Visa at the Doorsteps of Ethiopia’s Payment Ecosystem

Visa has had a long-standing presence in Ethiopia, with Ethiopian banks relying on the payment giant to issue debit cards. However, Visa has even greater ambitions for its role in Ethiopia. The company’s leadership team has been visiting the country, and the Ethiopian chapter of its global fintech competition is tagged as a “special edition.”

Recently, Visa appointed Yared Endale as the new Country Lead for Ethiopia. Before taking on this new role, Yared held the position of Senior Director of Digital Financial Services and Digital Transformation at the Cooperative Bank of Oromia.

Yared sat with Shega’s editor-in-Chief Kaleab Girma for his first interview since taking office in which he shared Visa’s past achievements, ongoing initiatives, and exciting new ventures in Ethiopia.

Visa envisions to become actively involved in the local payment landscape and expand its presence beyond a mere representative office. At the same time, Visa emphasizes that it does not view itself as a direct competitor to local startups and states that local fintech startups are better equipped to address and resolve local problems.

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Shega: Can you provide an overview of your role as Visa Country Manager for Ethiopia? What are your key responsibilities and objectives in this position?

Yared: As the Visa Country Manager, I am tasked with leading the development of strategic planning in Ethiopia. Some of the fundamental questions to address within the scope of strategic planning are related to how Visa intends to operate in Ethiopia, what contributions Visa will make to the Ethiopian market, and the identification of key stakeholders along with the necessary steps for their support.

The second role of a Visa Country Manager involves business development and relationship management. It is crucial to foster the development of new partnerships with entities such as banks and fintechs while also upholding existing relationships.

Another significant task I am responsible for is the revenue generated by Visa in Ethiopia. A fundamental aspect of any successful business is its financial robustness and sustainability. Visa must prioritize its own financial stability while also considering methods to enhance revenue, both for itself and its partners. If a partner financial institution is not in a position to generate revenues from the partnership with us, the cost-benefit analysis will not be considered valuable to move forward. So, we might need to support them.

With all factors considered, I bear the responsibility for Visa’s business operations in Ethiopia. This encompasses monitoring metrics such as payment volume facilitated through Visanet, the number of merchants successfully onboarded, the extent of individuals adopting the Visa brand, as well as our involvement within global communities and related domains. These aspects collectively contribute to a core objective of ours: promoting acceptance, wherein customers seamlessly embrace Visa for their transactions, obviating the requirement for physical currency.

With its entry into the Ethiopian market, Visa brought along a wealth of experience spanning over 60 years. This expertise encompasses digital transaction practices renowned for their precision and security. Hence, our aim is to expand the issuance of cards, also referred to as credentials in industry, within the country.

Lastly, I am also responsible for public relations and maintaining the security, health, and safety of my staff.

Shega: Visa has played a significant role in promoting global financial inclusion. However, it wasn’t until 2020 that Visa established its representative office in Addis Ababa. Some might consider this entry to be relatively late. Do you agree with the assessment?

Yared: Visa conducts robust operations across Africa. Ethiopia’s local office finds itself among the ten Visa offices present in Africa. Visa is making strides to establish a strong presence in Africa as a whole, with a particular focus on Ethiopia, the second-most populous country on the continent. This demographic factor played a pivotal role in Visa’s decision to open a local office in Ethiopia.

Since the launch, our engagement has yielded notable progress and success stories. For instance, within just one year of opening our offices, we hosted the inaugural Visa Ethiopia Digital Payment Forum. This event featured longstanding partners in Ethiopia, such as banks, and facilitated a better understanding of market interests while paving the way for the introduction of market-based products and services.

As of now, Visa serves eleven banks in Ethiopia, including the Commercial Bank of Ethiopia, Dashen Bank, and the Bank of Abyssinia. Furthermore, we have expanded our services to include value-added offerings like enabling e-commerce. This allows individuals from abroad to purchase services and products using cards without physically being present in the country.

Visa has also issued over seven million active cards and established relationships with approximately 37,000 merchants. While it’s true that starting earlier could have been advantageous, it’s noteworthy that our presence in the local market has grown significantly in a relatively short period of time.

Shega: Could you elaborate on the specific initiatives and tasks that Visa has undertaken since its establishment in Ethiopia? What are the collaborations and partnerships that Visa has established with local banks and fintech startups?

Yared: There have been several prolific initiatives before and after the opening of the local office. While the traditional goal of Visa was primarily focused on card business, the evolving landscape of technology and digitization has expanded its objectives.

Visa is actively involved in innovative solutions, such as e-commerce and inbound remittances, facilitated through the Visa CyberSource Payment Gateway. This gateway is utilized by platforms like CashGo and MamaPays.

Another great initiative in which we are involved is the National ID Project Program (NIDP). We have collaborated with NIDP to integrate its digital identification systems with payments. The initiative aims to establish a system where social accounts are generated for customers acquiring digital IDs. Attaching a bank account to the rollout of Ethiopia’s digital ID can help Ethiopia significantly improve its financial inclusion. We are initially working with the Cooperative Bank of Oromia but will soon collaborate with other banks. Users will have the flexibility to select their preferred bank for the account.

