In the event e-commerce doesn’t pay off for Jumia as losses continue to mount, its management appears to already have a semblance of a strategic pivot in place.
Chief executive Sacha Poignonnec and Antoine Maillet-Mezeray, the chief financial officer stressed the need to diversify Jumia’s revenue sources on its second quarter earnings call on Wednesday (Aug. 21). They were especially bullish on the prospects of Jumia Pay, the company’s in-house payment solution, as being key to creating new revenue streams beyond its beleaguered e-commerce offering.
Initially developed to facilitate digital payments on Jumia’s marketplace—a necessity given the unreliability of early-day online payment systems, Jumia has now started exploring use cases of Jumia Pay outside its “core retail marketplace transactions.” The service is now available to Jumia’s other business verticals in food delivery and hotel booking in select countries.
The company is also experimenting with opening up Jumia Pay beyond its own ecosystem, particularly in Nigeria and Egypt—its two largest markets where the service is showing the most promise. In the last quarter of 2018, over half of marketplace transactions facilitated by Jumia Pay on its marketplace came from both countries. While Jumia operates in 14 African markets, Jumia Pay is currently available in six, including Ivory Coast, Ghana, Morocco and Kenya.
Playing up the promise of Jumia Pay as an additional revenue stream appeared to be a bid to offset the dim view of its latest earnings results. In the second quarter of 2019, the company’s operating losses widened to $70 million year-on-year. It adds to its loss-making record which has already surpassed $1 billion.
But it will have an additional problem with earning partners trust in its brand after it was forced to reveal how its own staff members had been involved in a sales fraud that took nearly $18 million over the last year.
Poignonnec says operating Jumia Pay as a financial services marketplace and connecting financial institutions to its sellers and consumers is “a very natural extension of our existing marketplace.” One cited use case could see Jumia share data with banks, allowing them to create credit scores and then provide loans with Jumia making commissions on sales of any financial products. That’s a potential pool of 4.8 million active users (defined by Jumia as users who have placed an order in the last 12 months) and 80,000 sellers.
A more mainstream application could also see Jumia Pay used “to process payments on behalf of third party merchants,” with Poignonnec acknowledging “payment processing margins are very attractive.”
Management told investors it intends to “carve out Jumia Pay as a standalone entity.” But this will launch the struggling company into an increasingly crowded and competitive field of payments-focused fintech companies operating across Africa.
One measure of the startup activity is the level of investment, particularly from fintech giants who are wise to the potential upside of backing local players with a deeper understanding of markets across Africa. For its part, Jumia also counts card giant Mastercard as an investor. Fintech startups have accounted for the highest share of venture funding in recent years, snagging 40% of total funding raised and also accounting for five of the ten largest deals in 2018.
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