PayGate, a South African payment solutionsprovider, stated in a recent announcement it was launching a newproduct that would enable customers in Kenya and Tanzania to payfor online products through the popular mobile payment serviceM-Pesa. Though e-commerce continues to grow worldwide, it has haddifficulty gaining traction in Africa due in part to a lack ofinternet penetration and accessibility in countries throughout thecontinent. As a result, in order to spur growth in the Africane-commerce market, developing more effective means of accessing andpaying online are key.
Although internet access may be limited across Africa, consumersacross the continent have more access to mobile phones. Accordingto the GSMA (a mobile operators and related companies associationfounded in 1995) the number of cellphones in Africa has increasedfrom under 2 million in 1998 to 400 million in 2009. The GSMAestimated that by the end of 2012, Africa could have around 735mobile phones, representing 70% penetration. As a result of thebroad availability of mobile phones, delivering a solution to booste-commerce through mobile payments is a no brainer, particularlythrough M-Pesa.
Launched in 2007, M-Pesa has enjoyed incredible success in itsshort history, with the number of customers using the productincreasing by over 205% in the first five years to total over 14million as of April 2011. The mobile payments product enablescustomers to deposit, transfer, and withdraw funds and makepayments from accounts stored on their mobile phones and at agentsscattered throughout Kenya and Tanzania. With M-Pesa’s solid trackrecord, the success of the new online component could be a goodbarometer of future success with other mobile payment servicesthroughout Africa.
Robin Philip, marketing director of PayGate, described in therecent announcement a scenario in which e-commerce meets mobilepayments, by hypothesizing, “Imagine a customer who wants to buycomputer equipment or vouchers online…If the merchant has enabledM-Pesa, the customer can choose that as a payment option when theygo to check out. We give them the merchant’s M-Pesa accountinformation, they make the payment using their phone, we process itand tell the merchant so they can complete the transaction.” Whilegrowing pains are expected as M-Pesa’s new online capabilities aredeployed, retailers are beginning to line up, including FastJet,the region’s leading low-cost airline.
Although it will take time to determine the effectiveness ofM-Pesa in boosting e-commerce growth, combining the strength ofmobile payment schemes across Africa with the ability to makepayments online has huge potential overall. While internetpenetration will likely continue to improve slowly in many Africancountries, mobile payments can help prop up the e-commerce marketin the near future and help international retailers extend theirreach to the over one billion potential customers acrossAfrica.