Power of the internet changing the game for businesses

We don’t accept cash, please! You will encounter such responses in developed countries where the use of credit and debit cards is a tradition. Try Delta Airline within the United States and your dollars might not be of help. The airline discourages the use of cash for in-flight purchases.

Even then many cards from Africa are not accepted in some developed countries, cutting the continent from the internet boom. The story is different in Kenya where many set-ups don’t accept cards.

Imagine a tour company that loses a booking because it cannot process a card transaction or sell online – or a merchant who loses a customer because the client does not have cash.

“This happens all the time in Kenya,” according to Mark Sibthorpe, chief executive of CashDingo, “I tried to book a safari some time back but backed off when the agent could not process my debit card.”

Sibthorpe has lots of company.

“When I travel to South Africa and other countries outside Africa I don’t carry cash, but I am forced to first pass at the ATM when I go to Kisumu,” said Mr Louis Otieno, Microsoft East and Southern Africa general manager, last week at an e-commerce roundtable organised by I&M Bank, which recently launched an e-payment service in Kenya.

Spurred by a new legislation that legitimises electronic transactions, and increased broadband, e-commerce is slowly taking shape in Kenya. In January last year, President Kibaki signed the Kenya Communications (Amendment) Act, 2008 into law.

Mr Michael Murungi, an ICT and Telecoms legal expert, says this was the boldest legislative intervention in the ICT industry.

The law promotes e-commerce by increasing confidence in electronic transactions, giving legal recognition to the use of electronic records and (digital) signatures.

Worldwide business on the internet is booming although Kenya, like other developing countries, is yet to reap from the $500 billion (Sh38 trillion) e-commerce wave.

The landing of the undersea fibre optic cables – SEACOM and the East African Marine Systems (TEAMS) – is slowly turning Kenya into a technology hub. Until recently, very little business was transacted online in Kenya.

The scenario was: You book or buy anything online in Kenya by only sending an enquiry and receive an email from the business. No money is transacted online to a Kenyan online Merchant account.

The sad truth is that for any e-commerce cycle to be complete, a payment transaction must take place. The lack of a local payment system meant that many businesses missed out on billions worth of business .

But now I&M Bank and global financial services provider Visa Card have linked up in an arrangement that allows consumers to buy goods from the internet in local currency using credit and debit cards. The e-payment, whose switch will be provided by iVeri Payment Technology, is the first in East Africa and expected to relieve recipients of online payments of the trouble of engaging offshore electronic gateways to receive money.

Analysts say e-commerce decreases the time and cost of shopping and expands the marketplace from local and regional markets to national and international markets with minimal capital outlay, equipment, space or staff.

Some of the portals enjoying the fruits of this infant sector are Totallytoto.com, Mystrawberrystore.com, pesapal.com, enrakenya.com, kalahari.co.ke, styleconnection.co.ke, Vuma.co.ke, and intokenya.com, among other startups and information portals.

Mamamikes.com is the oldest e-commerce setting mostly servicing Kenyans abroad, and with the new payment, can now bring local clients on board. Kenya Airways has been providing online ticketing and firms such as e-manamba.com offer tickets online for commuters.

Mr Domian Cook, the chief executive E-Tourism Africa, says with the new payment system, firms need to change the way they market themselves.

“The second divide is how tourism is marketed, in which social networks – Facebook, Twitter and YouTube, will drive the growth in e-tourism. There is a critical shift on how tourism business is going to grow,” Mr Cook says. The way we market tourism must change. We cannot avoid targeted online marketing,” he adds.

Nation Media Group also joined the online business fray with the launch of digital versions of its newspapers and n-soko.com, a property and information portal. Plans for Nakumatt and other retail chains to launch online shops will re-shape the retail business in the country for good.

Mr Antony Munguti, the business development director at Advantech Consulting, a local technology consultancy, says: “Demand for online payments is set to grow and the need to adopt online payment options to meet customer preferences and hence the need for a vigorous investment in e-commerce and e-payments by banks. This is a new revenue stream for banks as long as risks are mitigated.”

Mr Harris Macharia, the e-commerce manager at Serena Group of Hotels, says in the last few months the hotel chain has been using the I&M system, the number of online transactions have hugely gone up.

“We are seeing a situation where the amount coming from the online system is more than from travel agents. In future travel agents will have to diversify,” Mr Macharia said.

For Mr Arun Mathur, the chief executive of I&M Bank, the gateway opens opportunities for web developers who can help businesses traders establish online platforms to use the bank’s system.

Users of the system willopen a payment and settlement account with the bank or opt for transfer services. Online advertisers and marketers can now source for business abroad without worrying about the high charges for international money transfer services.

Tamarind Group Managing Director Gerson Musimi says although the company has been using internet to market its services, it could not offer complete e-commerce solutions due to the lack of a local electronic payment system.

Travel is the number one selling commodity online that generates more than $110 billion annually in sales globally, said Mr Cook. The value of e-commerce sales is expected to reach $711 billion by the end of this year, growing at a compounded annual growth rate of 19 per cent.

Mr Joel Amenya, co-founder of Online Duka Ltd says before the launch of I&M payment system e-commerce in Kenya was more about the information in it than actual trading.

“We have been providing information through our portals but buyers could not go the extra step of making payment due to lack of an online payment system,” Mr Amenya says.

The advent of mobile money transfer service – M-Pesa and Zap – have solved this payment challenge to a degree but shoppers had to move from the website environment and make the payment through their mobile phones, which made e-commerce be m-commerce instead.

Only 5 per cent of online purchases are paid for using credit or debit cards, which only two million Kenyans have access to. The remaining 5 per cent of the payments are made through intermediary payment sites such as Pesapal or Paypal.

“We have also been approached by other payment gateways that have been developed like pesapal, hela, jambopay which shall be also launching soon and thus make e-commerce a complete reality for Kenyans and the region,” Mr Amenya says.

To reap from the anticipated boom, Online Duka is in the final stages of developing a wholesome business platform (www.mzoori.com) for Kenya and the region at large (Uganda, Tanzania, Rwanda) that it plans to launch soon.

Mr Sidney Wachira the chief executive officer of Liberty Afrika, which owns Vuma, an online music store, has seen potential in e-commerce. A person buying music had to SMS a song code or get onto a WAP site (special webpage designed for access on mobile phones) to download music. The same would be deducted from an individual’s airtime/talktime.

This, he says, was expensive in terms of operator charges and costs and the net earnings were often 30 to 40 per cent. With I&M and online technology (use of Visa debit and credit cards), Mr Wachira says the net of costs and charges has now improved to over 70 per cent.

Analysts say the online payment system may not have an immediate effect on the budding e-commerce industry, citing the pricing structure that I&M Bank and Visa will offer to retailers. Although internet security poses a major concern, analysts argue that transactions are actually less dangerous in cyberspace than in the physical world.

Companies most directly threatened by e-commerce include travel agencies, entertainment ticketing, mail-order catalogues, and retail stores. Some of the world-renowned e-commerce success stories are Amazon.com and Virtual Vineyards. Yet Amazon does not publish books nor does Virtual Vineyards make wine – they are simply online distributors.

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