Jumia Could Become Africa’s Largest Retail Bank by 2030

Jumia, the Nigeria-based gigantic ecommerce company, has since consolidated most of its services. The new Jumia is now a leaner company and effectively more structured to grow in Africa compared to few years ago when it (i.e. the old African Internet Holding) had Kaymu and other businesses operating as separate entities. As Jumia grows and expands in Africa, it will take over new markets and territories.

I predict that by 2030, Jumia could become the largest retail bank in Africa, by total loan amount made to merchants. (It does not need to be a bank to make that happen.) I expect the 2020s to be the year of the ecommerce where many merchants will move online to sell their products. As they do that, companies like Jumia will hold more of their data. Holding the data will give Jumia better insights on what is happening in those businesses. And using the data, Jumia will make smarter loans to merchants at efficiency levels no traditional bank can match.

Yes, Jumia will be in a better position than most banks because it is seeing not just the transactions at the side of the merchants, but also at the side of the customers to those merchants. There is no data that will be greater than that.

The turning point for ecommerce will happen in 2022 in most parts of Africa because most of the challenges we face today would be dealt with.

In today’s videocast, I make a case that Africa will enter the era of affordable broadband internet in 2022. That will be the year we will begin a new dawn of immersive connectivity where you can eat and surf all you can. Industry players will take off the Internet meter and then focus on service, experience and quality. From satellite broadband vendors to the MNCs with balloons and drones, the sector will become very competitive and service will drive growth. This has happened in the past – every decade, Africa experiences a major industrial transformation. We saw that in banking and voice telephony. 2020s, starting at 2022, will be the decade of immersive connectivity.

Jumia Data Advantage

One of the key advantages for Jumia is that it is collecting massive data on customers and merchants as the industry develops. I do believe that the data it has and as ecommerce takes shape in Africa will give it a huge advantage over banks on merchant lending. I do believe that merchant online lending will be huge because of the potential usage-convenience over comparable products from traditional banks. Companies with data will win. Today, in most parts of sub-Saharan Africa, Jumia is ahead on merchant data, at granular level, not necessarily on the data volume. Banks have merchant customers but they see largely cash-anchored without necessarily knowing the customers. Jumia in its ecosystem sees those customers who are buying from the merchants. That gives it an advantage to structure loans more optimally.

Ecommerce is the future because at the end commerce will move online. These merchants will need capital to grow, and ecommerce entities like Jumia have the customers where merchants could sell. Banks like GTBank understand this trajectory and are building marketplaces. Yet, the scale pales to what Jumia and Yudala could offer. At the moment, no bank in Nigeria is better positioned than Jumia for this market of the future. We are talking of small business lending where alternative data is scarce. Jumia has built a brand. And as the ecommerce business picks up, I expect the merchant lending business to grow. Applying for this loan may simply be hitting a button on the merchant dashboard, and may not technically require completing any form, unlike a traditional bank lender, because Jumia has all the data it needs to make decisions.

All Together

A bank may be blind to the needs of merchants but ecommerce platforms understand the needs and challenges of their portal-partners.  Jumia will not need to ask the merchants to fill paper forms on revenue because they have that data. It may not also ask the merchants to list their customers because it knows all of them. And because Jumia understands the trajectory of the transactions, e.g. seasonal demand of the products, it would be best positioned to make smarter loans. With that deep understanding and capabilities, it could lead the merchant online lending by 2030 in Africa. It may not have to do this lending directly; it can package the data for banks to do the lending while it takes a cut. That way, it pushes the risks to others.

Yes, Jumia could take advantage of its great industry positioning in the continent to run a possible aggregation construct merchant lending. That will bring additional revenue from multiple bank partners as it take its commissions. To further reduce risk, Jumia could warehouse the products and ship directly to final customers.  The merchants will benefit and the customers could see lower prices due to economies of scale, made possible with funding.

The banking industry has since changed: companies like Jumia will play key roles in the future. Any bank that looks at lending competition purely from institutions with “banking licenses” will struggle. Amazon loaned $1 billion to its merchants last year, signifying that within a decade it may topple most U.S. banks in that category while recording near-zero default rate.

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