E-commerce & Mobile Payments in Africa will not scale without Business Process Integration

By Mbwana Alliy  |  January 25, 2013


E-Commerce (or M-Commerce) and Mobile Payments in Africa gets a lot of attention.  I get a number of mobile payments pitches every month, and you can imagine how tough my skin has become over the last 6 months. Especially as I have personally transitioned from a plastic world into a mobile money world- I carry both and have used 4 services across Tanzania and Kenya. We are seeing some encouraging signs of e-commerce  life in Nigeria, but it doesn’t look like anything we probably all imagined a few years ago.

Over a year ago I wrote a post about how I saw the scene developing with the increasing presence and competition of brand name players such as Visa, MasterCard and Paypal with mobile money. Despite all the attention mobile money gets it is simply inflexible for certain type of transactions. The story no one is really talking about is the growth of plastic cards, tied closely with the rise of retail banked/middle class and the different user experience it provides for payments that mobile money cannot.  The ability to swipe and pay in a few actions or user pin can sometimes feel way easier than tapping over 20 button presses on mobile money system whilst you need to check you have the right M-PESA “Buy Goods” or “Paybill” no. Not to mention the number of times mobile money network might be down (my efforts to actually figure out the up-time of mobile money operators has so far yielded no clear figures)- like most things in Africa, I might have to gather this info myself via indirect measurement. To be clear I am not saying mobile money is not useful, it is clearly ubiquitous and outpacing plastic, its just not the perfect user experience for all transactions and some startups like Pesapal in East Africa make this much easier to transact online via a wallet. I am also very bullish on the convergence of  these payment systems as the middle class and retail trend continues – the interaction between the growth of debit/credit cards, urbanization and hopefully stronger banks will mean diversity of payment options. What really remains a big challenge is the merchant adoption side (online and offline) which is a lot more complicated than just “accepting payments”- in fact as I explain, way more is needed.


Mobile Money began with Airtime and is evolving to Merchant Acquisition.

The biggest incentive traditional mobile money operators have had historically with their offerings is to target their own services as well as compete and fight for retention- the purchase of Airtime (over 30%+ of value of the service to the mobile operator). In fact airtime might be one of the most sold M-commerce commodities in Africa– unleashed by the prepaid business model that set alight Africa’s mobile sector, and its not only mobile operators who are doing it, but now startups are selling airtime as gifts both domestically and via diaspora/remittance channels like the Airpesa as part of mamamikes.com. In some cases through a tight integration with savings and loan products such as M-Shwari services with M-PESA. When it comes to retail M commerce, mobile operator incentives begin to show weakness.

This creates a bright light for network independent mobile operators such as Pagatech in Nigeria and MTZ (renamed Zouna) in Southern Africa, they are interesting because they are not mobile operators and their competence is to focus more on helping merchants. Take Selcom Wireless’ PayPoint in Tanzania, their implementation is more an integration of Point of Sale (POS) directly to merchants- this in theory gives them more of a leg up on signing up merchants and focusing on serving them vs a mobile operator- however Airtime purchase and recurring utility payments (power, cable TV etc..)  is probably still the biggest category of transactions since they act as an airtime super dealer across the fragmented mobile operator scene and augment collection for businesses that need physical outlets for payment. I am much more bullish about network independent mobile money systems if they focus and serve merchants this way vs merely creating wallets, NFCs etc… adding to user experience/adoptions barriers in M-Commerce. Furthermore, this is still not enough if the integration between merchants and payments is not fully in tune with the business process and payment culture- something  I have clearly seen in the difference between Kenya and Tanzania mobile money/payment ecosystems. Paying a utility bill to TANESCO on Vodacom M-PESA in Tanzania can still take a whole day to clear. And when I made a Selcom Paypoint payment to Azam Marine (after booking online and getting a PDF receipt and transaction number)  for my ferry journey to Zanzibar over the holidays, the notification chain was broken in a key area and even when I showed up to the ferry terminal I held up a line of angry passengers  while the staff were figuring out what to do with me“You are meant to come pick up the tickets here at least the day before when you pay online”– I asked them what was the point of paying remotely (i.e. to save time and not be stuck in Dar traffic) only to need to come pick up the tickets, I might as well just pay in cash and if I am required to physically pick up tickets. This is a classic situation where the payments and business processes are disconnected and a huge issue that cause the adoption of mobile commerce to be hampered in African countries when attention is not paid to business process integration.



