This SA startup plans to eliminate digital payments failure in Africa. Here is how

Revio is a South African fintech startup looking to address digital payments failure on the continent. The startup has raised $1.1 million to expand its market presence.

According to recent data, three out of every 10 digital payments in Africa fail. Causes of failure range from a fragmented payments landscape and invalid cards to dormant accounts and high dispute rates. These failures contribute to a $14 billion loss in recurring revenue for digital businesses across the continent annually.

Revio is a South African fintech startup trying to address this pain point. It was founded in 2020 by Ruaan Botha after seeing how much time and manual effort businesses spend in engaging customers on outstanding and failed payments. The startup raised $1.1 million in November which it has used to drive its presence in other African markets including Nigeria.

TechCabal caught up with Nicole Dunn, Revio’s Chief Commercial Operating Officer, to discuss the startup’s payments solution, its expansion ambitions, raising funding in a downturn, and the state of payments on the continent.

Please tell us more about Revio and the problem the company is trying to address.

Nicole Dunn: When we look at the African continent, we’ve had really rapid digitisation of historically cash economies in the last 10 years or so with pioneers like Flutterwave and Paystack really laying the groundwork for digital payments. But with that, and with some of the national sort of focus on financial inclusion, there’s been huge fragmentation that has resulted. We’ve got 54 markets, very different markets and 42 different currencies. But a stat you might not know is that we’ve got more than 280 different registered payment service providers, and that number is growing every month, if not every week. And so as a business looking to do the single most core thing I need to do as any company, which is collect revenue from my customers, I’m confronted with huge complexity on multiple levels.

I not only need to incur the search cost of which are the most locally relevant and reliable payment methods in each market, I also have to negotiate with each of those gateways. And that’s not a one-off project. It’s an ongoing operational burden or headache I need to incur because APIs change, there are unique settlement flows, there are unique settlement structures and fee structures. And even if I get all that right, what we see is in African markets, payments fail more often than anywhere else in the world. We’re seeing on average a failure rate of 30% on recurring payments. In some markets that’s even higher, reaching 50%-60%.

And there are also other payments that are specifically risky. For businesses, like insurance businesses, a first premium payment often has a success rate of less than 30%. And so really, what we are tackling at Revio is this fragmentation and failure problem where businesses are unable to collect revenue from their customers. Failures can be for a host of reasons including technical failures and connectivity issues. It can also be customer related, where it’s a cash flow issue on the consumer side, or you’re trying to debit from their bank account, but they’re predominantly cash or mobile money based. So, we’re really bridging that gap to help businesses localise their payments stack and collect revenue at scale.

What challenges have you faced in trying to address these challenges and how have you been trying to address those challenges?

ND: I think it’s been interesting for us to just discover how unique each market is in terms of the payment cultures, and the payment preferences. So even within a market, you can have high fragmentation where a different payment method is preferred for a higher-value payment versus a lower-value payment. So in South Africa, you have debit order as the most popular payment method for recurring payments, but then we see the card and instant EFT growing in popularity for one-off e-commerce payments. And so there’s just a kind of infinite complexity that exists here.

So the way we have tackled this is through partnerships and leveraging what the gateways do very well, which is payment acceptance capabilities. So our platform has a single API that is pre-integrated with the best gateways and each of the markets that we’re currently operating in and where our clients want us to operate. We aggregate those payment gateways so that we’re not reinventing the processing infrastructure that is already there. But we are also abstracting the complexity that’s around that.

So for technical failures, building optimisation, like smart transaction routing to route transactions to the gateway, where they’re likely to have the highest success rate, or being able to dynamically fail over, set up different business rules for transactions, and really understanding the root causes of the failure. If it is a customer-related issue, it’s about being able to trigger an engagement with that customer to prompt them to do something that remedies the problem. So that’s really our approach in brief.

In November, you raised $1.1 million. What was your experience raising funds in a downturn?

So we announced the round in November but we actually closed the transaction a little bit closer to July. So we really went out into the market as the downturn started and it was really, really bad. And it was particularly painful for me because a year prior, I had been on the venture capital side and saw deals happen at hugely inflated valuations. And now I had to give away a piece of our company for much less than I knew companies with much poorer fundamentals had gotten away with the year before. So personally, that was really difficult to make peace with.

