Boosting E-Commerce in Africa through Mobile Payments
February 20, 2013
Tristan Hugo-Webb
Mercator Advisory Group
PayGate, a South African payment solutions provider, stated in a recent announcement it was launching a new product that would enable customers in Kenya and Tanzania to pay for online products through the popular mobile payment service M-Pesa. Though e-commerce continues to grow worldwide, it has had difficulty gaining traction in Africa due in part to a lack of internet penetration and accessibility in countries throughout the continent. As a result, in order to spur growth in the African e-commerce market, developing more effective means of accessing and paying online are key.
Although internet access may be limited across Africa, consumers across the continent have more access to mobile phones. According to the GSMA (a mobile operators and related companies association founded in 1995) the number of cellphones in Africa has increased from under 2 million in 1998 to 400 million in 2009. The GSMA estimated that by the end of 2012, Africa could have around 735 mobile phones, representing 70% penetration. As a result of the broad availability of mobile phones, delivering a solution to boost e-commerce through mobile payments is a no brainer, particularly through M-Pesa.
Launched in 2007, M-Pesa has enjoyed incredible success in its short history, with the number of customers using the product increasing by over 205% in the first five years to total over 14 million as of April 2011. The mobile payments product enables customers to deposit, transfer, and withdraw funds and make payments from accounts stored on their mobile phones and at agents scattered throughout Kenya and Tanzania. With M-Pesa’s solid track record, the success of the new online component could be a good barometer of future success with other mobile payment services throughout Africa.
Robin Philip, marketing director of PayGate, described in the recent announcement a scenario in which e-commerce meets mobile payments, by hypothesizing, “Imagine a customer who wants to buy computer equipment or vouchers online…If the merchant has enabled M-Pesa, the customer can choose that as a payment option when they go to check out. We give them the merchant’s M-Pesa account information, they make the payment using their phone, we process it and tell the merchant so they can complete the transaction.” While growing pains are expected as M-Pesa’s new online capabilities are deployed, retailers are beginning to line up, including FastJet, the region’s leading low-cost airline.
Although it will take time to determine the effectiveness of M-Pesa in boosting e-commerce growth, combining the strength of mobile payment schemes across Africa with the ability to make payments online has huge potential overall. While internet penetration will likely continue to improve slowly in many African countries, mobile payments can help prop up the e-commerce market in the near future and help international retailers extend their reach to the over one billion potential customers across Africa.