Interview with Bevan Ducasse, CEO of wiGroup
As South Africa’s only interoperable point of sale mobile transacting network, what exactly is the niche that wiGroup fills in the mobile payment spectrum?
WiGroup provides two services the market; the first is what we call WiCode. Very simply, you have a number of retailers that are looking at this mobile transaction landscape and they don’t know how to integrate their point of sale to every single one of these apps that are arriving in the market. What we have built is a platform where they integrate their point of sale to our platform and through that they can then enable all of the different mobile transaction apps that are coming in. In effect they don’t have to back one horse; they can actually just back mobile in general. That is the one product and then on top of that product we layer engines, things like vouchering and digital loyalty. This enables us to provide services to the different retailers, banks, insurance companies and telecoms within that product suite.
That is across every operating system, platform, and device...?
Absolutely, what is very key in Africa is that we obviously have a massive penetration starting to happen in the smartphone space now but we come from a place where the penetration was very low when we started in 2008. We have had to build our platform to span across what we call feature phones right through to smartphones and our platform can cater to all of that. We are running money transfer solutions using USSD strings to loyalty programs using USSD or SMS right through to smartphone applications that we build for the Shoprite or Woolworths group. We really are across the board.
It is a very successful South African start-up that has rapidly grown into a sophisticated multi-brand Fintech success story. What have been the most strategic decisions when it comes to laying the foundations for your company?
The biggest thing for us has been the people. I read a book by Jim Collins called ‘From Good to Great’, and he speaks about getting the right people and I think in any organisation, specifically in the tech space, you must know that your initial ideas are going to be changed over time, certainly because this is a changing market. We have had to innovate and be agile in our thinking which is key. When you get the right people in an organisation that is when you see the difference, for example between our success and someone else’s. We were able to grow as an organisation because we were very positive about being innovative; it is a culture and attitude of remaining relevant and being agile. I think that is what we have done very well for the last seven years, we have kept relevant. Our first idea actually failed, but it was learning through that failure and pivoting to what we are today which really set us apart.
Our platform has been fundamental in really spearheading growth in this market.
We understand that wiGroup has integrated upwards of 100 mobile transaction apps, what roughly speaking is the volume and value of the transactions?
We have integrated to 65,000 lanes so those are point of sales lanes which integrate to our platform across some of the biggest retailers in Africa. On the one side are retailers and on the other side are the applications. We probably have more than 100 different apps and that is across banking apps, money transfer apps, reward loyalty apps etc. We have just plugged in Discovery which is one of our biggest insurers and they are using a rewards platform. In terms of volume in the last couple of years we have processed about R4.9 billion through the platform. That is quite a significant chunk of value going through the platform.
So how does it work? You take a percentage of each transaction?
We get a transaction fee so it is not a percentage but depending on what service transaction you do, the fee varies. Payments funnily enough through our platform are actually free, we don’t charge for them, we believe payments are a commodity, a bit like airtime so if you plug into our platform for payments, we don’t charge. We do charge for digital vouchers, rewards, coupons, loyalty, end commerce and money transfer. Those are the different transaction fee elements. Effectively we generate revenue in three ways. We charge development revenue although we are not a dev house; we only build stuff that is strategic. We charge access and software fees which is when they plug in and utilise our products and we charge monthly support fees. Then there is the transactional fee which is the sort of annuity and scalable fee.
Why do you think that mobile transacting in South Africa has become so popular so quickly?
I believe we have done a number of things right. Obviously we like to believe that wiGroup has been quite a catalyst for that and one of the major things that we do differently to any other market is that this platform allows a retailer to integrate to a single platform and enable any transaction app. That has been a massive catalyst. If you can picture different markets, if someone wants to launch a rewards app, they have to go to every single one of the retailers and integrate each one, and then the next person that launches money transfer rewards has to go and do the same thing and so on. That obviously doesn’t promote growth because it is not interoperable. Our platform has been fundamental in really spearheading growth in this market. Then the other major thing is that we are really answering customer needs, so not just saying that we want to do mobile payments for the sake of mobile payments. Some customers want to do money transfers in cash, some want to do digital loyalty, others want to just get a digital voucher and go and redeem that voucher. It is really fine tuning the use case for customers and then answering that need. I think those are the two things that we have done in South Africa differently certainly to other markets that we have looked at.
South Africa has a great many economically active citizens but a lot of them remain chronically underbanked yet there is a mobile penetration rate of over 100%. This presumably opens up a whole new interactive customer base for retailers to use mobile payments.
