Editor’s Note: Vanessa Clark is the co-founder of Mobiflock, a mobile safety and security company offering parental control services for smartphones and tablets. She is involved in the mobile industry in Africa. Follow her on Twitter.
Zimbabwean Tawanda Kembo, 25, has been employed for more than two years but still doesn’t qualify for a credit card. This is the result of banking restrictions on issuing credit cards, he says, and around 70 percent of his fellow Zimbabweans are in the same boat. This is not unusual across the entire African continent, which has a similar unbanked or underbanked rate, according to the World Bank.
Kembo’s issue with not having a credit card is not about having access to credit or the convenience of having more than one way to pay for something. Nor is it about the increased security of being cash-free: mobile money has quickly filled that gap. Rather, it’s about the ability to make and accept online payments, which Kembo discovered when trying to monetize his corruption-reporting website I Paid a Bribe. Kembo wanted to support the site via donations, but without credit cards, customers could not donate money online. This is despite the growing success of Zimbabwe’s EcoCash, the telco EcoNet’s M-Pesa-esque mobile money service that has handled $300 million in transactions.
Presuming there was a wider market for a system to make and receive online payments without a credit card, the BSc-graduate set out to solve his own problem with the development of Virtual Bank, a mobile-wallet-type service akin to PayPal that accepts deposits via credit cards, bank accounts, mobile payments or other Virtual Bank accounts. From there, Virtual Bank account holders can pay other people, shop online or transfer money to bank accounts or mobile-money accounts.
Virtual Bank is in the process of obtaining regulatory compliance and signing up a banking partner. When it finally launches, it will close the loop between mobile money and e-commerce in the country and enable websites like I Paid a Bribe to accept online payments. This paves the way for the development of an e-commerce sector that was previously untenable.
While this is significant in itself, perhaps more important is that it will allow Zimbabweans (or anyone) living outside of the country to transfer money safely and cheaply to their friends and relatives who can then make payments, withdraw the money as cash or more likely convert to EcoCash. According to Kembo this is the first time this has been possible and it negates the need to use more expensive traditional remittance services, or, like 85 percent of the money moving from South Africa to Zimbabwe, travel via insecure informal channels.
So while EcoNet talks about the $70 million – $100 million in value that the EcoCash service has enabled to flow from urban to rural areas within the country’s borders, Kembo says he has his eye on servicing the $1.4 billion sent to Zimbabwe from the diaspora in 2011.
Challenge And Opportunity
It’s not just in Zimbabwe where a mobile money system is providing the catalyst for a more sophisticated e-commerce payments system. Kenya, home to the mobile payments front-runner M-Pesa, has a fleet of startups jumping on this opportunity.
Erik Hersman, co-founder of Ushahidi and founder of iHub Nairobi, a startup accelerator, pointed out that where M-Pesa has primarily enabled peer-to-peer payments, this new generation of entrepreneurs is triangulating on the merchant-to-consumer relationship. He cites iPay, PesaPower and Kopa Kopa as the leading examples in Kenya. And at the DEMO Africa event held in Nairobi in October, a number of new services tackled the challenge from slightly different angles.
The challenge and opportunity is this: while Kenyan merchants do accept payments via the M-Pesa mobile money service, this is on an ad hoc and informal basis. A customer might transfer M-Pesa to a store assistant, who then pays the store in cash. And even if the customer pays the merchant directly using M-Pesa, the payments take place outside of the store’s usual systems and need to be manually recorded and processed. Online payment alternatives such as PayPal and Google Checkout simply don’t exist in many African countries, and where they do, they are often impractical and expensive and require a credit card or bank account.
Nairobi-based Lipisha has built a point-of-sale system that allows organizations to automatically process all non-cash and micro-payments and collate the data. This could be used by schools accepting school fees via mobile money or small business owners and even big companies who previously needed to manually transfer their mobile payments into their bank accounts.
MPAYER takes things a step further. It maps mobile money payment transactions onto other factors, such as store branch details, weather, time of year and other variables in order to provide the merchant with business intelligence based on the mobile and cash payments they receive. It also throws statements into the mix, solving the lack of records and paper-trail problem that comes with peer-to-peer mobile money payments.
Hewani, founded by Virtual City’s Jon Waibochi, allows retail customers to buy goods and services from a range of merchants using mobile money or banks, and then keep track of the goods via mobile or web using any channel from USSD through to native apps. For merchants, Hewani offers a ready-made portal from which to start selling.
CrowdPesa pulls merchants together onto a single platform and then uses location-based services to allow customers to find a merchant nearby. Customers can then make a purchase using CrowdPesa’s mobile point of sale and either have the goods delivered or collect them themselves.
It’s not only Kenyan companies that have identified this opportunity. Tanzania-based Kivuko links vendors to customers online and allows payments by mobile money as well as more traditional ways. No doubt as mobile money takes off in Nigeria, similar services are going to spring up there, too.
While the developed world is scratching its head, working out how to break the middle-class’s credit card habit in an attempt to introduce contactless payments, there is no doubt that serving the emerging middle class in Africa is a mobile money play. And entrepreneurs such as Tawanda Kembo are helping to fulfill that promise across the continent.