Unlike other African countries, South Africa also has a functioning credit system with the prevalent use of credit cards. However, expensive value-added services like credit cards do not necessarily address the needs of underbanked people. Digital payments gateways, on the other hand, have a unique use case, particularly when they can help people use their basic bank accounts to make payments. Ozow is one such player. Coming off a year of exponential growth, it has raised a $48 million Series B to provide more alternative payment solutions to its millions of merchants and consumers. Chinese internet giant Tencent led the round, with other investors Endeavor Catalyst and Endeavor Harvest Fund participating.
The platform, which caters to more than 47 million bank account holders, typically works this way. First, consumers select Ozow as a payment option when shopping online or in-store. Next, they choose their bank (from all ten major South African banks), log in with their online banking details, and Ozow automates the payment process. All merchants need to have is a bank account and a “smart-enabled device” to receive payments. Ozow’s clients include leading enterprise companies, such as MTN, Vodacom, Shoprite Group, Takealot and Uber. Ozow is free for individual users. Merchants can also use the payments gateway for free in the first 12 months, or up to $65,000 in processing value per month. The company also works with distributors and payment service providers and resellers of its product. They get charged a percentage fee that varies between 1.5-2.5% for every successful transaction made via Ozow. A portion of the funds will also be directed at mergers and acquisitions and pan-African expansion to four countries in the next six months: Namibia, Ghana, Nigeria, and Kenya.