The rise of Africa’s e-commerce and how businesses can expand into new markets
The e-commerce industry has seen a boom in recent years, amplified by COVID-19, with the global e-commerce payments market set to reach $612.1bn by 2030, as reported by Yahoo Finance. Cards, digital wallets, and even cryptocurrencies are amongst the alternative payment methods favoured when making online orders, strengthened by an ever-rising global number of smartphone users. Additional layers of security like biometrics and transfers made by digital wallets make buying online via smartphones even safer. Looking solely at Africa’s e-commerce market, it shows revenue is projected to reach $49.02bn in 2023, with an annual growth rate of almost 14% (according to Statista). So, what trends and opportunities lie ahead for Africa’s e-commerce? And what financial tools does this industry need to support its upwards trajectory?
The local impact of Africa’s e-commerce
By 2027, the number of users in Africa’s e-commerce market could hit 609.3 million with a user penetration of 44.3%. An expanding industry brings with it multiple benefits for the continent, including economic growth and prosperity, job opportunities, expansion of the digital economy, and providing consumers in rural areas access to goods and services. This was recognised by Sacha Poignonnec, co-founder and co-CEO of Jumia, who pointed out the opportunities for businesses of all sizes across Africa, in particular for small businesses as a safer and cheaper way to grow. His experience at Jumia has seen small businesses grow with less investment needed as online sales take precedence over brick and mortar, while getting a greater reach of consumers.
Africa’s e-commerce potential was recognised by Aubrey Hruby, co-author of ‘The Next Africa: An Emerging Continent Becomes a Global Powerhouse’, who claimed “The potential is large: urbanisation means it’s getting easier to deliver, there are more mobile phones, more people are getting credit and debit cards, and using mobile money. All those trend lines are positive for ecommerce platforms.” Africa is a continent rich of tech-savvy consumers who seek quality goods and pay using smartphones. Consumer goods like fashion and self-care products have soared, alongside travel services which are easily booked and paid for online. There looks to be a wealth of opportunity for e-commerce businesses, yet several challenges can stand in their way.
Challenges to Africa’s e-commerce
Consumers in Africa are facing challenges with a large proportion of the population being unbanked and preferring to pay in cash. While Kenya and South Africa score highly of 88% and 82% respectively having accounts, Nigeria stands at 51% and Egypt at 38%. While the number of online shoppers across Africa is rising fast, it opens doors for African e-commerce businesses to penetrate new markets. But the right financial tools are needed to do so.
Current barriers to Africa’s e-commerce businesses reaching their growth goals and new developed markets lie in their payment methods. Not having access to payment platforms which collect funds in multiple currencies, long settlement times impacting cash flow and poor communication of when funds will land in accounts with no real-time tracking. Online sales in Africa are projected to reach $75 billion by 2025 (International Trade Administration), but according to a study by Checkout, 72% of businesses aren’t receiving their preferred settlement currency. E-commerce businesses in Africa need to be able to find a simple way to collect global payments from both emerging and developed markets to open new corridors and expand their customer base, without the hassle.
Introducing Global Accounts
E-commerce businesses require a single hub where all payments, transactions, FX orders and multi-currency wallets can be viewed on a dashboard to help manage business accounts and cash flow. According to a survey by PayPal, 76% of e-commerce customers preferred paying in their local currency, so businesses need to be able to provide that option if they want to expand into new markets. Our global account allows for collection in up to 25 currencies into one account under your business name.
There are several benefits a global account can bring to Africa’s e-commerce and overall provide a smooth and streamlined cross-border payments experience. These include:
Businesses can build trust and loyalty with customers around the globe as paying is easy with local currency payment options.
By collecting payments in preferred currencies, e-commerce businesses can save time and money without needing to convert currencies or pay processing costs.
Businesses can tap into a wider customer base and increase sales with a global account that’s designed for easy payment collection, no matter where your business is.
Gain greater security with international payment collection and reduce the risk of fraud, and any other cybersecurity threats. With fewer touchpoints than traditional banks and faster settlement times, businesses have greater peace of mind over their global finances.
The user experience for both the customer and the business becomes much smoother, and more likely to make repeat purchases.
Transparency over cross-border transactions with real-time visibility and messaging to make the experience seamless.
Compliance and security can be a drain on business resources, but is unavoidable and non-negotiable. Our platform is highly regulated and always follows updates to all AML/CFT regulations in every jurisdiction that we operate in. Businesses can be put at ease that compliance concerns are handled. Verto also provides local accounts across the UK, Denmark, the EU, and the US, so businesses in these regions can collect money from local businesses and customers using local account numbers at high speed and low cost.
As Africa’s e-commerce industry swells, choosing the right solution to surpass the competition and increase profitability is crucial. That’s why our Verto accounts are designed to provide a lower cost alternative that’s designed for African businesses to reach their full potential and have smoother payments, whether it’s local or from the other side of the world.
The next step
Africa’s e-commerce industry looks to have exciting growth in upcoming years, providing plenty of opportunity for businesses to expand across the continent and enter new markets. Having a global account provides an intelligent solution that’s ready to get e-commerce businesses into new markets, reduce FX costs and payment processing, and provide a better customer experience, combined with high security, and protect businesses from fraud or hacking. E-commerce businesses should be prepared to leverage the benefits a global account can bring and support for new market expansion beyond Africa.
Start using Verto’s Global Account today and let’s help you grow your e-commerce business.