Kenya is a world leader in mobile money transfer technology that has enabled financial services to reach remote villages. While even the old and illiterate in the most remote corners of the country transact money via mobile phones, the adoption of online buying remains low. For most Kenyans, hard cash is still king.
It is quite common to see people walk into a shopping mall, withdraw money at the ATM or mobile money transfer agent, then pay via cash at the supermarket till. Local online retail platforms also largely rely on cash-on-delivery.
Eran Feinstein, founder and CEO of 3G Direct Pay, attributes this to a myriad of problems including “traditional industries that move very slowly”, lack of knowledge among consumers and cultural barriers.
Feinstein also argues that ecommerce is behind the market by many years mostly because the financial sector is not providing all the necessary facilities, investing in technology and acquiring licencing needed to power online payments efficiently.
“The banking system here is moving quite slowly and they are not providing all the options they can provide. We need local banks that will provide all ecommerce solutions,” says Feinstein. “They need to invest in better technology… these PDQ (swipe devices) machines they are using belong to the 1990s and that is why sometimes you experience delays and low quality services.”
The Israeli entrepreneur moved to Kenya in 2006 after he was contracted by regional airline Airkenya as a consultant to help develop its ecommerce strategy and programme.
He eventually started 3G Direct Pay, a global ecommerce and online shopping services provider, after noticing various challenges in the Kenyan market. The firm enables real-time shopping and payments and accepts all major credit cards, mobile money and e-wallets. Its end-to-end solutions include online payments, customer care services and fraud prevention.
“I saw a huge gap in the travel industry between the airline and the customer. It was 2006 but where I came from we paid for everything using credit cards, especially online. Here there was nothing like that. The airlines said there was no such thing as accepting payments online in Africa and most of the consumers thought online payments to African companies were too risky.”
The firm’s African operations are headquartered in Kenya while its international operations are headquartered in Dublin, Ireland, which is a strategic location because of the need to form partnerships with international banks.
“One of the reasons we have a local headquarter here is because we want to be close to the market and develop relationships with local banks. We believe in this region. Most of our team is in Kenya. We are very active in the rest of the region… but [it is] the best place to set the headquarters.”
Feinstein decided to tap into the travel industry because it was the only market then that actively sought online payment services. However, the company has recently begun offering its services to other markets segments such as restaurants.
“When I came here I immediately realised that travel was the only market which was looking for such solutions. Even today, most companies are still not active in the ecommerce arena.”
“More opportunities than challenges”
However, Feinstein is optimistic that with the right ingredients, Kenya will leapfrog.
“There is a lack of understanding on how ecommerce works. But there are more opportunities than challenges,” he says. “It’s a huge market. The middle class is growing rapidly and it is unbelievable. You see how many young people go out to restaurants, movie theatres and shopping malls. This is an opportunity because all of them can also shop online. This is a huge opportunity.”