Ease of payment must be solved to deepen intra-African trade – Goott
Ecommerce has been helping small businesses find a way to gain access to markets they would not have had access, and also driving entrepreneurship in a place like Nigeria for about a decade now. To expand the prospects of technology in driving trade across Africa, payments remaining important, and TREVOR GOOTT director, Unlimint Africa & India, in this interview with CALEB OJEWALE offers insights into smoothening payment and other challenges to business growth. Excerpts:
From your knowledge in this industry so far, how has technology been an enabler in helping small businesses reach markets they would not have had access to?
To begin with, technology has lowered the barriers to entry in almost every way for the entrepreneur or the SME to start and sustain a business. What technology is doing is that it’s removing a lot of hurdles and in the process, it’s allowing the entrepreneur to spend more time focusing on the business or product they wish to ultimately offer to their end users.
Now, you’ve got things like smartphone penetration, which is growing and is a distribution point; the smartphone itself can be used to access your social media platforms, and with the growth and penetration of smartphones in the country, the use of these social media platforms has multiplied.
When an entrepreneur starts a business, there are so many different areas that they have to think about but technology has rolled everything together, allowing the entrepreneur or the SME to focus a lot on the core business and then deliver it in the best way possible. Part of it is using social media platforms like Twitter, or Snapchat to communicate the business’ core offerings.
When you want to grow e-commerce within Africa for example, or even outside the continent, cross-border payments are quite important
It’s hard to be precise on the percentage, but it is often said that about 50%-70% of businesses in Nigeria die within the first five years, and some even die sooner. Do you think there is a way e-commerce can make a difference in the survival rate of businesses?
The first thing you have to ask yourself is why are these businesses failing in five short years. The question is; is it an e-commerce problem, or is it a business problem? Maybe the person delivered a product that had no uptake or consumer demand but let’s assume that’s not the case. There are a couple of other factors which I think could help the survival of these businesses.
Let’s talk about a company that has found a great product, customers want the product and there’s demand for the product. How do they, in essence, a) ensure the survivability of the business but b) most importantly, scale it? Because, remember, entrepreneurs don’t want to just survive, they want to grow and thrive. So, how can they do that which by default, leads to the growth of e-commerce as a category and as a contributor to the economy?
So, a couple of things to think about is that first of all, the trust aspect is quite a big problem in Africa with regards to dealing with e-commerce. Often, you go online and you see that there is a pair of shoes that you want to buy, and the web page looks wonderful, the pair of shoes is what you’ve been looking for, and the price is correct but, do you as the consumer trust that at the end of the day, ‘if I pay my money, will the shoes arrive, and if there’s a problem with them, am I going to get my money back? Is there a refund?’
There is a big trust factor here. So that’s one of the challenges or hurdles that need to be overcome generally for the survival of the e-commerce business in Africa, and in Nigeria in particular, because if you can overcome a survivable problem, then the business by default should grow.
Another aspect is business practice and business reporting and metrics and KPIs. So, the person is now running, growing, and scaling their business but are they able to get the data and management information needed to make good and correct business decisions going forward?
For instance, if the merchant takes all the waiting capital and buys a good quantity of shoes, and stores them in the warehouse. Suddenly, the sales take a slight dip, for seasonal reasons or whatever, but now there is no waiting capital left to drive the business, insurance costs have gone up because the merchant has got more stock to insure, the storage costs have gone up because he’s taking up more space, suddenly there’s a cash flow squeeze on the product that the merchant is keeping. His business might be under a survival threat there.
Even though he’s online and even though everything’s fine, he didn’t have the reporting data available to say to him – if you looked at this time last year, there was a seasonal dip. Therefore, if you are buying stock for this season, you shouldn’t buy 3x the amount, buy 2 or buy the same amount as last year. That’s another thing to think about.
Another very interesting problem for me, in particular, is the scalability of inter-African transactions (cross-border transactions). Now, it’s much easier to send something from let’s say Europe to Nigeria than it is to send from say Nigeria to Kenya. So, you have got all these problems, and that is an external problem that can affect the survivability of these businesses.
