Cash, Mobiles and Africa
Digital Transformation in African Payments
Johan de Lange, cofounder of Transsmart Holdings Limited, is a Moja advisor. Transsmart has built an innovative and versatile type of payments infrastructure. Nope, no new wallet, no new cards, nothing new to add to the many payment options out there. Rather a new way of looking at payments, possibly even trying to make them disappear, make them a non-event, make them so seamless they become unnoticeable. This post was originally published as an article on Johan’s LinkedIn page, and is republished here with permission.
Cash is not what you read it to be, especially not in Africa. It’s not minimized or threatened, it’s not less popular or important, it’s not irrelevant or fading. Cash remains king with the consumer, and becomes emperor the further down the pyramid we move. It’s cheap to own and use (no fees), it’s easy to understand, and it’s recognized in every city, town and village across the entire African continent.
Trouble is that when it is moved beyond the consumer, the management costs start to escalate, the risks to own high, and the opportunity to use are limited. Even in Nigeria, famous for its bulk cash payments for high value goods, the central bank is forcing down a policy to use virtual means of payment as opposed to cash, with limited success. Cashless is therefore the only route to go, but the cost of transitioning for the bulk of people on the continent is a difficult calculation of cost versus benefit at this time. Although in eastern and southern Africa, widespread digital transformation is accelerating the transition from cash to cashless.
In the meantime we have put a mobile in almost every economically empowered individual’s hand, making an ideal channel through which to “virtualize” cash. Problem is we try to absorb this channel into our traditional consumer engagement strategies, and invoke fees and commissions that simply make no sense to the cash user and distracts them completely from its benefits.
Cash will remain king with the greater part of the consumer pyramid unless we find business models that enable a costless conversion from physical to digital cash, and a low or, better, no fee transaction model. It is not a model we should fear, as there is more than enough opportunity to capitalize on the converted cash garnered through such an offering.
Are there alternative models in use today? Is it really good enough that monopolized markets serve as our only truly successful stories for mobile money initiatives, markets where the consumer has no reasonable choice?