We are also making efforts to strengthen our social commitments. Visa has supported a project that ran for three years under STEM Power Ethiopia, benefiting over 3600 students ranging from high school to universities. This project focused on nurturing capabilities in science, technology, engineering, and mathematics (STEM), and Visa contributed to the establishment of the necessary labs. Visa invested over $150,000 in this initiative.

In addition to maintaining our existing relationships, the establishment of new partnerships is of paramount importance. We have recently formed such partnerships, the details of which will be disclosed in due course. Furthermore, we have ambitious plans to further expand our partnerships in the coming years.

A noteworthy aspect of Visa’s recent activities is the proactive engagement of Visa’s leadership team in Ethiopia, which has entailed fostering positive interactions with state actors and other players. This strategic effort is driven by clear motives, one of which is the opening of the Ethiopian market to financial institutions and fintech companies. Additionally, this aligns with an impressive initiative aimed at creating a digital ethiopia by 2025. Given Ethiopia’s status as the second-largest country in Africa, it is indeed a fitting and attractive marketplace for investment.

Shega: Are there any partnerships you are willing to mention, especially those that ventured into fintech?

Yared: There are partnerships we cannot announce at this moment. In general, Visa believes in investing in fintech companies to empower them further. We can see this commitment in initiatives like the Visa Everywhere Initiative. While we value the co-creation concept, it’s essential to recognize that local fintechs are best suited to address local challenges. Visa acknowledges that it may not be as adept at solving local issues as local fintech companies. It is in these startups that we aim to invest.

When Visa invests in local fintechs, it isn’t a direct investment. Rather, we identify them through a competitive selection process, provide awards and incentives to support them, especially if they are at the startup stage, and promote them alongside the Visa brand to enhance their visibility both in the local and international markets. Additionally, we actively seek out and establish partnerships with these fintech companies. Visa’s goal is to accelerate the growth of local startups.

Shega: How does Visa engage with Ethiopia’s regulatory bodies and policymakers to ensure a conducive environment for electronic payments and digital financial services?

Yared:  Visa is highly proactive in its engagement. One significant focus of our discussions with regulators is capacity building through leadership sessions, which are not only beneficial for businesses but also for government institutions.

Furthermore, we are taking steps to advocate for the crucial role of regulatory bodies in establishing an enabling environment. Key features of such an environment include an open regulatory framework within a nation, a level playing field that allows for fair competition among all players, and the creation of a market that fosters innovation in a fair and unrestricted manner.

Advocacy is normally done through discussions and building relationships with government entities, creating knowledge-sharing forums where Visa brings its experience in technical ability and exposure in other markets and enables them to have a regulatory sandbox. The availability of a regulatory sandbox is essential because we can verify our actions against those regulations.

We have also made significant contributions to facilitating inbound remittances in Ethiopia, resulting in an increase in the generation of foreign currency.

With opportunities emerging where the National Bank of Ethiopia is granting licenses to interested parties in areas such as payment instrument issuance and payment system operation, Visa may apply for licenses in areas it thinks are more attractive and play a role in the local market, not just as a representative office but as a direct player. As such, we are in talks with the central bank in relation to the manner of entry and consider ourselves at the exploratory stage.

One thing that is very interesting about Ethiopia is that it is open for discussion. The expected arrival of financial institutions, the expansion of telecommunications companies, and the central bank’s licensing of fintech firms presents an enticing opportunity. Visa, being a major player in the fintech industry, fits naturally into this landscape. Therefore, it is wise for Visa to explore opportunities for direct participation within the bounds of the regulatory framework.

Shega: Visa has launched the second edition of the Visa Everywhere Initiative (VEI) fintech competition in Ethiopia and is preparing to launch its She’s Next women’s empowerment initiative. What exactly should we be expecting from these two initiatives? Is there any special emphasis given to Ethiopia?

Yared: The Visa Everywhere Initiative is Visa’s global fintech competition program, which challenges startups to solve the commercial challenges of tomorrow in the local market. The program was extended to Ethiopia for the first time in 2021. Arifpay won the inaugural discourse. As a consequence, we believe we have created enough visibility for Arifpay.

The 2023 Visa Everywhere Initiative in Ethiopia is indeed receiving special attention and is designated as a ‘Special Edition’. This designation signifies a shift in Visa’s intentions in Ethiopia. Key objectives include awakening Ethiopia and activating fintechs in the country.

We should also consider that Africa is anticipating an unprecedented digital acceleration. This digital acceleration has largely been driven by fintechs. We can take the example of Flutterwave. This begs the question, Why not support the fintechs and make them more productive? When the ecosystem grows, all parties involved will rise as well.

