This blog post is a direct response to Erik Hersman’s blog post: The problem with e-commerce and online payments in Africa.
Erik Hersman, a fellow African blogger, shared his thoughts about the need for an African e-payment system. He starts with a lamentation that is indeed true:
A lack of true online payment options is crippling African e-commerce, and South Africa is no exception. The inability to accept payments for products and services on equal footing with the rest of the world means that many viable business options are not available for merchants in Africa.
He goes on:
The few options there are for African e-commerce take a certain amount of business history, wealth or contortions to attain. […]
These are also true, but only to some extent. Erik Hersman obviously had the mainstream payment systems that evolve around the major credit/debit card brands in mind. But even with only MasterCard and Visa in mind, it is still possible for an African merchant to participate fully in the global e-commerce arena. How? Read on…
I see your point about African e-commerce a la credit/debit card payments. Google Checkout for merchants is currently restricted to the UK and USA, AmazonPayments is restricted to the USA, Paypal accounts (where they exist in Africa), can only send payment – not receive. Despite these facts, residents of Africa have other options!
2Checkout (2CO) is a solid option. It is US-based and a third-party payment gateway for accepting payment from all major international credit/debit cards. This is not a real merchant account, but works just fine. 2CO charges the buyer’s card directly. The seller only gets to see the buyers contact information, not his/her card details. At the end of each month, if the volume of trade has exceeded $300, the seller can request that the funds be wired to his/her local bank, for a small $10 fee. 2CO applies a 5.5% commission on each transaction, plus a $0.45 charge per transaction- but it’s worth it, if you asked me. What’s more? Buyers in selected countries can pay in their local currency, while USA customers have the option of paying via e-check or BillMeLater.
I know all these because I used 2CO for several months at Web4Africa. Yes – used. I had to pull off 2Checkout as a result of the incessant fraudulent credit card transactions coming from especially Nigeria, Russia and a few other countries. The fraudsters nearly sank me. That’s a story for another day.
UK-based Moneybookers is yet another excellent option. It is more like an online wallet; quite similar to Paypal without the tight restrictions Paypal has placed on Africa. Users can upload funds using credit or debit cards, or international bank wire. In fact, users in South Africa have the luxury of paying into a local bank account. I’m sure withdrawals to South African bank accounts would be fast as well since Moneybookers has a local bank account in South Africa. All merchants go through some verification process and are approved when Moneybookers Ltd is satisfied with the information provided. Again, I have used Moneybookers on Web4Africa for years without any major problem.
Yet another platform is Canadian-based Alertpay. Buy and sell. Withdraw your money via e-gold, cheque or to your USA or Canadian bank account. Residents of most African countries are welcome. There is some account holder verification here, which is fair enough since money is involved.
I would write extensively about the above options, at a later date.
Excellent alternatives to credit/debit card payment systems are digital gold currencies. Residents from almost every country in the world, can make and accept payment via e-gold, e-bullion, GoldMoney, etc. If you are thinking digital gold currencies are not a viable, read my recent blog post about why e-gold is popular in Africa’s most populous country – Nigeria.
One major downside though, with e-gold, Alertpay, Moneybookers (to some extent), e-bullion, GoldMoney, is that one can only receive payment from account holders. A buyer would have to sign-up with any of them, and then upload funds, to pay through these means.
I need to mention that nation-wide card payment platforms already exist in some African countries. An example is Interswitch in Nigeria. According to their website:
InterSwitch Limited is an electronic transaction switching and payment processing company with a business footprint that covers the provision of shared, integrated message broker solutions for financial transactions, e-commerce, telecoms value-added services and e-billing in the Nigerian environment. […]
[…]InterSwitch facilitates real-time electronic payments for automated customer transactions from different customer touch points and transaction channels such as Automated Teller Machines (ATMS), Electronic Funds Transfer at the Point of Sale (EFT-POS) terminals, Mobile Phones, Personal Digital Assistants (PDA), traditional wired/wireless Telephones, the Personal Computer and the Internet.
There are 23 banks on connected to the InterSwitch network and debit card holders from any of the banks, can withdraw cash from the ATMs of participating banks. Card holders can pay online to participating merchants. Another competing platform in Nigeria is Valucard (backed by Visa international), as well as eTranzact.
The Bank of Ghana (Ghana’s central bank) recently announced a similar national payment platform for Ghana, that is expected to go live come 2008 with all banks linked to it. Now, it would be nice for such national platforms to be linked in future so users in any country, can pay or receive money across the border, electronically.
I believe I have proved beyond reasonable doubt that residents of Africa can indeed participate in global e-commerce, even today! I fully understand the angle you are pushing – Erik Hersman – but I believe your model of an African e-commerce platform would only be feasible, if African countries had a tight economic union. A union with common financial regulations and common economic policies. The European Union is a classic example.
As of today, this is not the case. Not even the regional blocks (at least I am very sure about ECOWAS) are united economically though efforts are being made in this direction. I know of two examples of your e-commerce model that already exist in Europe and work well for Europeans: Moneybookers and ChronoPay.
Is African e-commerce platform possible? Yes it is. However, Africa countries need to unite for this to be possible. Every other thing shall follow. Finito.