Paystack, Nigeria’s first start-up to enter the world’s most prestigious start-up accelerator, Y Combinator, has been catalyzing digital payments in a country where 60 percent of adults remain financially excluded. In the process, it has shown how open APIs can enable new financial and nonfinancial use cases for digital payments in developing countries, including for low-income customers.
Paystack helps businesses in Africa accept payments online from anyone, anywhere in the world. It was launched in 2016 by software engineers who wanted to make it easier for businesses in Africa to accept secure digital payments. This was an ambitious goal. The online payments market in Nigeria at that time was fairly new, with an estimated transaction volume of just $30 million per month. Paystack believed that by removing friction from digital payments it could help businesses of all sizes to grow.
To make it as easy as possible for merchants to plug into Paystack’s payments service, it built open APIs that addressed merchants’ common pain points:
- Merchants can start accepting payments in a matter of minutes rather than days, weeks or months. Businesses often face hurdles that make it hard to start accepting payments online. These could be related to inaccessible developer documentation, minimum turnover requirements, technical requirements or expensive integration costs.
- Merchants do not need to have a registered business to open an account and start accepting payments. This is a big deal for small businesses and merchants in Nigeria. The International Monetary Fund estimated that the informal economy accounted for 65 percent of Nigeria’s gross domestic product from 2010 to 2014, far higher than the 38 percent average for Africa. To cater to this group of merchants, Paystack allows smaller businesses to get started with just their individual bank account details and an ID. As these businesses grow, they’re required to upgrade their business documents.
- Online sellers can accept payments via a simple link, enabling them to sell online without a website. Social commerce in Nigeria is set to expand rapidly, with fast-growing youth populations and increased smartphone penetration driving consumption patterns. Paystack enables businesses to generate a link they can share with customers wherever it is they sell to them, whether Instagram, WhatsApp, Facebook or Twitter. The APIs also allow merchants to collect payments in whichever ways their customers are most comfortable paying, including cards, mobile money wallets, QR codes and bank transfers. It also offers plug-ins for e-commerce platforms, such as Shopify and WooCommerce, to make it easy for more formal online merchants to accept payments.
- Merchants receive their payouts the next business day. Managing liquidity is a stressful challenge for small businesses. Receiving money the next business day can affect the viability of businesses.
By addressing these and other common pain points, Paystack’s open APIs have enabled a range of businesses to grow quickly, with many reporting that they have doubled or tripled their monthly revenue within a few months. According to Paystack founder and CEO, Shola Akinlade, Paystack accelerates growth for over 50,000 African companies, helping them launch new business models and deepen customer relationships.
For example, PiggyVest is a savings and investment product designed to help Nigerians save. According to the PiggyVest website, It now has over 100,000 users. Farmcrowdy, a crowdfunding platform for farmers, is another example. It connects farmers with “sponsors” who provide funds for seeds, machinery and other agricultural inputs in exchange for a return on their sponsorship at the end of the crop cycle.
Paystack’s payments aggregator APIs are helping online businesses grow, and they are fostering a digital ecosystem of services. The company plans to extend its product range for merchants. It also plans to offer business development support services by integrating with software accounting tools like Xero, for example. It plans to launch soon in new markets like Ghana and South Africa.
For more information about Paystack APIs and other APIs relevant to financial inclusion, visit CGAP’s API Dashboard.