The development of the African FinTech Industry has attracted global attention, including the global payment networks Visa and MasterCard. These two corporations have developed a business model that has enabled them to attain significant success for decades. At the core is a network-based business model that is based on adding endpoints that funnel more transactions through their networks.
Supporting that business model is a pricing model that has been continually updated based on changes in the competitive marketplace. The African FinTech Market will require Visa and MasterCard to look at how they price in Africa.
The specific pricing challenge relates to domestic transactions. Cross border transactions offer an f/x component that supports viable margins per transaction.
Domestic transactions lack that f/x component and present other challenges:
Smaller monetary transactions, produce smaller % based fees and revenue
Domestic pricing controls, cap end-user fees
MNO competition, with lower pricing
FinTech business models that often use no or very low fees to focus on generating a large customer base.
The current Visa and MasterCard pricing works well for cross border transactions and in many other parts of the world that do not present the full set of challenges of the African FinTech market.
The African FinTech solution for domestic programs will have to involve all stakeholders in the value chain: Visa/MasterCard, banks, processors and FinTechs. They will need to solve for the overall business model, insuring each stakeholder is earning sufficient revenue. This means opening up their pricing models to adapt to the market requirements.
Every stakeholder will have to adjust and adapt. The process will need to be iterative: test, measure, adjust and repeat. It may require trading some margin in return for market penetration and growth. The sooner you begin deploying this process the closer you will get to the “right price” and gain a competitive advantage.
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