Africa desperate for an effective payments system

For Africa’s digital economy to work, it desperately needs an effective payments system that can handle micro payments and with transaction costs that are reasonable. Microsoft’s 4Afrika initiative has partnered with payments provider Skrill to offer an answer.

Russell Southwood spoke to Nilesh Pandya, SVP Emerging Markets, Skrill and Frank McCosker, General Manager, Affordable Access and Smart Financing Africa Initiatives.

Owned by private equity company CBC, Skrill has been operating since 2001 in the online payments space. It has partnered with Microsoft’s 4Afrika initiative to launch its e-commerce platform in Africa: the product has been designed in such a way that it will both meet African requirements and lower transaction costs.

The platform is designed to bring hundreds global internet brands to the African digital consumer for the first time: it has 180,000 merchants on its platform globally.

Through the platform, users will now be able to use their mobile wallets and digital currency to buy from Africa’s online merchants, including iROKOtv, Spinlet, and a range of social gaming providers – all at a fraction of the cost of a typical online transaction. It can also be used to send international remittances more cost effectively.

Skrill works from an online portal (branded by the operator) that allows the user to create a mobile wallet and to fill it. Access to the portal is free with the data charges being picked up by the operator.

Customers can make payments for transactions using a simple PIN number to validate the transaction. The merchant is charged a 20% fee by Skrill per transaction, part of which it pays part to the mobile operator.

Although this is still high (and higher than some credit card charges), it is nonetheless lower than the 50% mobile operators charge for USSD airtime billing. And on its international remittance transfers, it only charges 5% to the customer making the transfer.

Nilesh Pandaya, Skrill stresses the benefit to mobile operators of getting customers to use data for a wider range of everyday things to replace falling voice revenues.

It has already signed a partnership with MTN, been integrated into MPesa and has several other operator announcements in the pipeline. The MPesa service has not yet been marketed but has already done 5 million euros in authorized transfers.

From Microsoft’s point of view, the initiative is a mix of soft and hard purposes. The portal gives the user access to its One Drive product that has all the MSOffice software for free. Skrill is also integrated into its Skype offering and can be paid for using Skrill.

At the softer level, there is also a virtual library of useful materials and services including commodity prices, feed prices and weather.

Skrill may turn out to be an answer rather than the answer to Africa’s payments pain barrier but something that unlocks digital payments is as good a start as we’re going to get. More and better will follow as the mobile operators get the hang of content and services and people paying for them.

By Balancing Act

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Africa desperate for an effective payments system