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FinTech

Connecting Africa Podcast: S3 Ep. 2 – Nigeria's king of micro-payments

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On this Connecting Africa Podcast we chat with Michael Oluwole, co-founder and chief growth officer at Touch and Pay Technologies (TAP), a Nigerian fintech startup that is digitizing and processing micro-transactions in Nigeria's transport sector, and driving financial inclusion in the process.

The transportation sector was the initial focus for TAP, but the company is expanding into other sectors like retail.

Oluwole said that in Africa 70% of all payments are cash-based micro-transactions, and in a sector like transportation the same people are making the same small daily transactions for public transport every day or every week. However, up until now, most of Nigeria's transport sector ran solely on cash because digital transactions or card payments were perceived to be a hassle or carried a high cost.

"When we started, nobody believed that micro-transactions could be digitized. So, we had to be the acquirer, we had to be the issuer – we issued cards, we issued [payment] devices. We did a lot of the heavy lifting," he explained.

In Nigeria, where 64 million adults don't have a bank account, TAP is helping to advance financial inclusion among this unbanked sector by digitally processing micro-payments ranging from ten US cents to $10.

Opportunity for change

Contactless payments may be the norm in developed markets, but in a city like Lagos if you want to take public transport, cash is usually the only option. That is where TAP saw an opportunity for change.

The startup developed a contactless payment option (tap-to-pay) via a physical transport card – called the Cowry card – as well as via a mobile app. This allows users to load money onto the card at local retailers or use a bank card to load money onto its smartphone app to then pay for public transport.

TAP launched in 2019, initially in Lagos state, and has now expanded to other Nigerian states like Ogun, and Oyo. The company has almost 4 million total users and about 500,000 active daily users.

Oluwole told the podcast that TAP was bringing unbanked or underbanked West Africans into the digital fold and moving their cash onto the Cowry card or app to be used in a similar way to the digital wallets that have become so popular in East Africa's mobile money economy.

Another important aspect of the business is using the data it collects to help retailers and transport companies grow their businesses and help end-users access better services.

"In 2019 we started with one bus company, which had 30 busses. After less than six months of working with them, they had grown their fleet to 50 busses. As I speak to you now, they have well over 400 busses in their fleet and this was literally from digitizing their operations," Oluwole said.

He explained that the bus company could grow quickly because access to data about their customers allowed the company to optimize routes and schedules. The data also helped them get more funding from financial institutions to grow the fleet.

How to become a fintech king

Oluwole shared a story about how one of TAP's investors asked the founders: "Do you want to be rich or do you want to be king?"

"We could be a king in a small market, or do we want to expand and make sure that the solution has a huge impact to people, and that is the option we took," he explained.

"We were quick to understand that this solution has huge potential, and we would be doing Africa a disservice by keeping it to ourselves. Rather we must expand and make sure we solve this problem across Africa," he added.

Touch and Pay Technologies co-founders Olamide Afolabi and Michael Oluwole.   (Source: TAP)
Touch and Pay Technologies co-founders Olamide Afolabi and Michael Oluwole.
(Source: TAP)

"Today over 250 million Africans still perform cash-based transactions every day. This simply means that even if those people are spending $1 a day, it means that $250 million exchanges hands every day in Africa – and these are very conservative numbers. Imagine if its $5 every day, meaning $1.25 billion dollars, changes hands in cash transactions every day and these transactions have no digital footprint," Oluwole explained.

"If we are looking at a society where we want to create credit facilities and better solutions for merchants to receive payments, if we don't solve this problem on a large scale, we are just the king in one corner," he added. "So, partnership is playing a huge role [going forward]. ... We are leveraging partnerships and making sure that we can provide this solution across the board and solve this problem for all Africans."

Expansion plans

The conversation then shifted to TAP's expansion aspirations.

"This same model can be taken to almost every part of Africa. We are in early conversations with [companies] in East Africa and Ghana, in the transportation sector," Oluwole said.

In Nigeria, the company is also expanding beyond just transportation into merchant payments and acceptance to enable the Cowry card and app to be used to pay for food and drinks from small merchants at bus terminals. And Oluwole believes there is a lot of potential to expanded even further in the retail sector.

That led to a conversation about how TAP navigates Nigeria's regulatory framework across different sectors, licensing challenges and also how regulation will impact TAP's growth in other markets.

Transport on credit

A space where the company is seeing potential is the ability to provide users with small overdraft facilities or microloans on the cards.

"One of the things that is driving our adoption is the fact that we are providing a credit history for those commuters. If you are a commuter and you use your card for six to eight weeks you then pre-qualify to ride the bus [on credit] by a certain margin, if you want to get a cup of coffee or buy groceries, I can also extend that credit to you," Oluwole explained.

One of TAP's contactless terminals in a transport hub.   (Source: TAP)
One of TAP's contactless terminals in a transport hub.
(Source: TAP)

"No other platform has been able to create that ecosystem within the country where I have a card that will let me ride on the bus on credit, more like an overdraft. I can use it to get a haircut, to buy groceries, just basic transactions, and then I can later pay it back," he said.

Oluwole said users are really seeing the value of how the card can help their daily financial life.

"An average customer who commutes to his work every day, giving him a small micro-credit of $1 or $2 a day and before 24 or 48 hours he is able to repay that debt, that is very impactful. He doesn't need to part ways with that $1 for transportation, which he always would have needed to do. Now, he can ride on credit and use that for other things and before the end of the day close that credit out."

TAP has helped bus drivers use a similar system to get petrol on credit at the beginning of the day and then pay it off at the end of their shift.


Want to find more Connecting Africa Podcasts check out our Podcast Archive here.


This season we will be speaking to more startup founders and interesting personalities in Africa's tech ecosystem, so stay tuned for the new episodes dropping soon.

If you want to catch up on all the previous episodes you can find the podcast on Apple Podcasts; Spotify; Google Podcasts or find other podcast platform options on our main page on Spotify for Podcasters.

You can also find the podcast hosts online here:

Paula Gilbert (@paulajgilbert)

Tobi Lafinhan (@TobiLafinhan)

Matshepo Sehloho (@tsokamatshepo)

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Paula Gilbert, Editor, Connecting Africa

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