Yared Endale Appointed Visa’s Eastern Africa GM, Eyes SMEs, Cross-Border Payments

As Ethiopia’s financial ecosystem evolves into a predominantly digital landscape, payment technology providers like Visa are positioned to play a powerful role. Yared Endale, a veteran in Ethiopia’s digital financial ecosystem, was recently assigned the responsibility of General Manager of Eastern Africa at Visa, covering Ethiopia, Djibouti, and the Indian Ocean Islands. A few weeks into his new role, he sat down with Shega’s Munir Shemsu to discuss the new role and emerging trends across Ethiopia’s financial ecosystem.

The following interview has been edited for context and clarity.

Shega: Ethiopia’s financial ecosystem has undergone a comprehensive transformation over the past few years. The banking sector has been opened to foreign investors, the currency has been floated, and a capital market has technically been established. Which development has particularly caught your eye?

Yared: There have been several interesting policy changes. The macroeconomic reforms are laying the foundation for realizing Digital Ethiopia. Just recently, digital transactions have overtaken traditional transfers, coincidentally during a period in which the banking sector is opening to foreign investors. This incentivizes local banks to prepare themselves by further investing in their digital infrastructure. In my fifteen years working in the financial industry, I have witnessed the early hesitation to invest in digital alternatives vanish from the banks. A digital product is being unveiled quite frequently; I am very happy with the progress. This has a direct bearing on our excitement and appetite in the market. Additionally, Ethiopia’s massive population of above 120 million is already enticing for any foreign investor as the country continues to open. Visa is very excited about Ethiopia. Several cross-country banks are currently eyeing the market because of the massive potential in the nation. Expanding financial inclusion will mean onboarding the nearly 2 million MSMEs in the country and introducing access to segments of the population currently left out. Inclusive payment systems are integral to our mission. The best way to pay and get paid is our motto, after all.

Shega: One of these reforms is the establishment of capital markets. Visa is an active player in capital markets across the globe. How are you viewing the prospects of the sector in the Ethiopian economy?

Yared: It is one of the most impactful reform measures. The potential benefits to overall economic growth, expanding access to finance, and overall financial sector development are massive. Helping MSMEs, which are the backbone of the economy, through capital mobilization to accelerate growth and ignite scaling of operations is quite exciting. There are ways we can assist activities within Ethiopia’s exchange. We are still talking in Ethiopia and Kenya, but nothing concrete as of now. For the long term, though, it's clear that Visa would be quite relevant in providing cross-border payments, particularly. Investors located outside Ethiopia would be able to make investments in products available in the market just through their cards. The possibility of making the payment process more digital and worldwide is there, obviously. The Exchange has been busy; they just finalized setting up the market, and partnerships and integrations are the next stage. We are very interested in contributing to that.

Shega: Speaking of cross-border payments, several intracontinental integrations are coming to the forefront through the likes of the African Continental Free Trade Area (AfCTA) and the Common Market for Eastern and Southern Africa (COMESA). The Pan-African Payment and Settlement System (PAPSS) also promises to be an enabler of continental integration. How are you looking at the prospects considering these developments?

Yared: Interestingly enough, enabling cross-border commerce was one of the main issues we discussed during the recent AU summit and other sessions on the sidelines. Increasing infrastructure linkages between African countries is very important. One Djibouti official even recalled that items exported from Kenya to the United Arab Emirates would find themselves in their market for significantly higher prices. Significant savings in terms of overhead costs could be attained through infrastructure linkages. As intracontinental trade grows, who would be more fitting than Visa to provide a cross-border payment solution? We are interested and are part of the conversation. We are ready and open to providing our robust services. This is not something we are looking at from afar but rather a development closely being tracked as one solution provider. After all, Visa has a 65-year-old, resilient, and secure cross-border payment infrastructure. Our services are already available across most countries; we would only need to adjust our position in the existing value chain.

Shega:. Even as Visa evolves beyond card payments, the service remains one of its flagship products. However, Ethiopia’s card payment network remains relatively underdeveloped. How are you guys looking at the prospects of the card business in Ethiopia, or is it time to move past that?

