Nigerian fintech company Touch and Pay is getting ready to expand into several other African regions after getting a $3 million seed investment round.
Since it started in 2019, Touch and Pay have made several payment systems that use near-field communication (NFC). According to co-founder Michael Oluwole, the firm is working to create an entirely cashless society.“Today there are two types of transactions in Africa; firstly, macro ones like buying a car or house, or paying tuition. These transactions have been digitised and are processed electronically, “he said.
But the other transactions are micro-transactions, like payment of transportation fares, getting snacks or a cup of coffee, or buying groceries. These are all cash-based, accounting for 70 per cent of all daily transactions in Nigeria today. ”
Even those that have bank accounts still have to withdraw cash to perform these microtransactions.
“No financial inclusion is achieved, there is no data on these transactions, and no credit-scoring because all the transactions are cash or manual,” said Oluwole.
Touch and Pay is trying to achieve in West Africa what M-Pesa is doing in East Africa, which is to digitize micropayments. Oluwole reported that take-up was quite good.
“We operate in a market for the lower end of the pyramid. Getting them to adopt is always very slow, but once we do, we achieve stickiness, “he said.
“We started with payment of bus fares in 2020, and now we help 350,000 people pay for bus fares daily in Nigeria, with over 2.3 million users. We recently started digitising micro merchant payments.
Touch and Pay, a famed Silicon Valley accelerator’s W22 batch member, recently raised a seed round totalling more than US$3 million and is preparing to grow.
“Today, we are in four states in Nigeria – Lagos, Ogun, Oyo, and Kano. We plan to roll out to Ghana and Senegal, “said Oluwole.
The startup takes a percentage of the transactions it processes and currently makes around US$270,000 monthly.
Read also: Nigeria’s Kippa secures $8.4 million to expand service to small and medium-sized businesses
How Touch And Pay Technology Impacted the Lagos Transport System
TAP began digitizing microtransactions in 2017. However, it did not begin with transportation. Before deciding that transportation was the way to go, it piloted various industries.
“Between 2017 and 2019, we ran a lot of pilots.” We created wristbands for Gidi Culture Festivals; we collected the Jangali tax in Kwara. We also deployed the technology at Babcock University and LAUTECH. We even tested it with microfinance banks and thrift collectors.
“And it was at that point that we realised we couldn’t keep stretching ourselves.” We were probably a team of eight then.
The team asked, “Which sector can we look at that will give us traction in the shortest amount of time?”. The sector of transportation was the solution, so they chose to concentrate on digitizing transactions there.
Oluwole said that because they focused on transportation, they were in the best place at the best time. They started by working with LAGBUS to make a solution for tracking revenue that helps with revenue assurance. While the whole country was on lockdown, it was a big problem for governments to figure out how to get the economy going again in the safest way.
Observations
Since LAGBUS was so pleased with their job, he suggested that LAGFERRY do the same. But when the COVID-19 pandemic struck, TAP’s entire situation was about to change.
While the whole country was on lockdown, it was a big problem for governments to figure out how to get the economy going again in the safest way. The virus clearly has a robust dissemination mechanism in transportation.
The Lagos State Government needed to find a solution because the virus could spread in many ways, such as by exchanging money, giving out bus tickets, and talking.
Many businesses that could offer this service stepped up. They originated from Cyprus and various other European nations, according to Oluwole. However, their remedies did not take into account Lagos’s circumstances. He claimed that although several offered online transactions, the internet in Lagos and Europe was of quite different quality.
Oluwole and Afolabi, who reside in Lagos, were aware that a radical change that was too unlike the way people were used to things would not be successful. TAP was the best business for the job because it has sufficient experience with LAGBUS and LAGFERRY. In order to digitize the transportation sector, the company and the Lagos State Government created a strategic relationship.
Even though TAP is starting with transportation, it wants to use contactless cards to digitize the whole black market. This could be a way to make sure that everyone has access to the financial system.
The people who made Cowry cards say that they give financial information to people who may not even have bank accounts.
An example of this is how the technology has been used in other states, such as Kaduna, Ogun, and Oyo. The Cowry Card, for instance, assists the government in Kaduna in collecting money from transportation providers.
Nigerian fintech, NowNow raises $13million seed funding to boost financial inclusion
Oluwole emphasized that the government was missing out on a lot of information by getting the income in cash through a collector. Despite paying taxes on a regular basis, the government had no idea who the actual bus drivers or owners were.
“Now we’re changing that model by giving them a card that could also serve as their association ID card.” They can fund this card and make their daily payments with it. The more they make these payments with the card, the more the government has access to them. ”
The government receives information about specific drivers and their tax payments when people pay with cards. Then, providing tax returns or tax relief is simple.
The wealth of information that the card payment system gives might be used by bus drivers to acquire insurance. In one of these situations, passengers get free rides because information about how often they take the bus is available.
It is important to remember that none of these things necessarily depend on having a bank account.