Author: Mbugua Njihia
Life is mobile and with life comes living, which requires one to part with cash or some other form of value in exchange for what they want. With the introduction of mobile money in many African markets and the success that is Mpesa, focus is shifting to mobile payments.
While some may argue that it is the technology that is holding back adoption of mobile payments on a mass scale, I believe it is the lack of reasonable business models that ensure all players in the value chain are adequately compensated. The tug of war that played out for us after the rollout of Mpesa, goes to show that while mobile payments is a lucrative market, cross industry synergies must be forged to ensure seamless service delivery and most importantly stability of the payment ecosystem.
The mobile payments arena is attracting many startups seeking to become the defacto connector in what could soon become a billion shilling industry as demand for payment convenience and online purchasing rises in the region. Some of the payment services currently in the market include; PesaPal, Commerce 360, Moca, JamboPay and Ipay. All of these services build on top of popular mobile money services Mpesa, Zap and Yu cash with extensions that support credit card payment to target the growing number of consumers who carry plastic.
An analysis of the current services looking to grow mindshare reveals that the ultimate business model for mobile payments at least on a local level is yet to be discovered. And perhaps that model doesn’t exist.
The concept of mobile commerce and e-commerce lends itself to different types of inventory being available for purchase. Notwithstanding different users want to be engaged in different ways and they want different things. The experience and billing for a virtual good purchased on a social network cannot be the same as that of an online store selling dresses.
The key lies in creating business models that suit the different consumer experiences. Models that adapt to the preferred method of payment as well as type of good or service being purchased. One underlying issue that must also be tackled head on is the revenue structures. Currently mobile money, which is the backbone of current mobile payment solutions, is the domain of mobile network operators and the tariffs for these services were not developed with m-commerce in mind.
The mobile network operators would do well for the market and themselves, if they crafted a proposition to add value to the mobile payments ecosystem.
This move in my opinion is as simple as adopting a different set of tariffs for mobile payments and setting standards for interoperability that will drive innovation by the upstarts seeking to deliver last mile payment solutions. This will lead to an increase in the volume of M and E commerce with all players being adequately compensated for their value addition.
Mbugua Njihia is CEO of Symbiotic Media – a mobile tech firm based in Nairobi
Twitter – @mbuguanjihia
This article was published on cgap.org and highlights the innovative mobile money solutions coming out of Kenya. As a disclaimer I’m personally involved in one such project Mamakiba.
You can read the original article here
Kenya grabs a lot of attention with mobile money, but is all the innovation happening at the top of the food chain? We don’t think so. In fact, working with FSD Kenya and some great ex-Unitus folks, we’ve found a veritable hotbed of Kenyan entrepreneurs spinning out one exciting idea after another. The next round of mobile money innovation could easily come from the little guys, if only they could gain traction with the right financing and other support. Unfortunately, the entrepreneurs tell us that’s not there in Kenya. There seems to be a clear market failure with willing, able and attractive entrepreneurs finding a wilderness empty of the kind of angel and early VC financing, mentoring plus nuts and bolts advice they need to soar.
I recently spent an intense week in Nairobi scoping out the landscape. We found out 2 things:
1. There are a ton of small entrepreneurs working in mobile money and they are arriving from 4 vastly different directions.
- Adjacent industries: Mamakiba’s founder started by asking why so many women want to give birth in a clinic with trained medical professionals, but do not: the discovery… it’s hard to save up the USD 40 cost, even knowing months in advance (shades of Sendhil Mullainathan’s findings in the domain of behavioral economics). Mamakiba starts with a savings calculator to help pregnant women figure out how much they need for the kind of birth they want, links them to M-PESA to do the saving, and pairs regular saving reminders with health messages via sms. Take away: not all the innovation is coming from financial experts, but other fields where financial services are part of the solution to some altogether different problem. mHealth is particularly exciting — if mobile money is like PayPal, mhealth could be its eBay, driving usage to huge levels.
- Premium mobile content providers: Cellulant is a profitable company which got its start selling mobile music but really got active in banking 3 years ago when its founder – Ken Njoroge – decided they needed to make it easier for their clients to buy their products. Cellulant has since built platforms for many of Kenya’s banks (for more than music, these days) and is trying to bridge the divide between the multiple banks and mobile network operators. It may very well be a third-party, non-bank, non-MNO player who figures out how to connect everyone’s platforms to everyone else’s. Lofty goal indeed, but it would make mobile money truly interoperable for the first time in Kenya.Symbiotic has its sights set on a similar target, and is also thinking about how to make it social.
- Silicon Valley meets the Rift Valley: Then there are the classic tech entrepreneurs who write great code and see grand visions of the electronic future. One is PesaPal, which aims to aggregate massive amounts of data on electronic transactions and do 3 things: (1) offer the data to banks to do credit scoring, (2) personal software to help people “see” their finances and plan for goals, (3) supply chain management for SMEs. PesaPal is the only startup we found which had successfully attracted VC funding.
- The financial services sector: Chamgamka was founded by 2 guys who worked in mainstream insurance for decades. They launched in 2009 offering a reloadable health savings card stocked in stores next to maize, batteries and Coca-Cola. This effectively turns saving from something that’s abstract and has to be planned for, into a physical product one can buy on impulse. This is just the kind of product-side innovation we called for in CGAP’s latest Focus Note. Going with cards also allowed them to launch immediately, avoiding a long and potentially unsuccessful negotiation with mobile network operators to use the mobile network. They have several thousand profitable customers. Chamgamka allows top-up via M-PESA but their focus on cards as their main transaction instrument shows mobile isn’t the only game in town.
2. But as exciting as their ideas are, nearly all these entrepreneurs are somewhere in the “valley of death”, past funding from friends and family, short of commercial investment.
- There are some good resources out there. iHub and Mobile Monday have surged into the gap providing a space — literal and figurative — for networking. In fact, Mamakiba’s founders were introduced through the iHub. Several incubators provide training, work space and some other forms of support: particularly exciting is the newMobile Application Lab supported by Nokia, the Government of Finland and infoDev. There are also a few high profile contests. Outfits like Virtual City have won big awards from Nokia. The Kenya ICT Board ran a successful competition. And the US Department of State’s Apps for Africa contest handed out a $2,000 prize to Mamakiba and a few other designers addressing development issues. While these help get entrepreneurs excited, and raise the profile of the winners, no one can build a business off the small, infrequent sums.
- Money money everywhere, but not a drop to drink. We found a growing community of VC firms (mostly foreign), some angel investors (mostly Kenyan), and an incredibly vibrant tradition of investment clubs (chamas) which by one count have USD 469 million in assets in Kenya. But no one is investing in tech startups. The smallest investment we found a VC making was USD 150,000. Local angels strongly prefer businesses with physical assets which can be sold in extremus, particularly real estate and service businesses like restaurants. And the chamas – though widespread – tend to invest in the stockmarket and more traditional businesses. In other words, nearly all the entrepreneurs we spoke to have a hard time seeing the path to commercial investment and business success.
- As a result, many ambitious ideas are in danger of staying on the drawing board, untapped. Ideas that have a long gestation period and which can’t be immediately self-financing typically don’t get tried. When they are, there is enormous pressure to focus on the surest bet, quickest. In other words, the runway is very, very short — far shorter than the window of opportunity for Silicon Valley entrepreneurs. Kenyan entrepreneurs have maybe a few months, half a year. It’s almost impossible to iterate an idea to find the right recipe in time.
How can we shift this equation?