Kenya Payments Services: Virtual Pay, The All-in-One Platform for Collection of Client Payments

Interview with David Morema, CEO of Virtual Pay

What is your scope of business as Virtual Pay?

Virtual Pay is a payment service provider. We offer various channels of payments in ecommerce, mostly cards and mobile money application. We do a bit of alternative payments as well. Virtual Pay is a young company. We started about four years ago. Our first country of launch was in Kenya but we have gone on to expand into various markets in Africa and also in Dubai, where we possibly intend to move our headquarters to from Mauritius. We are regulated in a few countries in our operation, which enables us to access the local payment methods that are available in those countries. Our clientele is a mixed bag of global clients from all over the world. We have a number of offices as well. Our largest office is Kenya, our youngest office to be set up is Dubai, and then we have offices across a few other countries such as Tanzania, Rwanda, Zambia, South Africa, Nigeria, and Ghana, and also quite a presence in Uganda. We have about 100 employees. We are a small organization but we are proud of the team that we have and what we have been able to achieve up to now.

What is your competitive advantage?

The payments industry is huge, multifaceted, and with many players operating in specific niches and others operating right across the board. We came into payments with a very niche focus on who our clientele were going to be. We service mostly global, regulated financial services firms. This is our primary market, plus a few other select industries. These are industries which are a little bit more challenging to service. They require you as a payment processor to really understand that industry and the regulation in that industry to be able to operate effectively, to service your clients, and stay compliant with the various meshwork of regulation across jurisdictions and across borders. We believe that our superior understanding of these specific niche markets that our clients operate in has helped us to be able to navigate the regulatory environments while giving optimal service. We intend to continue playing in these specific niches rather than spreading our wings wider to cover industries we do not understand.

Why have you decided to stay niche, specialty, rather than to expand quickly?

Payments processing is a very heavily regulated sector on all fronts, from central banks to the regulators of the players for whom you are collecting the funds to global regulators like OECD, AML requirements, etc. It is probably the most regulated sector along with banking. Therefore, if you are going to operate cross border and operate in multiple countries, if you choose to target each and every market and industry that is available, then you better be sure that your capabilities internally within your legal compliance and risk team are strong enough and with sufficient experience and capacity to handle the risk monitoring that is required. That means that in each country you must have a strong risk team, a strong compliance team, a strong legal team. Of course, that involves your budget and sometimes, even if you had all the money in the world, there are certain challenges which you cannot just slap money on and get results. You just need to take your time. If you are getting into a sector, logistics for example, you need to take your time and study that sector and organically understand it before you can then say you can safely service clientele from that sector. This is why we chose to go that way. It is not because we could not invite every other sector to come and process payments with us. It is not because we could not raise enough funds to expand our Human Resource and other capacities to straight on take on our competitors, who are probably doing a much wider spread of industries. Rather, it is because we thought we should grow organically and learn as we go along.

What are some of the latest trends associated with the sector in Kenya as well as the African region? What are the latest news?

The FinTech sector and payments in particular is really exciting. Africa feels like it is somewhat the last frontier in payments and because we were late into other innovations from the past and we had so much financial exclusion, when mobile money and banking wallets and all these other alternative payment methods came, it looks like Africa jumped on to them and did a huge leap. It is very exciting to see across the continent how so many countries are leading now in FinTech. There are lots of young people setting up companies. Even traditional institutions like large banks are now getting into FinTech in a big way. They seem to be a lot more motivated than before, launching products, partnering. The other thing that you see across Africa a lot more that you did not see before, starting from Kenya, is a lot more collaboration between players. For many years, players in the financial sector in general – be it banking, insurance payments, etc. – were operating in their own silos. There was no interconnectivity or interoperability of facilities and wallets. But now, we see a lot more collaboration in the market rather than competition. The banks do not see us as competition; rather, we are their partners and we do not see them as competition either. With the API revolution now, what has spurred FinTech even more is this collaboration and the willingness from most of the players across the continent to collaborate rather than compete with each other. There are more strategic alliances in many different shapes. There is no one particular way that organizations are making alliances with each other. We like the flexibility and we have to take a bit of a risk and see where that takes us.

What are some of the products and services that Virtual Pay offers?

Our primary flagship services are card processing. We do most of the major card brands: Visa, MasterCard, UnionPay, AMEX, etc. We do both ecommerce and card present, not in all markets, though. We also do mobile money aggregation across most of the African countries with most of the brands that provide mobile money wallets. We also do a host of other smaller wallets that may not neatly fit into the mobile money wallet space. We are now in the process of launching our card present mostly in Kenya, Tanzania, Rwanda, and Uganda. These will be our first markets, but then we intend to expand that to other markets as and when we deem it is the right time to do so. Our first line clients are our merchants, the businesses that rely on our services to collect payments through our gateway. For those, it is mostly global clientele who are selling goods and services across Africa. It is also a lot of other African businesses that are exporting goods and services out of Africa to Europe and Asia and other regions. We would like to give them the ability to receive payments from an importer of for example chickpeas from China without having to wait for a SWIFT wire. Additionally, many other local businesses across Africa import a lot of goods from Dubai, China, Thailand, etc., and for a long time, they have only been able to rely on either sending money via Western Union or SWIFT. Now, we also give them this additional benefit where your supplier in Thailand, for example, can actually receive a payment from you from your mobile money wallet here because we have created the connectivity from Africa on to whoever the operators are in Thailand and they will receive it either in their own bank account in Thailand or in their money wallet or whatever method in Thailand they prefer. That connectivity for us is exciting as an alternative to the traditional transaction methods like SWIFT. We see a similar situation in Dubai where many African businesses are buying a large amount of goods from Dubai for sale and we facilitate the movement of funds either way.

