E-Payment and e-Business in Africa

1. e-Payment and e-Business in Africa AAF : Web Workshop Kigali, 31 May 2010 Pierre Dandjinou

2. Talking points ICT developments : current trends E-payment and e-banking in Africa Case studies : m-Pesa and Wizzit Lessons learnt Conclusion

3. Introduction Current trends in ICT developments in Africa indicate that m-banking is likely to become popular in almost all African countries, as epitomized by successful trials in Kenya, Uganda, Tanzania, Ghana and South Africa. Also, the African continent is now poised to benefit from not less than 10 submarine cables surrounding it or parts of it and plans are available for extending connectivity inland. One could therefore expect a huge impact on the African business and overall economic environment, which generates new jobs, innovations and investments. This paper considers these positive trends and seeks to map out major epayment and ebusiness initiatives across Africa on the one hand, and highlight lessons to learn on the other hand

4. ICT developments : the near future M-commerce will grow along with e-commerce fuelled in part by substantial deployments of 3G broadband services by mobile telephone operators. These 3G deployments coupled with significant terrestrial and submarine fibre deployments underway and/or planned for commissioning in 2010 all over the continent will see the number of broadband connections more than triple this year.� As intra-country connectivity improves, there is going to be a greater demand for local content in local languages and locally designed applications that fit the context of the different countries.

5. E-Payment in Africa No doubt, credit card acceptance is the heart of e-commerce, but technological hindrances and doing business in local currency can drive up transaction costs. There are rules and protocols to gain access to international card association systems, which currently do not favor African countries. The amounts of online transactions originating from most African countries hardly meet the rules required by the international card associations. So there must be a way around it. Therefore, banks in Africa need to establish special 'Merchant Accounts' for small businesses to enable them accept secured payments in foreign currencies processed in the same way as credit cards. Online payments will still have to go through SWIFT, encryptions, or other secured sites, as PayPal to ensure adequate security.�

6. E-business Globally E-Business is one of the fastest growing industries worldwide. In the US e-retail sales have risen by 11% in 2009 which equates to 10% of the whole US retail industry online and off-line! The expected revenue this year from US e-retail sales is $156 billion which is expected to increase to $229 billion by 2013.

7. E-Business globally The growth of e-business has risen in line with the incredible growth of the internet with more than 75% of businesses operating a website, 36% of businesses operating an intranet of some kind and around 10% of businesses operating an intranet. A survey conducted by IPSOS discovered that, far from being an extra �expense,� internet operations boosted businesses� bottom lines. 64% of businesses with websites claimed an increase in sales revenue directly attributed to the internet while 73% said having a website has saved money in admin costs. But globally, Africa�s intake of of e-business is still hampered by poor infrastructure, lack of a conducive legal environment and lack of an ebusiness strategy in most places

8. e-payment case studies from Kenya and South Africa : The m-Pesa and Wizzit M-Pesa (mobile money), is a joint venture between multinational giant Vodafone and Kenya's largest mobile phone company and Vodafone affiliate Safaricom; It allows cash to be sent over the Safaricom network. M-Pesa is designed for one-on-one cash transfers with a maximum transfer limit of 35,000 shillings (about $583) per transaction M-Pesa was an innovative solution which helped humanitarian agencies deliver aid, using new technologies. One such project was piloted in Baringo North and Pokot East Districts of Kenya's Rift Valley Province In Kenya, mobile money has reportedly boosted the incomes of rural households by 5 to 30 per cent

9. Wizzit Wizzit, a fast-growing mobile banking company in South Africa It takes only five minutes and an investment of less than $10 to open a Wizzit bank account on any ordinary cellphone � even a shared cellphone. The virtual bank has well over 300,000 customers across South Africa After Wizzit pioneered the technology, the banks caved in and created their own mobile banking services, which now have about five million customers in South Africa alone.

10. Key Lessons learnt Models of e-payments/e-banking in Africa could be grouped under two categories : -the Additive models, i.e those in which the mobile phone is merely another channel to an existing bank account and - the transformational models in which the financial product linked to the use of the phone is targeted at the unbanked, who are largely low-income people.

11. Lessons learnt M-banking has the potential to be transformative because : It uses mobile communication infrastructure which already reaches unbanked people It may be driven by new players, such as telecommunication companies, with different target market from traditional banks It may harness the power of new distribution networks for cash transactions, such as airtime merchants, beyond the traditional merchant POS or ATM networks of banks and It may be cheaper than conventional banking if the offering is competitive

12. Lessons learnt all case studies show that banks generally have a conservative and additive approach, while mobile network operators enter the convergence space and offer innovative and transformative propositions. Also, microfinance institutions are adding Mobile phone access through� their point of sale�; We thus see more and more collaboration between mobile network operators and microfinance institutions.

13. Lessons learnt By leveraging on the Universal Access Fund, one could now use the converged space to include both telecommunication and financial services as an inclusion package to remote and/or disadvantaged areas. Most case studies suggest a need for expanding the mandate of the regulator; thus, in Kenya, a new Kenya Information and communication law was enacted to regulate e-commerce as well, and expand the role of the Communications Commission of Kenya (CCK) to regulate spasm, fraudulent SMSs. Customer protection and security are other issues to consider in the converged space of telecommunications and financing services.

14. Conclusion Africa is well placed for exploring and exploiting the new opportunities presented by m-commerce. It has the core demand for such services; key infrastructure is in place as are key policy frameworks � even though more enabling policies on a more systematic basis could be developed. The flexibility shown by Kenya regulators is to be commended and Africa is well positioned to generate inclusive policies that enables m-commerce and e-business.