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NFC technology already supports huge amounts of mobile payments around the world.  Ovum forecasts that the number of consumers using it will hit 939 million by 2019 (in 2015 it was 11 million)  and the value of transactions is expected to reach $115 billion, from $0.7 billion for the same period.

No surprise then that in Africa (in many ways the cradle of mobile money) it’s also beginning to take hold.

Yet whilst many experts have touted NFC as the next big thing, its appeal as a payment technology in growth markets is subject to a different set of barriers and enablers. Here Srinivas Nidugondi, Head of Mobile Financial Solutions at Mahindra Comviva takes a detailed look at the NFC trajectory in Africa.

This article originally appeared in MEF’s most recent  Africa eBulletin which can be downloaded here for free.

Already considered the biggest success story of the global mobile payments space (critics notwithstanding, of course), Africa just added another feather to its cap. It has, like the rest of its peers on the global stage, made room for Near Field Communication (NFC) in its cluttered mobile payments market.

To understand how and why, let’s step back a bit. The fact that analysts are unanimous in their opinion that NFC is the technology of the future is an understatement. To be fair, the technology has certainly managed to garner a lot of attention, not to mention takers!

According to Ovum, globally, the number of customers using NFC-based proximity payments is slated to touch 939 million by 2019, up from a mere 11 million in 2015. That’s not all, the value of NFC-based transactions is expected to reach $115 billion, from $0.7 billion for the same period. No small numbers, these!

 NFC has beaten other contactless payment technologies (like QR Codes, Bluetooth Low Energy, et al) to the punch.

In fact, NFC has beaten other contactless payment technologies (like QR Codes, Bluetooth Low Energy, et all) to the punch. Moreover, the entire payment ecosystem has jumped onto the NFC bandwagon – from original equipment manufacturers like Apple, Samsung and Google to banks to operators like Vodafone and Orange.

In short, NFC is (currently, at least) in the payments spotlight. Now, the next obvious question – where is Africa positioned in this significant development?

Not too far behind actually. With numerous success stories pertaining to mobile payments, adding NFC to the mix was the next obvious step.

To set the context, let’s look at a few facts. As per the GSMA’s The Mobile Economy-Africa 2016 report, the continent accounts for 52 per cent of the 271 live mobile money services launched in 93 countries and 64 per cent of all active mobile money accounts. Mobile money is, needless to say, big.

Here’s the catch though. A majority of such transactions are executed via a USSD code, which isn’t a short process, to say the least. The lesson here is simple: for any payments technology to catch on in Africa, it ought to ideally leverage the popularity of mobile money, while offering the customer a convenient and easy payment option.

Enter NFC. While it is true that NFC hasn’t exactly taken the African payments space by storm, it wouldn’t be fair to merely dismiss it, either.

To this end, telecom operators in the region are currently customizing the technology to suit the African customer. Take, for instance, Airtel Money, Tanzania’s Tap Tap NFC Merchant Payment service. The service was launched in Tanzania in 2015 and was Africa’s first closed-loop payments service. It is, essentially, a one-stop shop that leverages NFC technology to simplify mobile money merchant payments.

 And now, the term “merchant” is further narrowed down to small-and-medium players (local grocery sellers), on-the-go entities (taxi services), roadside vendors and home-delivery specialists who previously didn’t accept digital payments.

Tap Tap equips merchants with an affordable and portable NFC point-of-sale (POS), a mini-calculator sized GSM device, which is linked to a merchant’s Airtel money account. It also provides consumers with an NFC card linked to their Airtel Money account. The merchant selects a payment option and enters the amount in the NFC POS. Meanwhile, the customer simply taps his NFC card on the POS to pay.

Interestingly, Tap Tap is one of the most economical NFC POS and card combinations globally. The affordable, portable and easy-to-use POS primarily ensures that Tap Tap is used by various businesses including large retailers (supermarkets), small and medium sized merchants (local grocery sellers), home delivery businesses (pizza delivery) and on-the-go merchants (taxi drivers). In doing so, Tap Tap digitises micro-payments and brings them into the formal economy.

