Legacy Payments Infrastructure Holds Small Merchants Back in Emerging Markets

The imbalance between payments issuance and acceptance is a major pain point in emerging markets.

According to Islam Shawky, co-founder and CEO at Cairo-based digital payments service provider Paymob, that challenge is holding back businesses, particularly small mom-and-pop shops, from unlocking their full business potential.

“We’re looking at markets that are very advanced in issuance but have a mismatch in acceptance,” Shawky told PYMNTS, pointing to Pakistan, a country with a population of over 220 million where Paymob expanded operations last year, as a case in point.

“[Pakistan has] more than 55 million cards, almost 22 million of them are NFC-enabled. They have a number of digital banks and private issuers that are scaling within the market. However, when you look at the acceptance side, the market has around 80-85,000 PoS in the hands of not more than 40,000 merchants,” he explained.

That huge gap is what Paymob is trying to fill today, especially since traditional banks are more focused on solving the needs of large enterprises, Shawky added.

From enabling businesses to accept digital online transactions via its application programming interface (API) to launching a SoftPOS solution — otherwise known as tap-to-phone — to enable couriers to accept payments during deliveries, the firm has been working to plug the acceptance hole both online and in-person, offering 40 different payment options to its merchant clients.

Beyond acceptance, the Fintech firm also offers merchants a payroll solution and provides software-as-a-service (SaaS) products to help them better manage their businesses, while working with partners such as financial institutions to facilitate access to working capital loans.

To further tackle warehousing, packaging and fulfillment challenges that are common in its core Egyptian market, the payments firm recently announced a partnership with on-demand digital warehousing and fulfillment management platform operator Khazenly to provide independent merchants with an “Amazon-like experience,” Shawky said.

He added that the goal is to become “the payment partner of choice” for businesses in its network,” working not as a provider but as an enabler that is leveraging its experience and digital infrastructure solutions to help small businesses.

Mobile, BNPL, Real-Time Payments

When it comes to emerging trends, Shawky said mobile is increasingly becoming a massive commerce channel in emerging markets, whether it’s to shop via mobile apps or carry out mobile checkouts.

Alternative payments such as buy now, pay later (BNPL) have also gained traction in Egypt, where the volatile Egyptian pound has weakened against the U.S. dollar in recent months, putting more pressure on consumers in the North African country.

“We’re seeing the effect it has on people,” he noted, “even people that I never thought would tap into the trend are now splitting payments into installments and deferring payments for a month.”

Egypt is also one of the Middle Eastern countries actively working towards implementing a real-time payments scheme, with the Central Bank of Egypt (CBE) announcing the launch of the Instant Payment Network and InstaPay mobile application in March of last year.

Shawky said that the move, which is still in the pilot phase and would allow bank customers to carry out instant electronic transfers, is a milestone that will not only promote secure and affordable digital financial transactions for Egyptian businesses but also eliminate the edge that cash payments still have in the market.

As he said: “We are at a disadvantage because cash settles instantly while digital is T+1 or T+X [number of days]. So, if we can settle transactions in an instant fashion, it will definitely be a huge leap forward.”

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