Mobile money slowly turning East Africa into cashless society
Posted Saturday, February 11 2012 at 17:01
Ali Ndiwalana, an IT specialist, had just finished an interview with The EastAfrican at Dormans Coffee House in Kampala, just across where he works, when he handed the waiter a Ush50,000 ($20.80) note in payment for a forest cake and two sodas taken in the course of the conversation.
The waiter could not easily get change, which amounted to Ush38,000 ($16). So, for nearly 10 minutes we stood around waiting until Mr Ndiwalana asked if he could pay by mobile money. The waiter, his back towards us, did not hear him. Mr Ndiwalana was, of course, joking.
Although, he said, he would have paid through mobile money were it possible.
“Convenience,” he replied, a short and straightforward answer to the question as to why he would prefer to pay by mobile money compared with cash.
The conversation, which lasted for an hour, had been all about whether or not mobile money payment solutions could evolve to cater for such “micro transactions” of about a dollar or less.
Mr Ndiwalana has a wealth of knowledge on this topic. He is currently leading research at Grameen Foundation in Uganda, a global non-profit organisation that works to replicate the work of Bangladeshi Grameen Bank, about what else can be done over the mobile money platform beyond their commonplace uses: money transfers, paying utility bills, and salaries in some rare cases.
“Small transactions will really have to be consumer driven,” Mr Ndiwalana said. “If enough people came in here and asked if they could pay by mobile money, the attendant would be compelled to decide whether to lose that money or not.”
If this happens, it would depart from the introduction and uptake of the credit card in the US and much of the West, which was merchant-driven in much the same way mobile money has been telecom-driven. When, for instance, Kenya’s telecom giant Safaricom pioneered its mobile money platform M-Pesa — Pesa being a Kiswahili word for money — it was not because its customers asked for it. Rather, it saw it as an innovative way of growing its subscriber base and keeping subscribers on its network.
Even if Mr Ndiwalana could not put a timeline to mobile phones evolving as points of sale, he predicted it will be faster than the uptake of the cashless system in much of the advanced economies.
“In a credit card system, you would have to install hardware and the technology that supports it. But mobile phones are hardware in themselves and can easily be used at points of sale,” he said.
South Africa has already begun experimenting this. In December, Absa bank and MasterCard inserted a chip on phone handsets of the bank’s staff to enable them pay for goods at coffee shops and canteens. The trial went well.
According to Benjamin Lyon, the Vice President Business Development at the Nairobi-based Kopo Kopo Mobile Financial Services, “In order to make mobile payments the new norm at the point of sale, consumers need an incentive to pay via mobile money and merchants need an incentive to accept mobile money.”
Kopo Kopo is focused on enabling merchants accept, process, and analyse mobile payments in real-time. The firm is working on how one can use his or her mobile phone at points of sale.
However, these requisite incentives are not there yet.
Margie Jobanputra, the Director of Dormans, has not had anybody at her coffee shop ask to pay by mobile money. The concept of hard cash for such transactions is still strong, she said. But later, when there’s demand for such a form of payment she’d have no hesitation in making it available.