Selcom Paypoint POS Terminal via http://www.wavuti.com


So many ways to pay, very little business process integration


Fraud Management is a Business Risk Management Process

Credit Cards is a whole new game. As we have seen, some partnerships have been savvy and have tried to integrate the two by creating virtual throwaway credit card numbers that mobile money users in Africa can use for online transactions  Debit and Credit cards brings on risks that many African banks may not be prepared for, and that’s fraud management. Over the Christmas break we even saw an outbreak of card skimming scams at Standard Chartered ATMs in Nairobi, Kenya for instance- this is not even online, but offline. Your card is not safe as you’d think and its not apparent if banks are prepared to scan for sophisticated fraudulent activity. You can see why consumers in Africa distrust banks to the benefit of mobile money. Fraud prevention might be plastic’s biggest disadvantage against mobile money despite the user experience benefits- their use is limited by the strength of the fraud protection (and perception of security). As Eran Feinstein from 3G Direct Pay said to our Savannah Fund accelerator class yesterday “Online Credit Card transactions in travel are much riskier than say gaming” – “we have recognized clear patterns on how to spot the most common fraudulent transactions in travel with our risk management and business intelligence platform”– something I learnt clearly when I ran yellowmasai.com travel portal and Savannah Accelerator startups are only realizing what they really need to be prepared for in taking credit card payments online.

Large Merchant Momentum  integrated with Business Process/Incetives will Drive M-Commerce

There is a silver lining in my Azam/Selcom Paypoint experience. Enter Fastjet, a barely 3 month old airline startup that is taking the aviation industry in Africa by storm, they have just introduced M-PESA payments after starting with cash agents- they opened the mobile money channel while encouraging the use of that channel with promotional offers of free flights- why? Because the end game for fastjet is to completely do without agents and hence have a cost effective airline operation that reflects their low cost business model, but  they are smart enough to start with cash/agents and transition into mobile payments by offering strong incentives because they know mobile payment adoption won’t happen overnight unless they offer both strong incentives whilst educating the market. The incentive is already strong against the competition with having the lowest travel fares (up to half of competitors) available and also being the most punctual airline in Tanzania since launch, taking it a step further, their “Smarter Travel” tag line makes perfect sense to position themselves in the what often feels like primitive airline industry that has yet to fully embrace global airline online bookings. I really do think that Fastjet will do more to shake up the mobile commerce industry in Tanzania then any other initiative and its not by offering payments channel like everyone one else, but by having a tightly integrated business process, customer experience that then educates and sets a high expectation of the true benefits of M-commerce. Azam Marine and TANESCO will have to adapt from their example- otherwise consumer trust will continue to suffer and hence we will see less M-commerce adoption- cash for decades in Africa has ensured an expected level of certainty in transactions  despite its short comings- like this 500 shilling note that I clearly would like to convert to mobile money as it is probably not going to be accepted by any sane Tanzanian merchant.

As I tell the startups in our accelerator who are exploring integrating payments, its not just about accepting payments its about a business process and even business model rethink and in turn convince both consumers or businesses to pay electronically to effectively monetize their services. As KopoKopo is ramping up their merchant acquisition in Kenya effectively extending the reach of what a mobile operator such as Safaricom is not designed to do- reach out to businesses effectively with the right value proposition around payments and business workflow.


FastJet integrates promotion offers on Facebook fans with the launch of their Mobile Money Channel. Coupled with amazing experience will encourage the mobile money channel


Where does this leave Africa E-commerce Today?