What has been quite interesting is that mobile banking and mobile payments, in terms of opening up new accounts hasn’t been as big as for example in Kenya. I think the reason for that is that in Kenya they are very few banks, in South Africa we actually have 50% of our population banked so it is not as big a problem as it is for example in Kenya. I believe that catalyst is what got M-PESA off the ground in Kenya really well and why it hasn’t worked as well in South Africa. Your mobile monies of the world haven’t performed as well here as they would have in Kenya. We also have a whole load of low cost banks that have opened up so you can go and open up a Capitec bank account for example which is very cost effective and easy to open up. Our focus as an organisation and I think as a country hasn’t necessarily been on a mobile banking solution because we have lots of good banks with good systems and with cost effective accounts and which are growing. They are signing up hundreds of thousands of new customers into the banking world every month. I don’t think the problem is the banking world, really what we are trying to do is provide services and solutions that are mobile on top of those bank accounts and that is really where the answer lies. As wiGroup we are not trying to be a bank, there are too many people trying to play in the banking world, too many people trying to bank customers. We are rather the banks solution provider as just one of our sectors, certainly not exclusively but as one of our big sectors and we provide solutions and services to them. A good example of that is that of those 25 million banked customers, most of them are using mobile banking apps or USSD strings so they are certainly interfacing with their bank using mobile and the next element of that could be sending money to someone without a bank account because that is Africa. Generally the flow will happen where say, I am working and I have a bank account and I send money to someone who is not working and who doesn’t have a bank account. That is fairly simple, you don’t even have to open up an account for that person, you just pay them money and they get a token which they take to our platform ,for example, to a Shoprite and they can draw cash. They don’t need a bank account to get the cash. Obviously the next step would be to get that individual onto a bank account because cash is as we know expensive and something we want to get rid of but it certainly does provide quite a seamless way of doing that.
Investec Asset Management took a stake of over 25% in WiGroup last year which should hopefully take you to a new growth phase. Firstly, how is that developing? Secondly, how will that capital investment enable you to fast track new product development as well as expansion into other countries and regions?
You hit the nail on the head. The investment was for three reasons really, one was that Investec is a very strong global brand and I think being a company that has come out of a start-up mind-set to becoming a fairly significant business meant we needed a strong brand behind us if we were to go into other markets and have credibility. Also the expansion into other markets needed capital so although we were growing the business profitably up until the end of last year, there was an investment needed to break into other markets and that is certainly part of what this investment was for. The third element is new products. We had been ahead of the game but in order to stay there we need to continually invest in innovation and new products. We have taken that capital and those are the elements that we are really investing in. It has been great. It has only been four months since the deal but so far it has been a good relationship. We started off on a good note which is always a good thing. They haven’t had any surprises from us in the first few months which is great! We are also getting the right support from them. They are really bringing a lot of insight to us and that is what you want as a young business and a young executive team.
You can draw on their management expertise?
100%. They have also helped us source other key executives that we have brought into the stable and who have come with experience and knowledge. We have now got quite a good balance of new people that have gone before us with a lot of experience of running companies and who are now coming in here and fitting in really nicely. They are not stopping the agility and the innovation of the company but they are bringing a lot of stability and insight which as a young executive team we might not have had.
It must have been like Christmas for you! A very gratifying day!
Interestingly, we have had such a journey with wiGroup, with ups and downs for 7 years. The first up was landing the first round of funding when I had just an idea, I think that really felt like Christmas! I went to a company called Capital Eye Group and I pitched the idea to them, I said to them “I need 2.2 million rand and I am giving 30%”, we ended up settling for 2.2 capital plus 2.2 loan and I ended up giving them 50% but we just had an idea and I was 23 so I think that was really Christmas for us! Those are big moments. Because we grew the business organically and we are profitable, it was a good place to do a deal from because we were not sitting with our back against the wall saying that we need capital and we will sell our soul for that capital. We were in the position where we didn’t need the capital, we would have wanted it but it wasn’t a requirement. So that allowed us to sit at the table with Investec on a pretty equal footing and find what would be a win-win for both parties. These deals take a long time, so it’s not like we woke up one morning and this happened, there was a lot of planning and sitting down negotiating. What I am really grateful for is that we ended up in a place where I believe both parties were very satisfied with the deal. I know that is not often the case so I believe we are very fortunate.
You have partnered with Interswitch in Nigeria. Do you have plans to scale wiGroup’s proven model into the rest of Africa? What other regional expansion plans do you have?