It also resolves various challenges such as long, drawn-out transaction times (from a minute to a mere ten seconds), previously unaffordable payment methods and arguably the most important issue, small change, as it offers a convenient payment method.

An increasing number of African vendors are using the Tap Tap NFC Merchant Payment service.

Now, let’s move on to open loop NFC payments, which facilitate transactions at all merchants supporting POS’ verified by MasterCard/Visa. An interesting example of this is the EcoCash Express Debit Card or the Tap-and-Go card. It is a MasterCard companion card, which can be used by a whopping 30 million merchants, both within Zimbabwe and globally.

Customers are required to merely tap the card against the MasterCard licensed POS machine, after which the payment is recognised. For transactions valued under $5 and up to a daily limit of $100, a cardholder no longer has to enter a PIN number on a POS terminal. And speaking of transaction values, customers can purchase goods for as little as 10 cents using the card and the Tap and Pay service. Another instance of the convenience I mentioned earlier.

In fact, the Airtel Money Tap Tap and EcoCash Express Debit Card aren’t one-off instances. Other mobile money providers operating in the region have thrown their hats into the ring as well.

Last but certainly not the least, let’s talk about who stands to benefit from using such facilities. In a nutshell, it is a win-win proposition for two factions – mobile money users (to make payments) and merchants (who accept the payments). And now, the term “merchant” is further narrowed down to small-and-medium players (local grocery sellers), on-the-go entities (taxi services), roadside vendors and home-delivery specialists who previously didn’t accept digital payments.

 Now, at this juncture, it becomes prudent to mention that NFC payments aren’t meant to simplify the lives of merchants alone. These payment instruments can in fact be deployed in multiple ways – at vending machines, to pay for transport services and at various events and amusement parks, the list goes on and on.

An interesting use-case in this context is Orange, which intends to deploy NFC-enabled stickers and POS devices for cash-in and cash-out in multiple African countries.

There is little doubt that NFC payments have piqued the interest of the African consumer. Before we get too optimistic however, we need to remember that a convenient payment method can get you only so far. Sooner or later, operators will have to throw in frills such as loyalty programmes and offers to keep the customer hooked. For now, though, let’s wait and watch.

December 8, 2016 0 comment
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Africa has, for all intents and purposes, emerged as a poster-boy of the global economic market. It has silenced its critics in several fields, including (but not restricted to) banking, education, agriculture, activism, etc.

The continent’s digital content space is no different. The segment has, over the years, grown by leaps and bounds, all while emphasising on the adage, “Content is King”. To illustrate-according to Statista, revenue from the digital media space in Africa and the Middle East is currently pegged at $882 million (2016). The largest segment within this market is video games, with market volume of $522 million. Equally sought after are online television, video streaming, gaming and social media. By 2019, as per Ovum, this order is likely to change to mobile based e-commerce and health and video applications.

So, what is driving this juggernaut? In a nutshell, a combination of rapid smartphone uptake and high demand for fast and accessible data are responsible. As is well known, the smartphone has made quite a splash in Africa. This is, as per industry reports, largely owing to a rapid decline in the average selling price of these devices. The bottomline is this-the availability of sub $100 smartphones implies that customers for whom devices such as desktop computers, laptops and tablets were financially out of bounds earlier now have the option of accessing data through smartphones. The result? Mass market adoption of smartphones, of course! Moving on to the larger picture, this is expected to have a three-fold impact on smartphone availability-to the tune of 540 million devices in 2020. Meanwhile, the number of mobile broadband connections in Sub-Saharan Africa is also set to increase from 24 per cent in 2015 to 57 per cent by 2020.

It stands to reason that the increase in smartphone demand will lead to a spike in the demand for fast and accessible data. This is overtly true, in Africa’s case, at least. According to industry reports, African countries have been developing high performance networks with at least 41 countries already using commercial 3G networks, and 23 countries having access to 4G networks. Going forward, by 2020, about three-quarters of all mobile connections will be on 3G or 4G, while Wi-Fi (another means to access the internet) is being offered free in a number of towns and cities.

