The announcement that Econet will be launching Eco-cash, a mobile payment solution is good news for the country. This will bring in new opportunities for technology entrepreneurs if the service takes off. We have to start thinking about businesses that will run on the platform. I will share some of the businesses that could be set-up, using examples mostly from Kenya where the M-Pesa mobile money service has been very successful. This is not an exhaustive list of all the possible opportunities that might arise, but an overview to help the community to start preparing for the changes ahead.
Let’s start with a primer on how mobile payments work. Consumers register for the service and they are given a mobile wallet – an application on their SIM card that is linked to their number. They then pay cash to an agent that loads e-money onto their e-wallet. Once the money is loaded, they can buy goods using e-money or transfer the e-money to other consumers. To convert e-money back to cash, consumers just go back to the agent who will buy back the e-money for cash.
The service offers convenience and security through a platform that is ubiquitous. The high literacy levels in Zimbabwe and the familiarity with SMS suggest that the service could succeed.
The obvious opportunity is to become a mobile money agent. The bulk of these agents might come from existing Econet retail partners and airtime vendors but one can always research areas that might be under-served and open up agencies there (universities and colleges perhaps?). Mobile money has some important differences with airtime sales. Mobile money agents have to carry a cash float for paying out to consumers. Mobile money commission is also usually lower than gross profit on airtime. This means not all airtime vendors will sign up as mobile payment agents and there maybe gaps in the market for entrepreneurs that are prepared to invest.
Another opportunity is in acting as an intermediary between Econet and its mobile money agents. The agents have to manage liquidity actively to ensure that they always have enough cash on hand to make out payments. They also need to have enough e-float to sell to customers. This means they often have to cash out their e-float daily to manage cash. We will therefore see the emergence of intermediaries that will buy e-float in bulk to distribute to agents in particular geographic regions to keep the system going. The intermediaries have to be highly capitalised so it’s an opportunity that will be taken by businesses with financial muscle. People interested in this model could research the business model used by PEP Intermedius (http://www.pepintermedius.com/).
Our greatest hope is ecommerce. Two factors need to be addressed for ecommerce to be viable. The first is trust. Consumers have to trust that merchants will be true to their word, and it can take time to gain that trust. The second is the low amount set as the maximum transaction value for Eco-cash. Eco-cash accepts transactions up to $20. The maximum is usually set low to prevent money laundering. If these two factors are addressed, we could see ecommerce really take off. Initially we might see ecommerce shops selling low value items. Will this low maximum amount offer the convenience to consumers that will lead to wide adoption? I am not sure. However, we know that early adopters of new services are usually the youth and the technically savvy. We might therefore see the first ecommerce shops that accept mobile payments targeting the youth and selling technology products. Once this catches on, we could see most retailers also going online with ecommerce shops.
Kenya has a good number of ecommerce shops that accept mobile payments. One example is Rachel’s bargain corner. This is a Kenyan equivalent of Amazon.com. They sell books and accept mobile payments (http://www.enrakenya.com). The model works because book prices are usually within the maximum transaction level and they target a highly literate market segment. To bypass the low maximum limit, ecommerce shops could accept multiple payments for an item.
If ecommerce powered by mobile payments takes off, web designers will need to start developing solutions that allow their clients to accept mobile payments. Metrocomia (EA) Ltd (http://www.metrocomia.co.ke) is web design company that develops mobile payment (M-Pesa) ecommerce solutions in Kenya. We might see demand for such solutions here as well.
If Eco-cash succeeds, it’s likely that the other networks will launch mobile payment systems as well. This will lead to complexity as retailers will need to integrate different e-money systems with their existing information systems. The Software as a Service (SaaS) model is emerging as an efficient way to integrate different systems with a retailer’s information infrastructure. An example is Kopo Kopo, a company that is incorporated in the USA but operates primarily out of Kenya (www.kopokopo.com). According to their website, Kopo Kopo enables enterprises to aggregate transaction data from multiple mobile money accounts, match that data to corresponding customer account information, and import or automatically post the reconciled data into their MIS.
It’s obvious that mobile money might take over the money transfer market between urban areas and rural areas because of the convenience it offers. That business will go to Econet and their agency network. However, I think an opportunity to enable money transfer from the diaspora exists. We could have a service that accepts credit card and PayPal payments from the diaspora and transfers the money to mobile wallets of recipients in Zimbabwe. The advantage is that such a service offers convenience to people in the diaspora and it could be set-up as a cashless operation without a huge capital outlay.
There is a wide range of micro-transaction services that could also be setup. Consider insurance. Small scale farmers depend on the rain for their harvests and a drought can result in serious financial difficulties. A micro-insurance service can be set-up to insure their crops. Payments could be accepted through Eco-cash so the farmers don’t have to make a trip to town to get insuranced. They could also receive insurance payments through Eco-cash. The Sygenta Foundation is offering such a service in Kenya (http://www.syngentafoundation.org/index.cfm?pageID=674).
NGOs can also play in this space. Concern Worldwide are using M-pesa to fight malnutrition. Traditionally, malnutrition is treated through feeding centres where people go to get food but the problem is that the people have to travel to the centres and it can be inconvenient and costly. Concern Worldwide have launched a service in which they send mobile money to people on a feeding programme as a way of treating them in their homes. NGOs can also accept Eco-cash donations as part of their fund raising efforts.
If Eco-cash succeeds, there will also be consulting opportunities to help organisations integrate mobile payments in their operations and create new revenue streams.
This is only scratching the surface of what is possible. I am hoping we will see more technology businesses coming up through this new system. The success of M-pesa has started a started a new scramble in Africa and Zimbabwe needs to get in on the action. It’s never too early to start planning.