banks and fintech to enable merchants to accept affordable, accessible, and fast payments, even if they only have low-end mobile phones. It’s also more secure and sanitary than dealing in cash.

“Partnering with FinTech companies to accelerate the delivery of our offer and create unique opportunities is an important part of our digital strategy.” “Lipas Payments was chosen as one of our Imvelo venture capital fund investments,” said Francois Dempers, Manager of Innovation & Digital Strategy at Capitec Bank.

“They are a young, dynamic, and agile team of tech entrepreneurs with an intuitive understanding of Africa’s unique operating environments and how to apply technology to help people live better lives,” Dempers added.

How Does Lipa Work?

Even if a low-end smartphone lacks near-field communication (NFC) capabilities, merchants can accept phone-to-phone payments (via Bluetooth technology) or bank-card payments directly on their smartphones (using NFC technology).

“We see technology as a scalable tool for addressing everyday problems.” Lipa Payments solves two problems. “First, we provide low-cost technology to small-scale merchants to accept digital payments at the point of sale, and second, we enable buyers of goods and services to pay digitally without having to worry about cash or network coverage,” said Thando Hlongwane, CEO and Co-Founder of Lipa Payments.

There is currently insufficient infrastructure to support digital payments at local spaza shops, hair salons, or fast-food restaurants, and most micro-merchants cannot afford to purchase Point of Sale (POS) devices. The distribution and maintenance of POS devices can be costly for banks and fintech.

“Traditionally, informal sector merchants have relied on customers having cash on hand to transact, but Lipa Payments is changing that.” Trading with cash has obvious limitations, and it is only becoming more difficult in a digital, cashless global economy,” said Roger Bukuru, Co-CEO and co-founder of Lipa Payments.

The Transition from Cash to Digital

People are moving away from using cash, according to research conducted as part of Mastercard’s 2020 State of Pay report, which was conducted across 14 different countries. The last two years have been fruitful for South African fintech start-ups, with the transition to a digital economy accelerating at the start of the pandemic.

Few fintech startups, however, are focused on the potential at the bottom of the income pyramid; however, for Hlongwane and Bukuru, returning to their roots and driving financial inclusion for the lower-income market was a no-brainer.

In 2022, the Lipa Payments duo intends to launch their Software-as-a-Service (SaaS) solution across South Africa and Nigeria.

“We’ve always wanted to find solutions to the problems that informal sector merchants face.” “It’s been a journey to find the answer to the question, ‘How can we bring them into a digital payments space?'” Hlongwane concluded.

According to StatsSA’s Q4 2020 Quarterly Labour Force Survey, approximately 2.5 million South Africans work in the informal economy (non-agricultural), and the number of people working in the informal economy has increased since 2013.

Whether selling goods and services from a taxi rank, a spaza shop or a dirt road in a rural village, Lipa’s digital solution for merchants of the informal economy allows them to be financially included in the digital economy of the future.