Clearly, then, the explosion of digital content in Africa ought to be no surprise at all! For a clearer picture of what may be in store, here’s a quick laundry list of content that is likely to shape the industry, going forward:

Gaming

It will come as no surprise that the continent’s youth segment is largely responsible for pushing gaming. This, too, is driven by the availability of games that come with a “made in Africa” tag. Essentially, these offerings are both culturally relevant and available on a variety of devices. It doesn’t end there, though-going forward, as per Statista, mobile gaming in Africa and the Middle East has registered double digit growth, from $228.6 million in 2015, slated to jump to $261 million in 2016. Age-wise, the 25-34 age group form the largest fragment of the 23.8 million global mobile gaming community while the 45 years and over segment are the least. Overall, the segment, as per PriceWaterHouseCoopers, is worth at about $217 million.

Videos

As per industry reports, the video segment in Africa is expected to witness a 45 per cent compound annual growth rate (CAGR) between 2015 and 2020. Of this, video-on-demand is beginning to hog the spotlight, with close to 100 platforms entering this very lucrative space.

M-learning Applications

According to The 2012-2017 Africa Mobile Learning Market report released by Ambient Insight, the five-year CAGR for the M-learning market in Africa is 38.9 per cent. Revenues are expected to increase more than five-fold to reach $530.1 million by 2017, up from $102.4 million in 2012.

Existing Grey Areas

Now for the flip side. Despite the very rosy picture portrayed by the space, it does have a fair number of grey areas which are yet to be tackled in a satisfactory manner. I allude to the issues of the lack of locally relevant content, high total cost of ownership, low literacy rates and the quite substantial gender gap across the continent.

Overall, though, the argument still stands-Africa is in tune with technology. This isn’t a distant dream propagated by armchair analysts anymore, it is an affirmation. The rest of the world, are you listening?

November 15, 2016 0 comment
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Good governance is about people: of the people, by the people, for the people. With more people armed with mobile and internet, governance also needs to go digital. While digital governance is topping the agenda of many nations, most governments still have a myopic view of it putting only generic information online. If governments truly want to harness the benefit of digital governance they need to focus on how technology can be used to create citizen-centric experience.

A citizen-centric experience is about simplifying people to government interactions by making it digital. Consider applying for a passport. A truly digital process would’ve used digital tools such as the internet and the mobile for the entire process – right from filling required details, providing verification documents, paying service charges to tracking application status. With mobile and internet making deep in-roads into emerging economies, delivering such seamless digital experience is now imminently possible. However, there are few weak links, such as payments. With majority in emerging markets being unbanked and un-carded, digital payments remains a challenge.

Mobile money, which has rapidly risen as a preferred alternative payments medium in emerging economies is the answer. Governments across the world are leveraging the power of mobile money to digitize Person to Government (P2G) and Government to Person (G2P) payments, advancing digital governance agenda, as well as achieving sustainable development goals.

Figure 1 – Mobile Money enabling mGovernance

Person to Government payments (P2G)

Governments are using information communication technologies to improve the quality and efficiency of public sector service delivery. This includes usage of mobile money for P2G payments. According to the GSMA, in 2014, the ability to make payments to the government via mobile money was live in at least 13 markets across Africa, Asia and Latin America1.

Tax payments

Tax payments can be very taxing! Citizens have to fill up long forms, visit their local revenue authority or bank, and stand in long queues for hours on end to pay their taxes. But not anymore! Governments are now moving toward e-filling and mobile payments. Revenue authorities in countries like Kenya, Tanzania, Mauritius, Guyana, Rwanda, Cameroon, Uganda and Philippines enable individuals and businesses to use mobile money to pay income tax, corporate tax, property tax and VAT. With an end to end digital process in place tax payments get sorted in minutes.

In addition to delivering convenience to citizens, mobile based tax payment is helping governments to curb tax avoidance and boost the amount of tax collected. Tanzania and Mauritius revenue authorities have experienced increased in tax collection due to introduction of mobile based tax payments. Digital tax collectioneliminates the need for maintaining and storing physical documentsand allows government officials to keep and track records electronically.

