Mobile-First Software Solutions Can Help African Merchants Digitize Their Businesses

Despite high mobile penetration across Africa, cash remains a preferred payment method for everyday transactions, with an estimated 95% of transactions in Nigeria, one of Africa’s biggest economies, being cash-based.

For merchants receiving these cash payments, the lack of a digital collection system can make it challenging to properly track their income and expenses or determine how much money they have to replenish stock inventory, for example.

“Most businesses just collect cash and when you’re just collecting cash, [it’s difficult to know] how your business is actually faring,” Bastian Gotter, CEO at enterprise software startup Bamba, told PYMNTS in an interview.

Introducing mobile money payments — prevalent in countries like Kenya and Ghana — as a second channel of collecting payments in addition to cash further complicates the situation, Gotter said, creating a situation whereby merchants must track two different sets of payment inflows while still trying to make sense of the business fundamentals.

“We see a lot of merchants trying to [undertake the complicated task of] recording sales on paper or counting the SMS messages received to make sense of the sales data,” he explained.

Simplifying that process is what Bamba is aiming to do today, helping merchants “professionalize” their sales process and easily record cash sales as well as access cash advances against future cash flow — giving a clearer picture of their day-to-day operations.

“All of a sudden, they get a pretty accurate picture of [their day-to-day business operations] combined between cash and mobile money,” Gotter noted.

Related: Kenyan Software Startup Bamba Secures $3.2M Seed Funding

Today, the young firm, which is currently in stealth mode, has secured $3.2 million in seed funding, earmarked for enhancing its app and expanding its user base across 12 sub-Saharan African countries including Kenya, Ghana and Cameroon that have high mobile money penetration.

Meeting Merchants’ Needs

Given the huge working capital gap on the continent, the firm also has a huge opportunity to serve small- to medium-sized businesses (SMBs) in the region in need of funds by leveraging the data it has on merchants to offer credit and make appropriate lending decisions to small businesses in dire need of funds.

And compared to consumer lending products, which tend to have a negative reputation, Gotter said SMBs often put business loans to productive use — either for an additional location, hiring an extra employee or improving on their customer service processes, all of which are critical to business growth.

He added that Bamba is exploring a model similar to what U.S. payments firm Square does by taking a higher rate on advanced invoicing features versus standard invoicing features as they help merchants with their payment outflows and inflows.

Finally, he highlighted the Software-as-a-Service (SaaS) component, which goes beyond helping businesses with daily operations to supporting them with payments to suppliers, employees or even marketing services.

At the end of the day, it boils down to listening to what merchants are saying, understanding their struggles and key pain points and building solutions that work for them.

“That’s part of the strength of Bamba — to really understand what’s happening on the ground and figure out what the next layer of services [are needed to meet merchants’ needs],” he said.

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