Independent card payments provider Yoco’s move into granting loans to its small business customers is paying off.

Yoco, which offers a service that allows businesses to facilitate card transactions via a cellphone, has disbursed R55-million in loans in less than a year. So far, only 2% of those who took out loans have defaulted.

This was announced by CEO Katlego Maphai at Yoco’s Parkhurst store in Johannesburg this week during the launch of its new affordable payment device.

Yoco’s device is one of the game changers in the mobile payments space and has shifted things by allowing small businesses to facilitate card payments by attaching a small device to their smartphone or tablet.

Maphai and the co-founders of Yoco spoke about the growth of the company, investments made in the past year, and its future plans.

Maphai says one of the purposes of Yoco is to challenge stereotypes associated with start-up entrepreneurs.

“One of the most fundamental things that we are doing and are in a position to do is to … challenge stereotypes,” he says. “There are so many stereotypes that we are dismantling around risk profile and the fact that it is said small merchants want to keep money under the table and do not want to formalise their businesses.”

‘Unlock a market segment’

He adds: “With the right market and the right product delivered in the right way, you can unlock a market segment.”

They are structured so that when a client pays the business using a Yoco device, a small percentage of the sale goes towards repaying the loan.

Yoco co-founder and chief financial officer Bradley Wattrus says the company realised that traditional financial institutions have burdened small businesses.

“One of the things we have learned through the capital product is that sometimes the product is what puts the strain on the small business,” he says.

“If you give a small merchant a loan but you have a fixed debit order that goes off at the end of each month, and the merchant has a bad month and does not have money in their account, they now stand as a default and go onto the debt collectors process.”

Wattrus points out that this is usually the lowest point for the small business, so there needs to be a better support system in place.

“Instead, the traditional financial institution process is to say, ‘You are in debt now, sell your mortgage and do whatever you need to do to pay this money’,” he says.

The cash advance is offered to merchants that have been using the Yoco device for more than three months and have been able to make at least R500 each month.

Yoco started four years ago with five merchants using its devices and now boasts 50 000 clients around the country who process payments of R6-billion annually.

Its new payment device is available for R799.