Figure 2 – Mobile payment's impact on tax collection

Government of Kenya is planning to sell government bonds via mobile. The platform known as M-Akiba will be delivered through all the major mobile money services, offering bonds worth Ksh 5 billion (nearly US$47 million) to over 32 million citizens. Today, 98% of government bonds are purchased by institutional investors and only 2% by individual investors2. By using mobile retail channels, the government hopes to reach more individual investors increasing their participation in government bond issuance. Citizens will not only be able to purchase bond via mobile money, but also receive the principle amount and interest in their mobile money account on maturity of bonds.

Payments for government services

In emerging economies, the private sector is either too weak or there’s a monopoly in the market leading to citizen exploitation. To accelerate economic growth and benefit the entire population, governments have set up public sector entities and institutions to provide basic amenities like electricity, water and sanitation amongst others. Citizens pay a charge to access these services, which in most cases is through cash or cheques. However, paper-based payments come with considerable costs. Besides financial costs related to printing, security, postage and clearing & handling of cash, there’s non-financial costs to consider such as growth of shadow economy as well as various environmental and security risks. The burden of cash usage on society is as significant as 1.5% of the GDP3. Moreover, due to limited collection points, usually there are long queues for payments inconveniencing citizens and creating chaos.

These challenges can be overcome by using digital payments. In many emerging economies, mobile money is finding new use cases everyday: paying bills for utilities; buying tickets for public transportation; paying fees for schools and universities; paying for medical treatments and premiums for insurance. Mobile money brings cost benefits and savings for both citizens and government entities. Citizens save time and cost of travelling to payments points whereas public sector entities are able to reduce costs of paper invoicing besides curbing the menace of shadow transactions as well as reducing carbon footprint by eliminating paper receipts. Some successful examples of G2P payments are:

School fee payments in Côte d’Ivoire: The Ministry of National and Technical Education (MENET), in Côte d’Ivoire, made it mandatory for secondary school students to pay their school registration fees digitally via of one of four accredited mobile money providers. In 2014, 99% of the students paid school fees digitally – 94% of which were mobile money transactions and 6% of which were online payments – proving the success of the MENET’s P2G payment strategy. The digitization of school fee payments provided two major benefits. Firstly, itreduced leakage of funds caused by theft, bribery and security issues.Secondly, digital registration of secondary school students allowed MENET toconsolidate its student database and significantly increasing the quality of its information. The database is now more up-to-date, includes a comprehensive list of 1.5 million secondary school students, and has eliminated duplicate entries 4.

Figure 3 – Customer journey of school fees payment via mobile money

eServices portal in Ghana: The Government of Ghana, in December 2014, launched Ghana Electronic Payment Platform (GEPP) facilitating digital payments for government services on its eServices portal. Citizens could pay online or through their banks or mobile money services like Airtel Money for various government services like passports, business registration, tax administration and police search reports. In order to process the mobile money payment the user must choose the mobile money provider on the eservice portal and fill in the relevant details. The payment is deducted from citizens’ mobile money account and confirmation is sent via SMS.

Figure 4 – Electricity bill payments via mobile money in Cameroon

Government to Person payments (G2P)

Now, let us look at the other side of the story – government cash disbursements. Government gives financial aid to citizens in the form of cash, subsidies, distress payments and salaries. Governments globally are adopting mobile money to make cash disbursements frictionless.

Cash aid and subsidies

The government provides financial aid to the poor directly in the form of cash as well as indirectly through various cash subsidies on items like fuel, cooking gas, water and electricity. Most cash assistance schemes are hindered by long cash disbursement cycles, presence of middle men, large number of unbanked beneficiaries and inability to directly reach the beneficiary. With widespread mobile reach, mobile money is the quickest and the most cost-effective option to disburse cash to beneficiaries.

