This most recent trip to Kenya has been enlightening in a number of ways. A common topic keeps raising it’s head in my conversations with technology guys here though. The conversations revolving around ecommerce, web application development and mobile applications all need a critical component for them to be really viable; that is a web and mobile based banking system. It was such a compelling thought that I put together a presentation on it, that I might post at a later date.
Recently, one of the newspapers here reported that the average Kenyan keeps 2,500 shillings in the bank (approx $35.00). Many Kenyans don’t have a bank account at all. Even those with bank accounts have limited access to credit or debt tools.
So, the question is, “how does mass-usage of ecommerce take place when there is no means to pay?”
As the mobile telecoms and banks of East Africa try and develop platforms that allow people to tie into their particular system, they end up missing the big picture. It’s not about your particular bank or phone platform, it’s about people being able to trust and pay using an agnostic payment system. Meaning, the credit and payment system should interact with all banks and phones regardless of type.
Think about PayPal, it looks a lot like that. Though you can have it access your bank account, you don’t need to. Though you can use a Visa card to pay through and accept PayPal, you can also get credit through PayPal. You see, it’s many systems working either together or independently, depending on what you need from it.
The answer in Africa looks similar, but has some uniquely African twists. For example, fulfillment – actually being able to put more money into, or take money out of the system – would need to have the same types of partnerships that the telecoms have created with merchants around the country. This serves as a local conduit to any person’s account and it also works with what local people are accustomed to doing. There is no need for a bank building of any sort.
Imagine a web and mobile-based system that is not tied to any particular banking establishment.
The Long Tail
Micro-banking works on the same principle as companies like Google (Adwords advertising), Rhapsody (music) built their businesses upon. It’s called “the long tail” (now a book by the same name), and it means not worrying as much about those “big” spenders on the front of the distribution curve. Instead, focus on getting to everyone else that has “less than average” numbers, and making a small amount off of a much larger number. (see Wired example below)
What would it take for someone to put something like this together? PayPal started with an initial outlay of $3 million. Once it showed success it quickly ramped up to much larger investment numbers ($23 million). It would probably take a similar amount to develop something like this for Africa (probably less, but I haven’t crunched the numbers). Just start in one country, prove that it works, and then scale up to a larger region.
As I mentioned to someone while in Kenya last week, it’s not as if there isn’t a banking mogul’s son who isn’t looking to try his own thing, or even an investor that would turn away a chance at millions.
Another reader coined this idea as “AfriPay” – I agree, it’s a great working name (even though the domain is taken). Now, who are the takers? Speed counts here.