The common view about Africa – once found in recent PYMNTS coverage – is that the vast, varied and massively populated continent represents the next frontier for eCommerce.
The middle-class and disposable incomes are growing in many African countries. Although consumers are still without formal access to traditional financial services, a growing number of them are closely tied to their mobiles phones, and all the commerce and payments opportunities offered by those devices. As well, the development and deployment of smaller, more efficient point-of-sale systems also serves to encourage the growth of online retail and services.
Even so, payments remains a big challenge, as discussed in a recent PYMNTS interview between Karen Webster and Ibrahim Oladele, co-founder and CEO at Vesicash. The Nigeria-based company, which has been in business for about six months – and so far serves about 60 merchants and “thousands” of customers, according to Oladele – essentially offers escrow account services to better guarantee payments and order satisfaction among buyers and sellers of online services.
“It’s all about transparency and accountability,” Oladele told Webster when describing the service, which not only works with buyers and sellers, but also with financial institutions and payment services providers, reflecting the complex infrastructure that powers eCommerce.
The problem is perhaps bigger than many people realize, at least according to what Oladele told Webster. In Africa, he said, three out of four online services rendered – or 75 percent – usually end up not being paid for in full, or remain completely unpaid. Buyers of those services might be ultimately dissatisfied with what they have received, think what they received is counterfeit, simply decide not to pay or have other reasons to skip payment. Sellers must absorb those costs and deal with other associated hassles – none of which, of course, serve to encourage further eCommerce efforts, as Oladele told it.
That’s where the value of a company such as Vesicash could help smooth things over, at least in Oladele’s view. “The process holds everyone accountable,” he said, talking about buyers and sellers. Buyers put up money for the transaction, but that money does not get released to the seller until the order is confirmed and meets the terms of the deal. Not only that, but Vesicash can act a kind of eCommerce mediator, too. “We solve all transaction disputes with 72 hours,” Oladele told Webster during the PYMNTS interview. Such services can fill in a blank spot, he said. “We provide the missing piece of eCommerce in Africa,” Oladele said.
Oladele said banks in Africa are grasping that such services could indeed bring down costs and otherwise reduce the hassle of conducting eCommerce in Africa. “In Nigeria, it takes a minimum of 10 days to solve disputes,” he noted, underscoring the long time involved – time that costs money and can erode trust among online retail participants. Indeed, it’s not just the technology that matters when it comes to encouraging the further spread of eCommerce and digital payments infrastructure, whether in Africa or elsewhere. That technology must serve to increase the trust buyers and sellers have in the process, lest the motivation to move away from cash and older, less efficient forms of transactions fade away.
Indeed, Africa stands ready to dramatically increase its eCommerce participation, making the trust issue ever more important as time goes on. The continent has 54 countries and some 1.3 billion people. A staggering 725 million of those people wield mobile devices. As well, three times as many people in Africa have mobile money accounts – roughly 280 million – compared to those who have traditional bank accounts. Part of that disparity has to do with the bifurcation between formal and informal economies.
The fact remains, though, that with the opportunity outlined above, there lies an abundance of challenges. There exists a lack of infrastructure across roads, power sources or even telecom networks, Oladele said. The FinTech that sets its sights on Africa must grapple with the vagaries of 54 markets, 54 central banks, disparate tax and legal policies, and changing foreign exchange (FX) rates. There also exists, in some cases, a lack of identity documentation and a general lack of financial services overall.
But within those challenges lie opportunities for retailers, FinTechs and payment services providers, for companies such as Vesicash. And though that business is very young and so far very small, Webster pointed out the rough similarities between its offering and process to the way Alipay has grown within the Alibaba ecosystem, similarities that Oladele acknowledged.
More is to come from Africa on the eCommerce and payments front – and we can expect more innovation as a growing number of consumers look to spend their disposable income and buy more products and services online.