13 years, 10 billion dollars processed. How has Paga evolved over the years?
During a conversation at the company’s headquarters in Yaba, a suburb of mainland Lagos once billed as Nigeria’s Silicon Valley, CEO Tayo Oviosu recalls the epiphanic moment that led to the founding of Paga in April 2009.
Stanford-educated Oviosu had just returned to the country he was born and raised in, but left at 16 and wanted to venture into the world of entrepreneurship.
The opportunities in the private sector at the time were immense. Nigeria’s central bank was pushing for a cashless economy, but banks were slow to innovate. After considering several ideas for a few months, Oviosu came up with what is now Paga, Nigeria’s leading mobile payments company.
“At the time, many transactions in Nigeria were largely cash-dependent, which was inefficient for both businesses and individuals,” he said. “Paga was born out of my own frustration of carrying cash. The idea was simple: there had to be a way to simplify payments.
Oviosu, aiming to build the “Paypal for Africa”, then partnered with Jay Alabraba to launch a mobile payment company named pagaa Spanish word meaning “to pay”.
Paga was arguably the first fintech company in Nigeria to popularize mobile money among the unbanked. At the time of its launch, the major players linking payments to mobile technology in Nigeria were Interswitch, eTranzact and SystemSpec’s Remita.
Thirteen years later, Paga, now a UK-headquartered group, has over 19 million unique users through its consumer channel and agent network of over 120,000 agents across the Nigeria. Since the company began trading in 2012, it has processed over $10 billion (N4 trillion).
In an interview with TechCabal, Oviosu reflects on the evolution and growth of Paga and talks about product innovation, global expansion and the next phase for Paga and the fintech landscape in Africa.
Digitization of consumer payments
Oviosu’s goal for Paga was to create a platform that simplified payments, digitized cash transactions and provided financial services to the mass market. He started with a team of 8, a number that grew to over 100.
Paga’s initial set of products focused on giving more people access to traditional banking services, especially sending and receiving money, through mobile phones and physical agents. equipped with point-of-sale devices. At an agent outlet, customers show up without an account number and for a fee they can send and receive money to anyone.
In December 2019, after the introduction of National Identity Numbers (NINs) and Bank Verification Numbers (BVNs), Paga launched its consumer direct product which allowed users to create mobile accounts and use wallets for transactions via mobile app and USSD.
According to Oviosu, more than 3.7 million wallets have been created on Paga since then, while the company plans to roll out physical and virtual cards later this year.
Over the years, the total value processed (TPV) of Paga has grown exponentially. While it took the company 99 months to reach its first ₦2 trillion, Oviosu revealed that it took 22 months to reach the next ₦2 trillion.
In 2021, Paga crossed the ₦1 trillion mark in annual TPV for the first time, reaching ₦1.2 trillion, and is on track to reach ₦2 trillion this year alone, according to the CEO.
As part of its consumer payments game, Paga in February announced its addition as a payment provider for Twitter Tips, a feature that allows Twitter users to send or receive by simply linking their service providers. preferred third-party payment providers to their profiles.
Beyond consumer payments, however, Paga is now a fintech giant that helps merchants digitize payments (under a separate brand called Doroki) and open its infrastructure to third-party companies to easily offer financial services.
Doroki for Merchants
Last year, Paga launched Doroki, a separate unit within the group that leverages Paga’s payment infrastructure to help SMEs digitize payments.
Doroki enables merchants to accept cards and other forms of digital payments through point-of-sale (POS) terminals and mobile POS handheld devices, allowing them to get paid and easily track inventory while enabling them to provide other value-added financial services. to customers.
Over the past year, the Covid-19 pandemic has increased the use of technology in payments and money transfers in Africa. However, the cost of purchasing and integrating POS devices is unaffordable for most merchants.
Paga last year announced a partnership with Untapped Global to provide funding that would lower the cost of entry for merchants, with payments clawed back from revenue generated from the devices.
After a successful pilot program, which saw 2,000 businesses with funded POS devices, Oviosu revealed that more than 6,000 sellers are currently using Doroki to collect payments following the commercial launch last November.
“We are trying to create an ecosystem that allows the consumer to easily make payments and for SMEs to manage their businesses and do payroll,” Oviosu said.
Product Framework Game
Instead of just allowing consumers (individuals and businesses) to make and receive payments with ease, the Paga Group now offers open source APIs for businesses to build products.
Paga’s Platform as a Service (PaaS) business began with the acquisition of a remittance license in 2018, after which it enabled companies like Western Union and Wise to end fund transfers to accounts in Nigeria.
In 2021, Paga opened its platform to more companies via Collect APIs, including more than 200 companies currently.
by Paga open wallet is available for any third-party developer. “We don’t want to compete with you by building your wealth management app; we’ll help you,” the CEO said, adding that its recent integration with Flutterwave is built around the same APIs.
Indeed, Paga has expanded beyond the payments industry to become a product infrastructure company, which involves entering into partnerships with technology companies in similar and adjacent industries.
Paga’s Nigerian approach
Paga’s go-to-market strategy in Nigeria has been a hybrid approach that combines offline and online channels. “A majority of the population may not be tech-savvy and smartphone penetration is still low,” Oviosu said.
Initially, Paga relied on a retail network of stores and agents where consumers could go. “To scale in Africa, you need a hybrid approach (digital and physical). If you don’t want or don’t know how to use the technology, you can go to agents and continue to deal [physical] cash, but the agent can do digital.
Oviosu acknowledges that in Nigeria, physical cash is still a thing and is not going away anytime soon. Smartphone penetration has also not improved significantly. Therefore, the company “always needs ramps and exit ramps to cash in on.”
Although the share of total Paga transactions conducted through agents has been declining in recent years.
“Three years ago, agents accounted for about 90% of our transactions. Last year, that figure dropped to 60%, indicating that other channels/parts of the business are growing rapidly. »
What future for Paga? Expansion
“The vision is always the same: to solve payment problems for individuals and businesses,” Oviosu said. “We have always taken an open approach. It is not a closed circle.
On what an “open approach” means, the CEO explained that with Paga, users can link their multiple bank accounts, debit cards and mobile money wallets from other providers.
Additionally, anyone, including non-Paga account holders, can pay a Doroki merchant. “You can walk into a store and pay with your card, scan a QR code, or make payments using USSD from any bank.”
While the vision has been stable, Paga’s ambition and reach have grown over time.
Along with product expansion, Paga has its sights set on global expansion starting with Ethiopia. In January 2020, it acquired Apposit, an Ethiopian software development company which should be its vehicle for expansion in East Africa and Latin America. Last month, Paga announced an official launch in the Horn of Africa country.
Because there are local nuances to be aware of, Paga has a local team of at least 50 people in Ethiopia. The payment platform has also been designed to be multilingual, so it is easy to switch between languages.
In line with funding expansion plans, Oviosu revealed that Paga, which has secured $35 million to date, with backing from investors such as Jim O’Neill and Tim Draper, is seeking to raise additional capital.
Fintech innovation in Africa
In the next phase of innovation in the African fintech space, Oviosu expects new startups to build more solutions on existing infrastructure provided by older players like Paga, Flutterwave, Paystack, etc. to resolve key issues.
“The first two years of Paga consisted of building infrastructure where it did not exist. We have built a hybrid payment infrastructure for the online and offline customer,” said the CEO.
“New businesses don’t need to repeat that. I expect to see more of them focusing on niche markets that can scale, leveraging existing platforms through open source APIs.
As for Paga, the vision remains the same: one billion people should use the platform to access and use money, according to Oviosu.
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