Top five payment solution trends in Africa
Mobile and contactless payments are expected to hit $3.6 trillion globally this year, according to Juniper Research. Discover five payment solutions trends that are transforming the way consumers pay for goods and services across Africa.
Is it still a case of near but yet so far for near-field-communications (NFC) technology?
From Google to Apple, just about all the biggest names in the business have thrown their weight behind NFC payments. Yet while a growing number of banks and retailers are accepting NFC payments, usage hasn't quite hit the heady heights that it was supposed to.
NFC enables two devices equipped with NFC chips to exchange data when positioned closely to one another. In a nutshell, it allows you to pay for stuff via your smartphone – and the eventual hope is that consumers will opt for this over their credit and debit cards.
Standardisation of the technology has become a bit disjointed, but the main barrier to widespread adoption has been concerns regarding the security of NFC transactions - although a growing number of measures have been introduced to protect both merchants and consumers.
In Africa, Android Pay and Apple Pay will have to compete with local operators, which have a strong head start in the market. Last December, Econet Wireless launched ‘Ecocash Ta!' which uses NFC to allows users to make payments via their phone, which is then deducted from their EcoCash account.
SMS payments arrived in the right place at the right time: some nine years ago in Africa, culminating in the remarkable rise of M-Pesa.
SMS payments are typically used for micro payments, and are processed through reverse billing – usually by sending a premium rated text message to user's phone which is then debited from their phone bill.
In Europe and North America, SMS payments are only starting to enter the mainstream consciousness, mainly as a means of making small donations to charities.
But across Africa, where the number of mobile phones continues to outstrip the number of banks accounts, it is being used to pay everything from utilities bills to groceries at a checkout.
Today, a growing number of small or micro businesses in the region base their entire business model on SMS payments, targeting customers who can only pay through this means.
3. Prepaid cards
Roughly 80% of the sub-Saharan African population is unbanked - or so the story goes.
There are in fact many initiatives underway to introduce banking services to populations for the first time.
Prepaid cards are among them, with a growing number of offerings from retailers, mobile operators and retailers now flooding the market.
Similar to the mobile phone pay-as-you-go model, a set amount of money can be loaded onto a card – which is not linked to a bank account - and then be used to purchase goods. What's more is an increasing number of prepaid cards now come with contactless technology.
Prepaid cards, however, are more than just the last resort of the unbanked. They help to reduce the risk of debt and exposure to fraud.
There is even evidence to suggest that increased usage in card payments leads to economic growth. According to a Visa-commissioned Moody's Analytics report, countries with the largest increases in card usage experienced the biggest contributions to growth.
4. Mobile apps
App developers look likely to have a major say in the future of payment solutions.
Innovations such as social peer-to-peer apps and digital wallets are moulding the face of ecommerce and paving the way to an alternative payments ecosystem.
And everyone is getting in on the act. Last year, Facebook launched a peer-to-peer payments feature through Facebook Messenger which enables users to add their debit card and make instant payments to friends. Facebook, Instagram and Pininterest have also introduced click-to-buy features that make it possible for users to make purchases directly from their mobile apps in a few clicks.
Digital loyalty schemes are also emerging as a key way for companies to entice consumers to pay through their apps.
One major success story has been Starbucks, which introduced a Mobile Order & Pay programme to its app that enables customers to order and pay for beverages in advance and then pick them up without waiting in a queue. More than 21% of transactions of the company's transactions now come through its app.
5. Wearable devices
If you can pay for goods with your phone, why not go the whole hog and pay with your watch?
Apple already has Apple Pay on its watches, and Google is widely expected to follow suit by introducing Android Pay to its Android Wear range.
An interesting development that could propel wearable device payments is Fitbit's acquisition of wearable payments assets from financial technology company Coin. Fitbit, which develops mobile-enabled activity trackers, has led the way in the wearables market, and now appears to be looking towards payments to give its products more of a competitive edge.
There isn't currently a huge appetite for wearable devices across Africa, but by the time there is, payments could be a key feature.
Image source: Fitbit
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