But there is some positive change from that downturn in that companies now have to focus on unit economics and shift away from growth at all cost. And so if you can demonstrate an understanding of your business model, and how that will ultimately scale into profitability, there is still capital out there for you. And there’s also some healthy correction in the kind of advice that venture capital firms are giving out.

I’ve seen a couple of startups in the local ecosystem get pushed to expand too aggressively. But so for us, finding investors that were genuinely committed to investing in the continent was the first thing that we tried to screen for because Africa is still perceived as extremely risky, especially by global investors, and you’re having to consistently justify the market size compared to markets that they know and understand much better. And we found some great ones who understood the problem space.

What was the funding that you raised used for?

ND: So a lot of that has gone into further product development. We’ve released a newer version of our product that incorporates more of the revenue recovery functionality, whereby in real-time, we’re able to engage with customers around payment failures and payment experiences to increase collection success rates, customer retention, and conversion rates for our merchants. It has enabled us to move up-market into enterprise, which is now exclusively where we focus from a client perspective. That’s been a key part of where the funding has been deployed, as well as of course, building the product and technical team to support that at scale.

We’re now actually bringing in some additional funding to help accelerate our coverage roadmap. So part of the funding was used to expand our coverage from just South Africa into Nigeria and select other markets where we had an existing client pipeline. We are fortunately seeing more demand than we anticipated, with a pipeline of more than 15 enterprise clients that want us in more than 16 African markets. So while we won’t be physically expanding the business and team into each of those markets, we will be investing in integrations with the local gateways in those markets, and obviously, the governance and compliance that is required.

What would you say is the state of payments in South Africa at the moment?

ND: In South Africa, there’s already a fair amount of aggregation. So the fragmentation at the local level isn’t as bad as we’ve seen in some other markets. There are still high rates of payment failures. The primary payment method for recurring payments in South Africa is still very much direct debit, or debit orders as it is called locally, and on average, we’re seeing failure rates of between 30% and 50%. And as I mentioned, there’s now been a growth in the past few years of alternative payment methods like EFT.

So there’s still a lot of dynamism in this market, despite it being in some ways, a lot more mature and consolidated than elsewhere on the continent. What we’ve seen is a lot of incumbents really struggle to integrate these new alternative payment methods into their core business processes. They function very differently from the direct debit method that they’re familiar with because there are a whole lot of different settlement rules and different risk factors they need to take into account.

There is still a big question around how we get our money out of the country, especially if it’s a large multinational, headquartered somewhere like Europe or the US. It’s a little bit less clear so that’s really where the payment orchestration layer becomes hugely valuable from our standpoint as Revio.

What do you think is the future of payments in South Africa?

ND: I think AI is going to play a very interesting role in payments to complement a lot of the work that is already underway. At Revio, we’re already using some of the OpenAI capabilities in the customer communications part of the business. Additionally, we’re deploying, as well as starting to incorporate, that into our data mining and transaction routing logic. I think that AI will play an interesting role in helping with localisation and personalisation of payment experiences, going beyond just payment processing. It will also play a significant role in building value-added services that drive higher conversion rates and repeat purchases for businesses, combining merchant and transactional data to power better payment experiences and business outcomes.

I think over time, we’ll start to see players like Revio, who have a very specific industry and regional focus, extend beyond money movement into real revenue optimization. And of course, we’ve got a bit of a first-mover advantage and the large volumes of data that we already have through the merchants that we’ve onboarded and are processing through our platforms. So I think data and AI will really be at the core of helping merchants understand the root causes of payment failures and the tactics and workflows that they can use to really optimise their revenue management and assurance.

What else about Revio should our readers know about?

ND: We’re currently working on the second version of our platform which will be released at the end of this year. It incorporates a lot of the learnings from our past year of trading and productisation. Those learnings have enabled us to have a user-friendly front end that will allow us to move back down from enterprise to mid-market size businesses and scale more easily into other markets.

We’re also building a lot of analytics tools around data to help merchants better understand their payment stack and where there are efficiency gains available. We’re also going to be adding some new use cases to the stack which will allow us to move beyond just reactive revenue recovery to more proactive use cases, like churn prediction and management, as well as a few more exciting product use cases that I can’t share just yet.

*Interview has been edited for clarity and length.