Internet use in sub-Saharan Africa is on the rise, supported by growing smartphone ownership and connections to multiple undersea communications cable systems. McKinsey estimates broadband uptake grew 34% per year between 2008 and 2015, and penetration is anticipated to reach 80% by 2020, up from 20% in 2015.
But despite this, e-commerce in the region remains in its infancy. According to Geraldine Mitchley, head of emerging products and innovation for Visa, out of all commercial transactions in most parts of sub-Saharan Africa, only 1-4% are made online.
Still, Visa has high hopes for the industry, and the launch of its Visa Checkout service in South Africa last year is one way it hopes to bring up these numbers. Mitchley says its function is to drive down the friction in e-commerce payments for the consumer.
“It is essentially a vault that stores your card payment credentials, your delivery address, your user name and password, and everything else which you typically need to fill in when you are shopping online. So you capture that once and it is stored by Visa in a very secure way,” she explains.
Visa Checkout does not only work for the company’s own cards. The system can also capture card details from other payment service providers such as MasterCard and American Express.
Addressing payment challenges
Backward infrastructure (such as a lack of paved roads and underdeveloped address systems), a distrust in digital payments, and the low number of people with bank accounts weigh heavily on the e-commerce industry in many African countries. It is unlikely a single company will be able to address every issue at once – but some players, including Visa, are instead targeting its most pertinent challenges.
One way online merchants are trying to combat low purchases and bypass the issue of distrust, is by offering cash-on-delivery settlements in conjunction with online payments. Mitchley says some retailers also allow consumers to “use the app to purchase the goods, but then use a face-to-face transaction via QR code to fulfill or complete the transaction”.
But Visa is taking another approach. One issue it identified is the laborious payment experience – and this is where Visa Checkout comes in. Mitchley describes it like this:
“So we have created kind of a one-click payment experience and as I mentioned it is really because we are addressing how we drive down friction and how we [assist] payments, specifically on a mobile or in-app environment.”
If the option to use Visa Checkout is available on an e-commerce website, consumers who have stored their card’s credentials can simply click one button to pay, without having to fill in their details.
Mitchley noted, however, that this only addresses one symptom of the greater problem. “Let’s face it, no one wants just a great payment experience, they want a great commerce experience. No one ever said ‘thank you that was a great payment experience’. We need to take away that pain point, it must go away… Today, most of our African shoppers are accessing the internet from their mobile phone… [But] today’s shopping experience on a small screen is fraught with friction.”
What Visa has found is a large number of purchases are abandoned during the payment stage of e-commerce transactions. Only 37% of transactions were being completed, and sometimes consumers had to fill in upwards of 25 fields in a form before they could conclude the purchase. However, after the inception of Visa Checkout in South Africa, Mitchley says the checkout conversion jumped to 78%.
In other countries on the continent, Visa intends to focus on mVisa, its mobile-phone application that enables cashless transactions, to boost e-commerce transaction numbers. Visa first wants to enable the typical cash customer to shop online using their phone – then roll out Visa Checkout to begin addressing the friction associated with that.
Mitchley believes mobile phones will lead e-commerce uptake in Africa, and ultimately leapfrog traditional payments.
“Mobile is the cause of all this disruption in our industries… I can do things on my phone today that I couldn’t do five years ago – but more importantly I can do things on my phone today that I couldn’t do six months ago. We are obviously thinking mobile and digital first, and Africa with 125 million connections today has one of the greatest adoptions of smartphones in the world.”