We are definitely expanding into Africa. We are partnering with Interswitch which is a credible Fintech company in Nigeria and one of the fastest growing companies there in the financial services space. They provide switching and card services so the complement was quite good in the sense that we were bringing the mobile transactional elements which they didn’t have. They actually wanted to look at how they would build that in so it was great timing that we found them when we did. That is something very positive. Although in Africa the retail footprint is far less than in South Africa. To give you some indication we have 1,000 Shoprite stores in South Africa alone and in Nigeria there are probably just 15 to 20. So that is a scale from a retail perspective, which is really our core focus, retail integrated transacting. Although we are positioning in Nigeria, the time frames to get things moving there are a little bit beholden on the retailer. Our idea is that we want to move into Africa on the back of our current retailers so the Shoprites, KFCs, Foschini Groups etc. and move into Africa on their growth. As we are already with their point of sales in their stores it is much easier to grow with them. Offshore we are going to focus on certain markets, at this stage we are busy determining which markets. We are casting the net wide to determine where the right interest lies and the demand is and then we will focus in on those markets. We are exploring Europe, UK, North America and South America particularly and within that we will determine where we want to focus and penetrate into.
wiGroup’s technology is well suited to emerging markets in Africa and beyond where mobile based transacting is poised to take on the traditional card based payment. Africa as a whole is very much more dependent on mobile technology than say the US. When it comes to ICT more generally do you think that South Africa and the Western Cape has a particular competitive advantage?
In terms of government assistance? I think we certainly have a lot of buy in from the government which is great. The fact that they have a seat at the table is probably better than in most markets. There is a lot of spend going into training and empowerment which certainly helps. They are really trying to work hard at tax benefits and other things. There is certainly a lot of benefit in that but at the end of the day business is business and it doesn’t really matter where you are in the world, you have to do the hard yards to get it going. I wouldn’t say that there is anything that we have felt as a significant impact but certainly just having their support goes a long way.
To what extent do you think that South Africa can take a big step forward on adopting more scalable and replicable approaches to innovation that the ICT tools are providing them with?
What we do have in the Western Cape is a network of incredible entrepreneurs. Drawing from that energy; they call it Silicon Cape after the Silicon Valley. That breeds innovation. When you breed innovation you get a lot more VC companies coming in, you have an entire ecosystem happening, you have mentors coming in... I am for example involved in an initiative where we are mentoring a lot of African start-up tech companies. There is really a broader ecosystem happening in the Western Cape and there is a lot of support around that. From that perspective, if you are a start-up business now and you are innovating, now is the time. The Cape is really a great place, there are a lot of warehouses where you can go and get hot disks, you have spaces, a lot of VC funds around for start-up tech and a lot of the banks are moving in too. A lot of our banks now are actually seeding Fintech solutions. Compared to where we were in 2007/2008; it is a totally different ball game if you are starting a business now.
How far away do you think the Western Cape is from having the right environment economically and in terms of regulations to create a Silicon Valley type ecosystem?
From a Western Cape point of view, we are there. There are no excuses around why we shouldn’t have successful companies in terms of what the government is doing and the regulations. That is certainly not the thing restricting the growth. The question around could we become Silicon Valley and what is stopping us from being there, is not to do with government or regulation; it is just the size of the market and the investment coming in. I do think government stability, and that is not a Western Cape thing, but South African government stability is a hindrance because if your rand is tanking, that is a challenge for investors coming in. If they are bringing dollars in to invest in South Africa, and the rand is depreciating at say 10% a year, you are losing 10% before you are even gaining. So that is a challenge. IP offshore is a challenge. Government stability in terms of the nation is also a challenge. From a macro perspective unfortunately the Western Cape can’t do much about that. They can obviously fight a good fight but it is about really getting our core government right and that is where we need to do some work and see what we can do. That being said, I still believe as a South African company, I like to look at the positive side. We really have a good opportunity to provide and export solutions because we are far cheaper than anywhere else in the world. With our currency where it is, resources are cheaper, products are cheaper, and time is cheaper, so we are able to provide software at a far more cost effective way. We also have brilliant minds, the varsities that we are producing in terms of the calibre of developers and individuals are still exceptionally high. If we look at some of the products that we are building, in the world standards they are really good. We just need to learn to export better, but I don’t think we are ever going to get to the type of money flow that happens in Silicon Valley here. There are just so many circumstances that create a Silicon Valley and I don’t think we will get there but that is ok. There are so many other markets in the world that have got great tech companies that are exporting and that is what we should do. I don’t think we should try and be a Silicon Valley; it is about being the best Cape Town. I think that is certainly an exciting story.
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