NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 30, 2015

For most African businesses and the populace at large, cash is king, owing to the continent’s developing electronic funds transfer systems and the slow uptake of technology-based remittance and payments platforms. But experts believe that the growing integration of telecommunications and banking in most African countries, as well as the continued revamping of platforms enabling electronic funds transfers, is helping mobile money to catch up to cash in terms of popularity.

Although still seen as king by most business people on the continent, carrying out transactions and buying goods and commodities using cash presents many challenges and pitfalls, including the risk of theft and armed robbery. Innovative application developers have come forward with applications aimed at reducing these and other cash associated risks. Most of these applications ride on mobile phones and are propped up by the fast-growing idea of mobile money. A recent study by Gartner shows that mobile payments globally will top $720 billion a year by 2017 – a significant increase from the $235 billion that was processed through such platforms during 2013. Gartner added that the potential upside is immense, as consumers made $15 trillion worth of retail transactions in 2013.

BitCoins to Shillings

BitPesa is a digital remittance company focused on changing BitCoins into African currencies. Bitcoin is a decentralised digital and internet-based currency that is used for online purchases and payments as well as money remittances. Bitcoins use peer-to-peer technology to operate with no central authority or banks. The value of the BitCoins is paid straight into the mobile wallet of recipients in Africa. The company is currently operating in Kenya and hopes to expand into the rest of Africa soon. Elisabeth Rossalio, co-founder and senior executive at BitPesa, says there are various problems to consider when operating a cash-based business or travelling with cash, which has necessitated the development of new platforms. “We have even gone beyond that, as we are among the first to bring usage of digital currencies in Africa through BitPesa,” she said, adding that further advantages of digital currencies are that they are Internet-based and also decentralised.

“The technological advancements behind digital currencies and mobile financial services will drive down costs of remitting money, even for the traditional money remittance and money transfer service players,” said Amy Ludlum, the head of trading and risk management at BitPesa, in a presentation at the Mondato Africa summit on mobile financial services. Efforts are now underway to further develop and integrate it into a deal with major airlines and hotels to offer a pre-payment facility.

Mobile money is one of two areas, including data, that industry executives see aspresenting immense growth opportunities for telecom companies in light of declining volumes from the voice telephony category as well as fast developing tech trends that are likely to lead to increased usage of plastic money and digital currencies. Mobile network operators in Zimbabwe are significantly shifting their attention to mobile money and are instituting new innovations such as credit cards that allow mobile money users to withdraw money in their e-wallets from Automated Teller Machines (ATMs). Nkosinathi Ncube, the head of mobile money for Telecel Zimbabwe said his company is now focused on driving up transaction volumes on its Telecash platform and also revamping it so that it can be useful for retail shoppers.

Andrew De Wet, the CEO of SA price comparison website, PriceCheck – which has since expanded into Nigeria under a partnership with MTN – said that 40 percent of buying happens on mobile devices and underscored that using mobile money and electronic-based transactions enhances convenience as well as the safety of shoppers and travellers.