Cash aid and subsidies

In India, the Government of Madhya Pradesh, with partner Vodafone M-Pesa, disburses financial aid to mothers, who receive the payment directly on their mobile phone. The beneficiary is informed with an SMS mentioning the amount of the subsidy, the withdrawal code & procedure, facilitating cash-out at any Vodafone M-Pesa agent. Direct disbursement to the mothers has resulted in reduction of the money being collected by the fathers and therefore never reaching the intended beneficiary in some cases.

Mobile money based cash disbursement is most useful in emergencies such as earthquake and floods. For example in Pakistan in 2014, the government partnered with mobile operator Mobilink to disburse funds to flood victims. The use of Mobilink’s mobile money service Mobicash ensured that fund disbursement is swift and transparent. Beneficiaries were able to cash-out flood relief funds from designated campsites located across the flood hit areas. The team deployed at the locations used Bio-metric Verification System (BVS) to maintain transparency and ensure that the funds reached the intended person.

Not only government, but NGOs are also partnering with mobile operators for financial aid disbursement. Monetary aid is a better option compared to in-kind aid (such as food bags) as the affected families can use the money as per their choice and individual needs.

Figure 6 – NGOs disbursing cash aid via mobile moneyAirtelPayments

Salary payments

In many developing countries, the government and public sector are the largest employers. Paying salary and pension to serving as well as retired personnel in far flung areas can be very challenging. Irrespective of whether a person is banked or unbanked, permanent or contractual, mobile money provide a robust channel to transfer salaries directly. The solution offers convenience specifically to the old age pensioners, as they can cash-out their salary at nearest mobile money agent and do not need to travel to bank or government offices to fetch salary.

Mobile money salary payments eliminate the role of the middlemen reducing corruption. A good example is the Afghan National Police which uses Roshan’s M-Paisa to pay staff located in remote areas ensuring full and timely payment of salaries. The previous cash based salary system was marred by corruption with senior officials pocketing salary disbursements with such impunity that many junior policemen were not even aware of their real salary. With M-Paisa these policemen received their salary in full and on time leading to surprises all around. In fact, in some cases, the hike was as much as 30%, preventing defections of policemen to the Taliban who were paying higher salaries5. The use of M-Paisa helped to uncover ghost police officers, constituting 10% of the workforce, whose salaries were pocketed by others. In Democratic republic of Congo more than 66,000 civil servants, including the military, the police force, and pensioners receive payments via Airtel Money6.

The road ahead

There are several successful examples of G2P or P2G digital payment transactions, some of which I have mentioned above. However, another truth is that most governments have just focused on digitizing only one or two initiative. The true vision of digital governance can only be realized if there is a comprehensive strategy to digitize every use case scenario where the people and the government transact – whether it is a G2P or a P2G payment. The importance of user experience cannot be understated. Instead of providing a different user interface for every service, there should be a single portal/app for handling all government transactions. Whether it is paying electricity bill, purchasing train ticket, paying tax or receiving subsidy – every payment should be on a single portal, providing a seamless user experience, leading to higher adoption of digital transactions. Governments should also collaborate with all the digital payment players in the market without any bias to ensure that the digital payment initiative has a wider reach.

1 http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2015/10/2015_GSMA_Paying-school-fees-with-mobile-money-in-Cote-dIvoire.pdf

http://www.busiweek.com/index1.php?Ctp=2&pI=4248&pLv=3&srI=69&spI=221

http://www.mastercardadvisors.com/cashlessjourney/MasterCard_Advisors_Global_Journey_From_Cash_To_Cashless.pdf

4 http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2015/10/2015_GSMA_Paying-school-fees-with-mobile-money-in-Cote-dIvoire.pdf

5 http://foreignpolicy.com/2015/08/12/afghanistan-calling/

6http://africa.airtel.com/wps/wcm/connect/africarevamp/africa/home/media/press-releases/airtelmoney

About the author – Mohit Bhargava has over eight years of work experience in product marketing and research in the telecom domain. At Mahindra Comviva, he is serving as Manager in product marketing for the mobile financial solutions portfolio. His areas of function primarily include evangelizing Mahindra Comviva’s mobile financial products and their impact on transforming the financial landscape globally.

April 26, 2016 0 comment
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