Prospects for JumiaPay, Africa’s leading eCommerce platform

This essay was written for the Harvard Fintech Course.

Introduction

Jumia, once dubbed as “Africa’s leading Ecommerce platform”, was founded in 2012 and provides ecommerce services across Africa (Smith, 2015). Since then, Jumia has capitalized on its position in the African market and expanded its services to offer payments as well. Though the company has achieved success over the past decade, strong competition and evolving customer needs continue to challenge Jumia. Based on Africa’s consumer trends, App purchases and ecommerce are increasing in Africa (Maigurira, 2023) and this bodes well for digital payments and players in this space. JumiaPay provides a lucrative opportunity for Jumia to create a super-app and one-stop service for its users.

Challenges

While Jumia is currently the key player in the ecommerce space in Africa, it faces strong competition in the Fintech space. The rise of ecommerce and digital payments in Africa benefit JumiaPay, it also benefits its competitors. Players like Konga have much better traction in the Nigerian market which it specializes in. Jumia will also need to manage its finances in view of the increasing operating costs. The factors that seem to determine a player’s success in the Fintech space in Africa include accessibility, partnerships, and operations.

KongaPay was able to provide a service that allowed KongaPay users to transfer money to people without a bank account (Vuuren, 2019). More than 50% of the African population lacks a bank account (Harrison, 2021) and approximately 40% of transactions in Africa use cash (Mordor Intelligence, 2023). Consumer’s accessibility to digital services is a key challenge to digital payment providers in Africa.

KongaPay has also established valuable partnerships. Recently, they partnered with Bibimoney (NM Press, 2022), which will allow KongaPay to access Bibimoney’s mobile wallet payment network of users. Digital payment providers will need strategic partnerships that help to advance its objectives.

Jumia, the parent of JumiaPay has been facing problems with achieving a net profit (Durant, 2023). It currently spreads its investments across many sectors and regions. As a result, it could potentially be sacrificing depth and quality of services. At least 50 other digital payment providers exist across Africa (Collins, 2022).

Strategy

Since we’ve identified the themes of accessibility, partnerships, and operations, I believe we can recommend actions for JumiaPay to grow and succeed.

Jumia has positioned itself as a trustworthy brand amongst Africans. Trust in Africa is amongst the lowest in the world (Roser & Ortiz-Ospina, 2016). Because of this, consumers can be resistant to new companies, and this is Jumia’s greatest asset. The large and loyal customer base allows Jumia access to a wealth of customer data and spending trends.

Partnerships and accessibility

JumiaPay has a strong advantage over other digital payment providers as JumiaPay has a full ecosystem of Jumia’s products to leverage on. Companies like oPay have a full suite of payment and banking services but lack an ecommerce arm. Companies like Jjji have a strong marketplace platform but lacks a proprietary payment solution. JumiaPay should leverage on its ability to integrate with many different services and partners to become ubiquitous. It can take inspiration from Alipay in China, which managed to penetrate the brick-and-mortar shops and replace cash. It did so by utilizing QR codes, a solution that deviated from the NFC technology that was prevalent amongst companies like Google and Apple.

JumiaPay can expand on its verticals by providing payments for brick-and-mortar stores. Brick and mortar stores are great places to begin digitization as a significant population of Nigeria still use cash (Maigurira, 2023). Taking inspiration from PayNearby, JumiaPay could strategically partner with brick-and-mortar stores to provide in-store payments without the need for mobile phones or internet connectivity by the user. This would overcome the challenges of internet infrastructure. Connecting a few stores to the internet could be faster than setting up telecommunications infrastructure for mobile internet access. With a brick-and-mortar infrastructure, Jumia could use Jio’s strategy of providing cheap phones to connect users to the internet. The brick-and-mortar partners could serve as network nodes and provide internet access to mobile users. This would overcome the challenge of infrastructure and serve as an additional revenue stream for Jumia.

Operations

Because of the high costs of operations, Jumia will need to look for sectors where it is able to obtain high revenue with the same investment. A problem that PayNearby had was that it catered to many low value customers. These customers however, do not create as much revenue for PayNearby as larger spenders who made few but large transactions. What we would suggest for JumiaPay is to explore services that are provided by traditional banks. FNB bank for example, provides investment, loans, insurance, rewards and currency exchange. Assessing the financial landscape, I believe currency exchange and cross border payments are a suitable market to target. The total trade value of Africa is approximately 700 billion USD (UNCTAD, 2019). Given Jumia’s partnerships with international businesses through its ecommerce platform, Jumia can use JumiaPay as a payments gateway for African exports. They can further enhance their offering to local exporters by providing logistics support with its existing logistics infrastructure.

Conclusion

The recommendations presented above carry risks. One of the key risks that Jumia will have to manage is fraud. It was discussed in a CGAP panel discussion that a spike in scams and fraud have increased along with the acceleration of digital financial inclusion (CGAP, 2022). This should be managed in order to retain customer trust as it was explained above that trust is one of Jumia’s greatest assets. Regulatory risk is low as the government is actively promoting the use of digital finance. However, Jumia will need to work closely with each country in Africa as regulations are very fragmented and could be potentially challenging to navigate.

In all, JumiaPay does have potential and there are many opportunities for growth along with Africa’s growing economy. JumiaPay’s future will be determined by its ability to provide a one-stop platform and ecosystem that competitors will find difficult to emulate.

Bibliography

CGAP, 2022. Mitigating Digital Finance Risks for Consumers in Sub-Saharan Africa. South Africa, Consultative Group to Assist the Poor.

Collins, T., 2022. Payments landscape in Africa. Briter Bridges, 2 Feb.

Durant, R., 2023. Jumia Technologies: Shift In Strategy Creates A Viable Path To Profitability. Seeking Alpha, 21 Feb.

Harrison, P. J., 2021. Top African Challenger Banks Helping the Unbanked Through Mobile Services. The Fintech Times, 17 Apr.

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Maigurira, L., 2023. The future of retail: How the African consumer is shopping now. Think with Google: Consumer Insigihts, Jan.

Mordor Intelligence, 2023. Statistics for the 2023 South Africa Real Time Payments market share, size and revenue growth rate, South Africa: Mordor Intelligence.

NM Press, 2022. KongaPay at House of Lords, London, signs historic partnership with Bibimoney. Nairametrics, Apr.

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UNCTAD, 2019. Economic Development in Africa Report 2019: Made in Africa: Rules of origin for enhanced intra-African trade, Geneva, Switzerland: United Nations Conference on Trade and Development.

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