Yared: Visa is no longer a card company; we are a payment technology provider. This means any digital payment is game. There are several reasons why credit cards have not become popular in Ethiopia. Some are regulatory, while others are institutional. The small loans offered through credit cards were not alluring for banks that are accustomed to collateral-based financing in an unclear regulatory space. But Ethiopia is now in a unique position that allows the country to leapfrog past several stages. We want to make payment frictionless and easy. Nearly 78% of digital transactions are happening on mobile banking apps currently, followed by mobile money and then card payments. Because of the regulatory barriers, most of Visa’s card business had to be about acceptance of payments in Ethiopia. There was not much growth [YW1] in terms of the issuance business. The moment mobile banking was introduced, it flourished in the gap left unaddressed by the underdeveloped card network. While growth in digital transfers is good, even if it is fund transfers, it is not necessarily a robust payment infrastructure. You still see 10 bank accounts whenever you attempt to make a payment to a merchant. Selecting a suitable bank, inputting a set of PINs, and waiting for a network signal takes more than a minute even in conversation. Imagine if you could just tap and pay using a Visa card. Giving your phone number, bank account, and other information could have implications even in terms of security. Don’t get me wrong, mobile banking needs to grow, but a robust payment platform is also crucial. Customers are charged when transferring funds to a merchant; this would not happen on a proper payment platform.

Shega: Could you further elaborate on the differences between the typical mobile banking fund transfer that has become ubiquitous over the past few years and robust payment platforms?

Yared: A typical payment should have four critical elements: merchants, customers, issuers, and acquirers. The more payment platforms are used, the more all four components get a proportionate benefit. Several incentives exist for merchants, like cashback options, increased volume of transactions, and centralized management, which has dividends in terms of credit scores. Card payments, for example, charge the merchant, not the customer, due to all the benefits being accrued to the former. This is not some personal realization, mind you; the banks are also beginning to recognize the potential. P2P transfers are the building blocks, but they are not the final stage since they are meant for transfers between people who know each other. The ease of the transfers is also quite limited. We must convert the P2P transfers into an appropriate payment infrastructure. The merchant is using a personal account, not a business one, which further limits the availability of credit access. Representing all four components adequately distributes the benefits equitably. In the current landscape, getting merchants to even have a POS machine requires additional benefits being provided by the banks. Allowing the merchant to demonstrate transaction volume will unlock credit access for the SME. Having five or six POS machines at a single merchant is not sensible, considering its potential benefits when it is distributed nationally. The biggest beneficiary will still be the customer, who will be spared additional charges on funds that were already subject to several other taxes and fees.

Shega: Mobile money has become quite the phenomenon in Ethiopia, even overtaking banks in some key metrics. How does Visa plan to link its services with mobile money service providers?

Yared: Visa is actively collaborating with mobile money service providers to integrate our digital payment solutions. By leveraging our technology and expertise, we aim to create seamless and secure payment experiences for mobile money users. This includes enabling interoperability between mobile money platforms and Visa's payment network. We have already partnered with Ethio Telecom to launch a wallet-based virtual Visa Card, as well as services to improve remittances via Visa Direct and the Telebirr Remit App. The new services include the virtual Visa Card, which can be accessed through Telebirr, and Visa Direct, which enables Visa cardholders globally to send funds to Ethiopia using their Telebirr virtual card number. This service allows people and institutions to send money from over 190 countries, according to Ethio Telecom.

Shega: What is Visa’s business model in other countries, and what does its current operations in Ethiopia generally entail?