When it comes to E- commerce, many in Africa (esp. outside of South Africa) would say the market is not ready- the technology is but the adoption often isn’t. Cash on Delivery seems to be a proven way for scaling e-commerce in Nigeria as we are seeing with the rise of sites like Konga.com and Dealday. Look deeper (video at the top of the post) and you will see the importance of business process design in taking more control of the supply chain by setting up a delivery/postal network in house may be more effective than trying to ram down online payments to a market that is not yet ready- in this model, I believe building trust and  hand holding consumers into the transition to electronic payments is more effective. One reason why diaspora/e-commerce that focuses on mobile airtime with a venture like Airpesa works is that these cultural barriers and business process integration required (no painful logistics) fulfillment is minimal vs delivery of shoes imported from China or Europe that might take a week or more depending on which African port you try your luck with- I might as well just go buy it in the physical shops tomorrow and pay with… Cash.

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  • One important part of what is missing from all what you listed above is transaction fees. I find some really ridiculous models in Africa where either the merchant pays two twice or both the consumer and the merchant pay for a a transaction to go through. I have lesser faith than you have on non telco m-commerce operators and their ability to scale m-commerce models and I think they will always remain niche players. I think the aggregation model the operators are employing is also a temporary solution as it just slaps another layer to an already flawed process. I am also sure fees wont matter if the process is friction-less

    Mpesa and models built to mimic it move cash over distance and the cash interface is the agent. For a merchant it is a different mechanism as it only involves settlement and theoretically it should be easier but it is not especially when you are using the same model for moving cash over distance. Telcos are also built to handle micro-transactions at scale and they do that for airtime very well. The airtime prepaid account is basically a wallet with stored value that the subscriber uses up with the telco’s own service and I do not see any reason why the m-commerce process cannot have similar simplicity with settlement happening in real time internally.

    I believe current telco models need a redesign and complete overhaul. We sometimes get carried away with MPesa’s success at performing one function and overlook its design deficiencies. Those deficiencies cannot be corrected with another layer or another player. I believe that Visa with its acquisition of Fundamo has a chance now to change the entire model of telco mobile payments as we know it and I am bullish on them and not any of the other players.

    Another key constituency is the merchants themselves. They are fragmented and not organized, if they were, it would be easier for everyone including themselves to explore the same model MCX is employing in America.

    • I agree- mobile money a la M-PESA, was not built for commerce. Note my 20 key presses (yes, I counted) to pay a bill. It only works for payments that are not time critical, like paying utility bills. At the point of purchase or POS it starts to show its limits vs plastic.
      I was completely negative on the network independent players, but once what they lack in scale the mobile operator provides they make up in merchant focus. I believe the M-PESA API was promised in 2011 and it has not arrived- some payment processors I know have retail access, most don’t.
      Net net, we’ll live in a world of diverse payment options and one can take your pick dependent on merchant, type of payment, channel and fee structure. Remember at some remote hotels in Africa credit cards get charged 5% 🙂

      • Ken Griffith

        Check out NdovuCard. They set out to solve that specific problem. They’ve got an awesome solution. https://ndovucard.com/ We plan to team up with them to give our customers access to POS.

  • I believe the technologies to make the payment experience smoother exist today. API and push USSD could be used to eliminate the need for the “20 button presses” and replace it with a simple PIN confirmation. Reasons we don’t see these solutions are a subject for a longer conversation. 🙂

    We know of several m-payments API platforms in East Africa (one of our own instances is running on http://zampay.com) which could be plugged into any wallet system and could be integrated to any POS. I think they have not been launched because of uncertainty in strategy/positioning of the parties involved. Most Telecoms don’t own their m-wallet platforms, in fact several are now owned by card processors who are direct competitors and or may have a conflict of interest.

    African telecoms who have primarily relied on marketing and distributions skills suddenly discover they need new tech and product and platform development skills of the type needed by cloud-based service companies like @square, @paypal etc… Needless to say these skills are in short supply, but I believe will define who wins.

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  • Really found your article interesting!!
    Wondered if you had heard about our mobile money africa conference in Johannesburg 27-29 May take a look here as might be of interest to you – http://www.mobile-money-gateway.com/event/mobile-money-africa-2013