Yoco, a South African FinTech startup that provides Point of Sale devices and payments services, has concluded its Series B funding round. The round, led by Partech, will bring in a total of $16 million into Yoco's coffers which the startup has said it will use to grow its network of small business merchants, invest in product development, scale operations and look to attract new staff.
A Yoco Point of Sale card reader.
Other investors that participated in Yoco's Series B funding round include Orange Digital Ventures, FMO (The Dutch Development Bank) and existing Series A investors Quona Capital and Velocity Capital.
"Small businesses, fundamental to sustainable economic growth, are generally underserved in our part of the world due to their size. Running a business is hard enough, we believe accepting money shouldn't be. We built Yoco on the key pillars of access and trust. Transforming the long and prohibitive process of applying for a card machine into a simple consumer-like product purchase that can happen online or at the store in minutes. Our Series B investment allows us to continue to scale our operations and deliver a world-class product experience that enables small businesses to thrive," said Katlego Maphai, Yoco Co-founder and CEO.
FinTech in South Africa
Unlike other countries in Afrika where there seems to be more talk of financial inclusion driven mostly by FinTech startups, in South Africa things are quite different mainly because of regulation. When it comes to banking and innovation in the banking sector, as a start, to receive deposits and operate as a bank, even if it is just purely digital, an aspiring FinTech startup would be required to apply for a banking license. This license, however, rules out the possibility of many startups applying for it given the requirements for a company to qualify for it. For example, M-Pesa in Kenya is operated by a telecommunications company, whereas in South Africa, on every occasion it launched, a telecommunications company had to partner with a bank.
"We built Yoco on the key pillars of access and trust. Transforming the long and prohibitive process of applying for a card machine into a simple consumer-like product purchase that can happen online or at the store in minutes."Katlego Maphai, Co-founder and CEO at Yoco.
Thus, in South Africa, you find that financial inclusion type of digital innovation is driven by the major banks or FinTech startups in partnership with a bank. This leaves FinTech startups in South Africa mostly looking elsewhere for opportunities to innovate.
In Yoco's case, it is with Point of Sale devices for small businesses. This is not something new in the country but Yoco saw a gap in the market they could take advantage of.
Helping small businesses
Although Point of Sale devices have been around for ages, the requirements for small and micro businesses to get and use one prohibited many from using them. This is where Yoco comes in with their card reader they launched in 2015.
For starters, unlike the traditional POS devices, Yoco's card reader connects with a small business’ smartphone or tablet, making it an affordable option to traditional POS devices, similar to the credit card reader that American startup, Square, made popular. They are not the only startup to address this market segment with one of their closest competitors being iKhokha, which offers similar POS card readers at prices that are reasonable for small and micro businesses.
The difference between Yoco and most of its competitors is that it also offers its merchant customers point of sale software, business intelligence, accounting integrations, and working capital financing.
“Yoco has built a product set and quality operations placing it as a top fintech company not only in South Africa but also globally. We are excited to have Yoco as the second investment from our Africa fund. Consumer spending in Africa amounts to over $1.4 trillion, much of which is driven by small businesses. Yoco’s ability to use technology to solve real problems for African small businesses at scale makes it a unique implementation of our investment strategy," said Cyril Collon, partner at Partech, who will be joining the Yoco Board of Directors as a result of Partech's investment.
The startup reports that it has grown its customer base to over 27,000 South African small businesses, 75% of which had never accepted cards previously.
Cover image credit: Yoco's founding team.Share this article via: