Trade via Internet yet to pick up despite cables

The landing of Kenya’s first fibre optic cable four years ago brought with it hope that local businesses would quickly find a new place on the Internet to sell their goods. Despite the initial excitement, the general consensus in the industry at the moment is that the prophesied boom in the sector is yet to be realised via e-commerce.

There have been a number of successful startups but the large part of the sector is plagued by cultural, logistical and technological challenges that are making growth in e-commerce sluggish.

In 2011, Kalahari, a South African online market place that had set up operations in Kenya, closed down citing lack of profitability.

“We are yet to reach our potential in e-commerce. The biggest problem we have right now is limited acceptability of e-commerce by the consumer,” said Consumer Insight research director Ndirangu wa Maina.

He said Kenyans do not yet fully trust the modes of payment popular with merchants on the web. Further, there is a fear that online retailing might simply be a way for conmen to dupe consumers into purchasing substandard goods.

Central Bank data indicates that there are over 10 million payment cards in circulation, a sharp rise from the 4.8 million cards reported in 2009. The number of cash payments at Points-of-Sale machines is also on the rise having jumped 74 per cent to Sh98.7 billion in the 11 months to November 2012.

However, according to Consumer Insight’s recently published research on the shopping habits of Kenyans, 95 per cent of shoppers still prefer to use cash when buying goods. Online transactions often require the use of electronic modes of payment such as credit and debit cards.

Historically, according to Mr Maina, Kenyans have associated cards with debt. They are averse to acquire any debt in a high interest environment. Additionally, there have been growing fears of card fraud which has only worked to put off more consumers.

“Kenyans generally don’t view e-commerce as being convenient. There are concerns of fraud; they also think that the goods may not be delivered on time and in good condition. Until buying from an online shop is viewed as being more convenient than simply rushing to the supermarket or kiosk, Kenyans will stay away,” said Mr Segeni Ng’ethe, founder of online marketplace, MamaMikes.

Over the last decade, Kenya has experienced exponential growth in mobile penetration. Over 98 per cent of Kenyans use their phones to access the Internet while 19.50 million have subscribed to mobile money services offered by telecoms. The number of mobile money deals totalled Sh1.39 trillion in the 11 months to November 2012.

Until recently, traders hoping to leverage on mobile money payments on their e-commerce platforms would have found it nearly impossible. The integration of mobile money services and commercial bank services as well as the rise of payment gateways such as PesaPal have partly resolved this dilemma.

Even with the rise of mobile money, experts say, increasing acceptance of credit and debit card payments among Kenyans is still crucial to growth of e-commerce.

“Concentrating on mobile money alone might also isolate the Kenyan consumer from global e-commerce services that do not recognise mobile money,” said I&M Bank’s e-commerce manager, Mr Robert Wakaba.

Monopolistic control

He said since the launch of e-commerce in 2010, the bank has seen more than 100 per cent growth in the number of those who have signed up. Many of these are service providers in the aviation and hospitality sectors who target tourists coming into Kenya.

Despite this, mobile money still remains a fragmented sector in Kenya with little inter-operability among companies and banks that offer the services.

“Payments on mobile money on simple phones are still under monopolistic control by mobile operators. The supplier of the money, the bank, and the suppliers of good and services do not have the means to access the masses using mobile phones,” said Mr Osca Ikinu, chief executive of mobile money transfer firm Tangaza.