Keeping Recurring Revenue for Merchants in Africa: Our Investment in Revio
Payment failures are a big deal. One only needs to look at the plethora of solutions in developed tech markets (of which we’ve been a part of with our partnership with Primer) that have built massive businesses to take on this challenge.
Africa, though, paints a frankly concerning picture of just how big this problem can get (think a 320 percent higher churn rate for recurring revenue businesses than in more mature tech markets). A first step into tackling this problem is to offer a variety of (more secure) payment methods to diversify the risk of failure. Something that businesses, such as Flutterwave or Paystack, have managed to do incredibly well. But simply having the ability to accept payments is often not enough. A business needs the capability to actually collect those payment revenues in case they fail somehow. And fail they do.
Fortunately there’s Revio, a Cape Town-based fintech startup that works with a range of mid-sized enterprises from traditionally offline to digital-first SaaS companies looking to automate recurring billing payments and that want to reduce customers in arrears. With an existing roster of large customers already working with them, we're excited to partner with the team as they look to supercharge their early growth and take a slice of the rapidly growing African digital payments pie.
Failed payments galore
Payment failures are not just about “Payment Failures” (bear with me here). The process of a failed payment actually starts much earlier. It can be traced back to how a business is setting up their payment process in the first place.
With the advent of digital (or let’s say, non-cash) transactions, businesses have discovered the benefits of having a variety of payment methods available to serve their customers’ needs. Setting up the right mechanisms and flows to optimize for reduced fraud, increased conversion, increased back-end acceptance, and compliance with local regulation all lead to lower instances of failure.
The reason that this can be complicated to do is that workflows might not be the same for every business, often leading to them hiring payment teams to personalize these flows to their particular model. So by the time a payment fails, chances are that it failed because the payment acceptance wasn’t set up in the best manner.
Now, there are definitely ways to increase the likelihood of collection after a payment fails (more on this later). But the first line of defense is to set up the right payment structure to avoid failures in the first place.
This problem is only exponentiated in recurring revenue businesses. These types of businesses suffer from involuntary churn due to outdated information attached to on-file cards, insufficient funds on registered accounts, or a variety of other reasons. The longer the relationship with the consumer stretches, the higher the potential for financial account information to be outdated and consequently the higher the risk for a failed payment. And this is when the payment process is already relatively automated. For most businesses in the region, this is often not the case. The risk only increases with more manual collection and billing processes.
With this backdrop, it hardly comes as a surprise that 3 out of 10 payments fail for subscription-based businesses in South Africa, according to Revio's internal research. While the advances in digital payment acceptance are extraordinary, particularly with leapfrogging technologies like mobile money, there is still a massive opportunity for mid-sized businesses to wean off of manual billing processes and improve their payment failure rates. This will in turn empower businesses to stop throwing people at the problem and to make a dent in the estimated $14 billion in recurring revenue that goes uncollected each year.
How to do it, though? Revio has a few ideas
At its core, Revio allows mid-sized companies to decrease their payment failures and increase their collection capability on the ones that do. They provide a digital platform for recurring revenue companies to set up and automate their current billing process. As a business, you’re able to personalize billing to the end-customers needs. This includes everything from subscription cadence and payment methods to applicable taxes, all the while providing reconciliation and real-time visibility on collected and incoming revenue.
The needs of South Africa’s largest insurer and a pan-African chain of gyms vary quite a bit, even if they are both recurring revenue businesses. Revio provides each business with the capability to set up their bespoke plan, faultlessly and from the beginning. With an integrated payment orchestration tool, Revio helps businesses set up their billing method to optimize for conversion depending on the client type they are serving.
Maybe local processors offer better interchange rates for local businesses, but the best rates on cross-border transactions are offered by a pan-African player. Revio helps a business organize these workflows and governing laws to help them maximize their revenue on a per transaction basis and above all, serve their customers with a seamless payment experience. All of this increases the likelihood that a payment will succeed. By collecting payment information digitally (and of course with utmost security), Revio allows a business to keep track of when that information becomes outdated and proactively take steps to fix it.
All in all though, as any payment expert will tell you, unsuccessful payments are inevitable. And much to the despair of subscription businesses, they are often a leading cause of customer churn.
But Revio is on a mission to provide a holistic approach to billing. Through both payment infrastructure integrations and efficient customer communication, they allow you to increase the likelihood of collection after a first attempt at payment has failed.
What was traditionally done by an in-house payment team or outsourced to a collection agency (in the case of businesses focusing on disbursing credit) can now be managed through Revio’s digital software. Businesses are able to limit human involvement and choose how to engage with their customers. This can encompass everything from automatic retries on specific dates, switching to an alternative payment method, and extending payment dates to choosing the best communication channel for specific types of customers. In turn, the customer relationship remains intact and businesses can maximize payment revenue potential.
Top-notch products are good, killer teams are even better
When Revio co-founders Ruaan, Nicole, Pieter, and Kyle came to us with this fully-fledged, working product, it came as no surprise that they were signing large customers left and right. What’s more, they spanned across industries and sizes ranging from fast-growing SaaS scaleups to large-scale insurance and telco providers.
With Ruaan and Pieter’s deep understanding of the African payments landscape working with both traditional finance players, and Nicole and Kyle’s profound experience in fintech building, we were convinced that this was the right team to change the African subscription payment industry for good.
All of us at Speedinvest are incredibly excited to be joined by Ralicap, The Fund and Two Culture Capital in backing them for the inspiring journey ahead. We can’t wait to see what the Revio team drums up next.
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