Moving the dial

Two Chinese firms eye African payments profit

Zhou Yahui w

Zhou Yahui: a success in Nigeria

“Chinese entrepreneurs that go to Africa to start a business – as long as they are unafraid of hardship, exhaustion and loneliness – will achieve great success. The chance of succeeding is very high,” proclaimed billionaire Zhou Yahui in a 2019 speech that encouraged more Chinese businesspeople to try their luck on the continent.

Following his own advice Zhou, 43, has focused his managerial attentions on Nigeria’s largest mobile payment company Opay and has relinquished his position as the chief executive of Beijing Kunlun, a gaming company he founded (it owned the dating app Grindr until it was forced to sell its stake by the US government in March).

Zhou (for a profile of the tycoon, see WiC325) has been chairman and chief executive of Opera, a sNorwegian browser company, since Kunlun acquired it in 2016. Two years later Opera founded OPay, going on to raise $120 million in a Series B financing from Sequoia China, Meituan and Softbank Ventures last November. In April, OPay claimed to have five million monthly active customers, accounting for more than 60% of mobile money transactions in Nigeria.

OPay’s latest funding will be deployed to expand its reach into Kenya, Ghana and South Africa. But the growth plan will pitch it directly against another Africa-focused fintech start-up called PalmPay, which also raised cash in a seed round last November, getting a $40 million investment from Shenzhen-based Transsion, the leader in African mobile phone sales (see WiC469). The latters dominance in the continent has been growing: Transsion’s market share reached 52.5% in 2019, up from 48.7% the previous year, according to IDC. The majority of its sales – under the Itel, Tecno and Infinix brands – are so-called ‘feature phones’, which lack the built-in functionality of smartphones but are much cheaper (usually costing $100 or less) and boast longer battery lives.

After taking pole position in feature phones, Transsion wants to establish more of a presence as a software provider too. In addition to its stake in PalmPay, it launched Boomplay with Chinese internet giant NetEase. Boomplay already boasts 100 million users, making it the Africa’s largest music streaming service.

At present PalmPay’s functions are still fairly basic, largely limited to peer-to-peer money transfers, payment of utility bills and top-up for phone airtime.

But with the relative shortage of banking services in Nigeria, the functions have brought new convenience to the local market.

To foster a faster scale-up of its customer base, Transsion has preinstalled the PalmPay app on 20 million handsets it expects to sell this year. The brand has also been working overtime to court new users by offering 5% cashback on bill payments completed on the platform, as well as a 10% discount for customers who top up their phone plans with the app. PalmPay says it now has more than 100,000 active users in Nigeria.

Why are both these Chinese-linked brands duking it out in the Nigerian market? “Nigeria is one of the countries with the lowest penetration of bank coverage: 95% of transactions are made in cash, and about 60 million people [in a population of 200 million] have no bank accounts,” explains Huxiu, a news portal.

While Chinese interest in Africa is nothing new, the mobile payments battle comes at a time when companies are trying to build champions that might replicate the successes abroad that WeChat Pay and AliPay have had in China’s domestic market. An Africa-focused fintech could build a market position that provides the foundation for a future IPO or even prompt an acquisition by a bigger payments company, such as the soon-to-be-listed Ant Group.

Although OPay is the leading payments app in Nigeria, it hasn’t been as successful with its motorbike ride hailing platform ORide or its food delivery arm OFood, both of which were shut down this summer. “The proportion of people with steady income is scarce and spending power is limited. In short, the market still needs to grow,” an industry insider told Huxiu. “[OPay] rolled out services in all kinds of sectors from travel to food delivery, grabbing market share from domestic players. That turns a lot of friends into foes.”

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