At the core of commerce is the almighty transaction that signifies the exchange of value between two parties.
While in the digital age the currency in a transaction may vary in light of new models of value attribution such as one’s social graph, the exchange that I refer to is that of legal tender.
How to move this value between two parties at the most affordable rate has been the pool of opportunity for many technology entrepreneurs, spawning household names both locally and globally cutting across different use cases such as international remittances, forex, e-commerce, peer-to-peer concerns and international trade.
Gateways quickly became platforms of value, providing a single window to a myriad of payment options, models and currencies for millions of individual users and businesses where they had successfully onboarded; shaving off a small percentage in commissions for processed amounts.
With the proliferation of players in the dumb pipe segment of the payment gateway business, we are starting to see a shift away from what has been the core business for a majority of these gateways, especially where they have been built on top of other platforms that may also be experiencing diminishing returns from the advent of new ways of value transfer.
There is hardly any margin to work with already and even at scale, price war where half a per cent is peddled as a differentiator would do more harm than good, as the associated risks of handling digital value continue to grow in complexity calling for more investments in infrastructure and tools to safeguard.
There are two paths that I can see players taking. The first is that of creating their own ecosystems that accept as many incoming channels of digital value as possible but work towards keeping it within their pipes where they then leverage financial tools and products to grow margin; second is the creation of value-added services on top of the baseline low margin offering; local examples can be seen in KCB’s MyKash targeting SMEs, PesaPal’s Reserve Port in the hospitality segment and KopoKopo’s merchant cash advance product dubbed Grow, among others.
Payments will soon be ubiquitous and embedded in every experience.
In my opinion, the field is still wide open for a market leader who will provide the cheapest route to fulfilment coupled with a Swiss army knife of tools that speak to the widest possible mix of needs that both individual and business customers have.
Njihia is CEO of Symbiotic | www.mbuguanjihia.com | @mbuguanjihia