The population is mainly filled with heavy cash users. Until recently, over 90% of people utilizing finances did so via cash and checks. Now, digital literacy is increasing, bringing along with it a generation that requires easy transaction methodologies.

Even though, giant companies such as Visa can provide multiple products from their large arsenal, the local fintech companies are better positioned to provide fit-for-purpose products based on their understanding of the market. As such, Visa will continue its work on the sustained growth of the fintech ecosystem.

In addition to Visa’s special focus on Ethiopia, the company has extended its renowned program, the She’s Next Women Empowerment Initiative. This global advocacy program provides support to women-owned small businesses through funding, training, and mentorship. Since 2020, we have invested $3,000,000, distributing 250 grants worldwide to assist women-owned businesses and similar endeavors.

The Africa Fintech Accelerator Program is another recent addition to our portfolio. It aims to empower Africa’s burgeoning startup community by offering expertise, connections, investment opportunities, and funding. It’s important to note that this program is distinct from the Visa Everywhere Initiative and has a broader scope. Participation in the Visa Everywhere Initiative or the She’s Next Women Empowerment Initiative is not a prerequisite for joining the Fintech Accelerator Program.

Related- Ethiopia Envisions Linking Digital ID with Payments

Shega: Ethiopia’s digital economy has seen several changes in the past few years, and there are more changes waiting to happen right around the corner. What has been your observation so far on what went right?

Yared: We are incredibly impressed by the enthusiasm demonstrated by the government, partners, and clients in driving economic growth and embracing digitization. The government is actively promoting digital payments through the use of platforms like Telebirr and CBE Birr, among others.

According to data from the IMF, economies that make the switch to digital payments can potentially increase their annual GDP by up to 3 percentage points. Ethiopia’s ongoing digital transition is poised to have a significant impact on the nation’s economy.

It’s important to note that there are untapped opportunities waiting to be explored. For instance, card payments have the potential for substantial growth. Considering that internet accessibility is currently estimated at a ratio of 1:5, it becomes evident that digital payments can expand beyond their current reach.

Generation Z, the first generation of digital natives, is now entering the workforce, purchasing homes, applying for payment cards, and opening bank accounts—and they approach banking in a distinct manner. In Ethiopia, just over one-third of the population holds bank accounts, with as few as one in ten actively borrowing.

Furthermore, there exists a substantial financial gap in terms of funding for Micro, Small, and Medium-sized Enterprises (MSMEs). Access to loans for SMEs is another area where digital financial service products can make a meaningful contribution.

Shega: As part of plans to open up the financial services sector to foreign competition, Ethiopia will issue up to five banking licenses to foreign investors in the next five years. How does Visa perceive this development, and do you believe it will create additional market opportunities for the company?

Yared: The short answer is yes, but it’s more nuanced than that. Ethiopia has earned admiration for its economic growth, with recent years witnessing growth rates in the double digits. Positive progress continues, and we firmly believe that there are still immense opportunities for further digitization.

The primary beneficiaries of opening up financial services to foreign markets are, initially, the financial industry itself. It’s important to note that foreign financial service providers bring with them extensive expertise and exposure. More importantly, customers will gain access to more refined, thoroughly tested, and diversified financial products. In essence, the entire nation benefits when the ecosystem of financial services expands and deepens its roots.

Customers benefit from having choices, thanks to the availability of competition among service providers who offer a variety of options. When service providers present these options, customers are naturally drawn in. To remain attractive and maintain a competitive edge, there’s no alternative but to continuously strive to improve. This ripple effect contributes to the overall growth and prosperity of the nation. 

Shega: The Ethiopian government has opened the mobile money sector to foreign players, while the local payment processor sector remains closed. Would you like to share your perspective or comment on this matter?

Yared: Every country has its own set of rules and regulations, aligned with its own pace of development. We wholeheartedly respect and adhere to these regulatory frameworks. As long as the regulations permit our participation and we believe that we can contribute value, we are prepared to leverage our experiences from other markets and bring them to Ethiopia.

This represents a part of our ongoing exploration and discussions with the central bank and other regulatory bodies. Our aim is to identify how we can contribute even more significantly than we are currently doing. While we presently offer traditional card services and related solutions, Visa envisions a broader role that can be realized given the opportunity. Thus, we are poised to bring our envisioned ecosystem growth to fruition on the ground.

Shega: How does Visa perceive its competition in Ethiopia, particularly in light of Mastercard’s presence in the market?

Yared: Our focus is not competition. We focus on becoming the world’s leading digital payment platform. Our purpose is to uplift everyone, everywhere, by being the best way to pay and be paid. Apart from that, we do not focus on competition.

Shega: Any last words?

Yared: We have an amazing and vibrant event on September 15, 2023, as part of Visa’s initiative to showcase our contributions and support for Ethiopia. We extend a warm invitation to our valued stakeholders and partners to join us in this event.

I would like to express my gratitude for the opportunity to highlight our activities in Ethiopia, and I am optimistic about the positive outcomes ahead. Thank you!