M-commerce and its Impact on Africa
Until very recently, most Africans did not have access to credit or debit cards let alone ones that were internationally recognized. I recall when credit cards were introduced to East Africa in the early 2000′s, it was a battle to secure one. The bank required that you make a hefty deposit and sign all manner of forms. I often mused that it was as if the banks in Africa were determined to exclude as many people as possible from having access to these financial services.
This lack of credit and debit cards or, in general, an electronic payment system has been partially responsible for the low uptake of e-commerce and online shopping in Africa. This was compounded by the limited availability of good and reliable internet access. A survey of e-commerce sites in Africa a couple of years ago revealed that most of these sites are in 3 countries- Nigeria, Kenya and South Africa, countries with some of the better ICT infrastructure and financial services sector in Africa.
While the number of credit and debit card carrying Africans is on the rise, there is emerging an alternative, equally convenient, widely available electronic payment mechanism- the mobile phone. Mobile banking that involves an alternative way of accessing an existing bank account to check account balances and perform other banking transactions is now taken for granted around the world. What is revolutionary is mobile banking for the “unbanked” those without formal bank accounts or even for those whose banks do not issue debit or credit cards. With mobile banking, users can get a sort of “virtual” bank account or “wallet” which they can use to receive and send money, pay bills and buy and sell goods and services.
The mobile phone eliminates two of the main challenges to e-commerce in Africa: it provides both a widely available electronic network and a payment mechanism. In countries like South Africa, where MTN Banking led the way and in Kenya, Uganda, Nigeria, Cote d’Ivoire, Tanzania, Zambia, DRC and Ghana where mobile banking has been implemented, it is increasingly possible to use the mobile banking platform to buy and sell goods and services. Some of the early mobile commerce sites in Africa were those dedicated to selling mobile phone “value added services” such as ringtones and screen wallpapers. These sites are likely to grow into Amazon-type sites as mobile banking becomes wide spread. Already, mobile based “market places” are springing up as in Google’s Google trader in Uganda which is an SMS based market place. One should expect to see more of this happening.
Two businesses that are making the most of this growing mobile banking trend are the utility companies and fundraising activities. Bill payment has been one of the first mobile banking services usually rolled out in any new market. And a direct beneficiary has been the utility (electricity and water) companies. Gone are the days when bills arrived four months late, if at all, and after the service had been disconnected, reconnected and disconnected again. Getting your bill on time meant camping, literally, at the utility company’s offices. These days, and for the first time for many of these companies, the utility companies in Africa can now provide you with a timely bill and you can also pay your bill conveniently whenever (before the due date naturally!) and wherever it suits you.
Another early beneficiary of mobile banking in Africa is fundraising activity; whether for charity, disasters, weddings or funerals in Africa. When mobile money transfer was introduced in places like Kenya, charity organizations were among the first to recognize the potential of this technology and rolled out advertisements asking people to make their donations through mobile money transfers. I think this is better than having a tin at a street corner or inviting people to meetings. Now all you have to do is send an SMS and request for donations by mobile phone. There is a neat and efficient quality to the whole process whether you are the giver or the receiver. And one can target many people making small payments, or what is called “micro” payment in the technical jargon, that will not strain the pocket so to speak.
While the banks had initially resisted the idea of mobile banking and specifically mobile money transfer fearing competition from the telecom companies (exemplified by Kenya), they are now increasingly part of the action either as partners with telecom companies or they are launching they own mobile banking services. According to a report on mobile banking that reviewed the Philippine’s experience, the banks benefit in two main ways: through deposits into the m-commerce system which are held by the banks and ability to tap into a new market segment of the “unbanked”.
The same report dwells on a seldom thought about phenomenon of the unbanked, outside economic circles, and that is their reliance on cash for all their expenses. The report notes that the unbanked are “invisible” to the formal economy because they don’t use banks. However, as their adoption of mobile banking increases, this “unofficial cash economy” can be captured providing a cash float to the government. So mobile banking has some macro-economic benefits as well.
In a continent where there is a lot of rural-urban migration and where most Africans still have roots back in the “village” and send money home regularly, having a cheap, safe and efficient way to transfer cash is a big move forward. As mobile payment systems become prevalent, the people receiving the cash on their mobile phones will use this same cash to pay for goods and services without having to change the cash back into physical cash. Gradually, there will be limited need to carry around physical cash and we shall see Africa move evolve into a cashless society. Yes sounds far stretched but it is happening faster than anyone could predict.
There are some who say, like this blog, that the success of MPESA in Kenya might not necessarily translate to a similar take up in the rest of Africa. There might be some truth there but the fact remains that mobile commerce has arrived and is going to revolutionize the continent.