Is your focus more on merchants and those sorts of clientele?

Yes, we are a B2B business so our immediate clients are the businesses that we service and indirectly, we then support their customers who need to do business with them.

Can you go into more detail about your customized payments services?

Most of the large payment gateways have chosen the path of one type of integration that they can support. So, you have to fit into the model that they have put together for everyone. We are slightly different in that way. Obviously, we are much smaller so we are more dynamic, we are agile, we can customize the methods through which we serve our merchants and businesses, and we can give them more practical and effective methods of collecting funds from their customers. For example, if I get a medium sized arts and crafts exporter who is doing very good volumes out of Nigeria, they have their small website, they get a lot of orders, you have the option of asking them to integrate our gateway on the back end of their website. Most of these merchants may not have access to technology service providers or the expertise to do all of that or they will tell you that each one of their customers are people they speak to personally, then they agree on a sale, and they send them an invoice. They still want another way to connect this via our gateway. Instead of forcing them to integrate via the gateway, we could do a secure payment link on our hosted page and then we will embed that link on their invoice. This way, the invoice shall also serve as the prompt for the importer or the person on the other side to insert their details and make the payment on that hosted page. This method is quite dynamic. Most of the other bigger gateways will not bend over backwards for a small merchant to do that for them, but we do that. We provide various other alternative, clever ways of solving our clients’ individual, unique problems.

What are some of the challenges you have faced in the sector and how have you strategized to overcome and adapt?

The challenges are not different from most other businesses. But in payments, your challenge firstly is always going to be how well you run your risk and compliance because you have many layers of regulators above you: you have the card network, you have the mobile money operators, you have the central bank, OECD, and the financial intelligence units across the world. All of these persons are regulating you directly or indirectly. You are also sometimes, by extension, regulated by the regulators of your clients because most of our clients are regulated. It is the expectation of their regulators that we monitor their activity to make sure that there is no violation of laws, especially money laundering. We have to always be checking that and making sure that whatever those other regulators are expecting of us, we are staying vigilant. The challenge of building a robust and experienced team and keeping that team would be the number one challenge to a payment gateway. Sometimes you get challenged with general talent, especially in technology. In specific niche areas, there are not enough developers and specialized software persons to go around in FinTech. It would be nice if the government and the key players in the education sectors could try and channel more young technology people. We do not want to keep outsourcing work to India, Pakistan, and other places. This is something we can do if we commit as a continent over the next few years. We should be able to have a big crop of young, brilliant tech people.

What is your vision for Virtual Pay for the medium term, three to five years’ time? What will be the next developments?

In the next three years, we hope to continue consolidating our position in the markets where we are currently. We will possibly be launching a virtual card service line. We are now on the verge of launching our card present acquiring in the jurisdictions mentioned earlier. We will not be doing more expansion beyond where we are targeting currently.

What is the impetus for pushing the Dubai office and creating a substantial presence there for Virtual Pay?

Dubai is a very central place in terms of global travel. For our European clients, Asian clients, Far East clients, and even American clients, it is so much easier logistically to meet with them in Dubai than asking them to go farther to Mauritius or to Kenya. Naturally, we have been doing a lot of our meetings out of Dubai as well. So, it only made sense that we have a proper presence there. We have many clients out of Dubai that we need to service closely as well.

What is your inspiration? What drives you to do what you do?

What inspires me the most or what keeps me going is when I see us building from the ground up a fairly sophisticated business with fairly sophisticated operations with a team of very young people who are incredibly talented but who maybe would not otherwise have had such an opportunity as we have given them had we not taken the risks to put it all together and create this whole institution where they all come together as a team to achieve the incredible goals that we have set. So, inspiring young people more than anything else is what inspires me. Most young people are very energetic, very intelligent, but then maybe they lack the opportunity to get the leadership of pulling it all together to make it work.

Are you active in CSR or any sort of mentoring programs to help these young people?

I am very passionate about education, mentorship, coaching, and developing young people. I have a personal foundation called the Morema Foundation. The main area we focus on in this foundation is supporting orphans. 90% of the children who we support are orphaned children and the remaining 10% might have one parent but are extremely economically disadvantaged. We finance their education and a number of them are housed in a children’s home that we finance in terms of their upkeep and living expenses. Some of these children are already in university and we have been educating them since high school. After this, our program attempts to place them within Africa or outside as trainees and mentorship with PwC in Dubai, for example. That would be great because then they go on to see the world, get a different experience, come back, and maybe change things and shape things here a little bit. We are in the CSR space, not in a big way, but in our small ways we are trying to support children right from kindergarten all the way up to university and hopefully placement for jobs and training programs.

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