African Lessons in Mobile Commerce
 

There is a frequent assumption that, with technology, Africa always has to learn from more developed countries. But what if it is actually leading the way? Perhaps it has lessons to give rather than to receive.

Two newly-published reports on electronic cash, one from Forrester sponsored by PayPal, and another from A.B.I. are outlined in The Register. While in developed countries companies continue to debate when or whether people will use cellphones instead of cash for everyday transactions, in Africa it is already happening. How are they making it work?

Essentially, Forrester believes it will be 2016 before cellphones take the place of banknotes while A.B.I. thinks this will happen by 2014.

In large parts of Africa, mobile handsets have already replaced cash for many payments. The biggest success story is M-Pesa which, according to the International Monetary Fund (PDF) provides mobile banking facilities for more than 70% of the population of Kenya and in that one country now processes more transactions than Western Union does globally.

These national figures reflect the phenomenal growth of cellphone ownership across the continent, something of which much of the developed world is probably unaware. The mobile operators’ organization, the GSMA, has produced a report (PDF) that plots the rise in the number of connections.

In 2000 there were just 17 million cellphone connections in Africa representing just over 2% of the population. By this year the figure had grown to 620 million, corresponding to over 60% of the continent’s inhabitants

Of course, the proportions are not spread evenly across the continent. In some countries such as South Africa, Algeria and, to a slightly lesser extent, Egypt, almost everybody has a cellphone. In others, including Nigeria, Tanzania, Sudan, Uganda and Kenya, around half the population owns a handset. Then there are places such as Ethiopia with 10% mobile penetration and Congo with 17%.

What really differentiates mobile growth in Africa from that in developed nations is not just speed, but the way it has grown from a base of zero. Most of the continent has never had any landlines. Cellphones are not a substitute for other forms of communication. For most people they are all that is available.

Elizabeth Galpin worked at Sagentia on the development of M-Pesa and is a founder of PAYG. Her new company is extending the mobile finance platform into areas such as health, logistics and agriculture. When M-Pesa was being created initially from 2003 to 2007 for Vodafone affiliate Safaricom, the focus was very much on microfinance, providing financial services to people who are generally too poor to have access to banking.

“A field officer would take a handset out to record information and, more importantly, to be able to say to a farmer, ‘I can see in real-time and you haven’t repaid your loan’,” she said.

“But once you had the ability to collect information it became incredibly powerful. It meant you could start to build up records against which subsistence farmers could borrow as cash flow is a perennial problem for them.”

In Kenya, though, the real driver behind the growth of M-Pesa was the number of people leaving home to earn money. There was, however, no easy method of sending the cash back. “Having got people used to sending money with M-Pesa it became apparent this could be used for so many more things because Kenyans are pretty entrepreneurial,” she said.

The cellphone also became a powerful business tool. “Once you’re using mobile money or any sort of cashless banking, you then have got a means of analyzing your transactions as a business which you didn’t have when people were just transacting in cash,” she said.

Thanks to cloud computing and the widespread availability of mobile Internet through G.P.R.S., services such as C.R.M. are now open to relatively small businesses. The growth in the number of cellphones has also enabled the adoption of sales tools such as special offers which were not possible before because there was no means of communicating them. Now it is just a matter of sending out an S.M.S.

It has not, however, been straightforward to transfer M-Pesa’s success to other countries. Brent Hudson, C.E.O. of M-Pesa devoper Sagentia, said that the M-Pesa system requires that one of its sim cards is put into a cellphone, but, in Tanzania, people are deeply unhappy about doing that. It is the sort of cultural difference that exists for reasons that are not always clear, but has a substantial impact on the adoption of technologies.

He said: “I’ve talked to C.E.O.s of Fortune 500 companies and, almost without exception, they’ll talk about emerging markets as if they were one market with one product line. Sometimes every city needs a different product, even if the differences are only slight.”

Both he and Ms. Galpin agreed that the technology itself was less important than the way it is adopted and rolled out. They also said that although much of their work had been based on the lowest common denominator of S.M.S. smartphones and even tablets are becoming increasingly common.

The falling price of advanced handsets means that African countries with relatively low mobile penetration are looking to leapfrog the rest. Cina Lawson, the young Harvard-educated minister of posts and telecommunications for the West African country of Togo, believes m-commerce is vital to national economic development.

She is particularly strong supporter of Near Field Communication (N.F.C.). This technology enables users of cellphones with the appropriate embedded chips to make purchases simply by waving them in front of a reader. It is this the reports from Forrester and A.B.I, mentioned at the beginning of this article, expect to provide the mechanism for electronic cash in a few years time.

Her enthusiasm is, however, different from that found in those reports. “N.F.C. is a great way to fight corruption,” she said, offering an example of how removing physical cash from the equation could help solve of the country’s problems. “Togo used to have a bus company, but it went bankrupt because it was robbed of its revenues.”

While this may seem far removed from initiatives to introduce electronic wallets in developing countries. Hard cash is what the black economy runs on in any country, rich or poor. Digitized payments are much easier to trace. Although, not everybody will find that an attraction.

CULLED FROM TECH EUROPE