Yared: Imagine paying 100 birr for a certain product. Whenever a customer makes a payment through a card, an interchange fee is charged. The merchant takes 97 birr, the acquirer gets a portion, the issuing bank gets the majority, while Visa takes only a service fee for services rendered to this ecosystem. In Ethiopia, Visa has around 10.2 million cards, which account for most of the issuance volume in the country. It's important to remember that Visa is no longer a card company. Around 10 billion Visa tokens have been distributed globally to further streamline the payment process. A token is transferred to a merchant without the details of the customer being shared in an extremely secure manner. POS machines are expensive in Ethiopia, which is why payment operators are emerging to provide a solution. We will soon be able to turn our phones into POS machines, allowing transactions between merchants and customers. In other countries, it is the merchant who ends up buying the POS machines. Creating a healthy payment infrastructure will benefit all stakeholders in the value chain. In the current landscape, the banks are benefiting disproportionately. While mobile banking introduces new users to digital payments, it will need to evolve in order to adapt to customers’ needs.

Shega: Since Ethiopia is a massive market, why have Visa’s operations remained relatively moderate, considering its capacity?

Yared: First of all, there is a big change. Visa has been operating in the country for 19 years with a physical presence since 2020. Visa has 10 offices across Africa, and Ethiopia is one of them. Within the last five years, even with a slowdown due to COVID-19, it has doubled its capacity. But perhaps most importantly, Visa’s offices in Ethiopia have now become the center of operations for the whole of Eastern Africa. There is a massive volume in Ethiopia. If you look at recent trends, you would recognize that Visa has begun establishing deeper partnerships with local banks (Commercial Bank of Ethiopia, Bank of Abyssinia, Cooperative Bank of Oromia, and more recently). Instead of being customers of Visa, they have become partners in shared growth. We are not just giving licenses anymore; we are providing deeper partnerships to grow our business together and add more value to the customer. A robust payment infrastructure is being created. Visa is engaged for the long term in Ethiopia.

Shega: Ethiopia’s payment infrastructure has occasionally been accused of being opaque in terms of fees, daily limits, and so forth. On the contrary, Visa is quite transparent. How do you view this in terms of creating an overall healthy payment infrastructure?

Yared: I can't speak on other institutions, but transparency is an integral part of Visa’s business model. A robust payment infrastructure entails clarity in terms of fees and who is getting how much. In any product we launch together with others, transparency is a given. Our entire approach is focused on the customer. The customer is key in payment.

Shega: What does your recent appointment mean in terms of the initiatives Visa is taking in Ethiopia?

Yared: My appointment underscores Visa's commitment to Ethiopia and the broader Eastern Africa region. We are focusing on enhancing digital payment adoption, fostering financial inclusion, and supporting the growth of SMEs. Ethiopia's rapid digital transformation and the increasing adoption of digital payments present significant opportunities for Visa to contribute to the country's economic growth and development. Visa's CEO, Ryan McInerney, visited Ethiopia last year and met with H.E. Prime Minister Abiy Ahmed to reaffirm the company’s commitment to the digital evolution of the nation. During his visit, McInerney engaged in dialogues with Prime Minister Abiy Ahmed (PhD), outlining Visa’s commitment to supporting the country's digitization efforts. The discussions were centered around the advancement of digital payments, fostering financial inclusion, and providing robust support for SMEs, women, and the youth.

Shega: Your recent appointment as head of Visa operations across Eastern Africa entails several new responsibilities. What are your motivations, and what do you hope to accomplish in the new role?

Yared: It is an honor to be entrusted with helping to fuel transformation across Eastern Africa. The position is a testament to the help and guidance of many who have worked with me and our amazing team here. We will work to become a solution provider not only for Ethiopia but for the whole of Africa. My proudest moments include the Visa Everywhere initiative, where we recognized promising fintechs like Kacha, and the accelerator program that allowed players like Chapa to flourish. Partnerships with local banks like COOP also motivate me, as I feel a sense of contribution to financial inclusivity in the country. Contributing to Ethiopia’s digital transformation already gives me joy. When I was living in the UAE, I used to be envious of their digital payment infrastructure. I can see the room for inefficiency and corruption being narrowed with the increased digital adoption of digital solutions. I want to be part of Ethiopia’s digital transformation. Visa is the ideal instrument to bring about that change both locally and at a regional level.

Now, I want to take what has worked here to other countries like Madagascar and learn from the achievements of the Mauritius and Seychelles markets.