You’ve also got currency problems; because again, there’s no single currency across Africa. So, there are all these other costs and inhibiting factors that could lead to the inability of the business to grow and for a business to be successful and have a chance, it needs to grow. That’s another problem that could affect the survivability of the e-commerce business.
The final point is one of fraud – now, fraud is quite a big problem in Africa and it also goes hand in hand with the trust aspect. The trust aspect is – can I, as a customer trust this website to be able to make a payment and receive my goods? That’s the trust aspect. The fraud aspect is, can I as a merchant accept this payment from the customer, and send in the shoes? Suddenly there’s a problem, the funds are reversed and I have lost my stock. These are the kind of issues that need to be considered when dealing with the business and the survivability of the business.
Read also: The impact of e-commerce on supply chain
The African Continental Free Trade Area took off about a year and nine months ago and there is little we have heard of it since then. How do you think we can use e-commerce to widen trade across the continent, paying attention to the payment limitations that you have already identified?
The idea behind the African Continental Free Trade Agreement is very good. The problem is that; think of the 54 different countries in Africa as 54 different Europes. Now you’ll understand the scale of the problem. If you want to implement the spirit of the African Continental Free Trade Agreement, you need to get 54 different Europes, all talking to each other, all agreeing with each other, and all having a common stance on rules and procedures, and border controls and regulations.
Realistically, it’s not going to happen, but it’s not all bad news. I like this so much because it is a step in the right direction, but my strategy and my solution as to how I believe this might unfold is that, under the umbrella of the Free Trade Agreement, you’re going to have to first start with small cluster blocs.
You have these various trading blocs and amongst themselves, these trading blocs enter into one similar agreement; that is the Southern trading bloc can do a deal with the Eastern or Western trading blocs for example. This is where one starts to slowly unlock the problems and hurdles that exist between Africa and that’s where you start to bring down the barriers as you go.
If we go back to e-commerce, one of the issues is that if you want to make payment from Nigerian Naira to Ethiopian Birr, for example, the problem is that there is no currency pairing of the Naira to the Birr. This means you have to go from one currency to a dollar and a dollar to the second one. There are two transaction legs and costs there and it becomes expensive to make the payment.
If you want to remit the money across the border, that’s another problem altogether. That’s where the idea of a single currency is also another solution that could go some way toward solving the problem. There could be another solution where the element of the E-Naira can link up with let’s assume the E-Cedi in Ghana if it’s available, and the E-Shillings in Kenya if and when it becomes available.
There is an African expression that says “There’s only one way to eat an Elephant – one piece at a time” and it also applies here. The only way you can tackle Africa is to deal with it in this way – by taking small chunks, making it work, and slowly adding on. In that way to me, that’s the strategy to unlock the vast opportunities that exist on the continent.
You’ve said quite a bit about payments and making payments possible because people need to get paid after they render services or provide goods. As an organization, what solutions can you provide on your end that have been tested and can work in deepening trade in Africa?
The starting point is that we are a global payments business, so the problems and challenges we have in Africa, we deal with them on a global basis. Starting from the question of trust – how does the customer trust the website thinking “This is a company that’s selling a pair of shoes; can I go to the checkout page, input my card details, click pay, and I’m not going to lose my money and not get a pair of shoes?” So, from the very beginning, Unlimint is a business that only onboards verified merchants who have passed stringent KYC and AML checks.
In other words, we will not allow a company to use our payment facilities to collect funds from a customer or third party unless we have verified that the company is legitimate and that it does what it says it’s going to do. From that point of view, Unlimint as a payment provider is an assurance that the company is legitimate so the trust issue there is solved.
The second issue is concerning fraud. So, if you are a merchant and you’ve got a customer that wants to pay a lot of Naira for a pair of shoes; the person uses his card and the shoes are sent out, but the customer receives a chargeback, would the merchant lose his money? What will the customer do? In this case, Unlimint has got very sophisticated and robust anti-fraud tools at its disposal.
We use Central Bank-grade anti-fraud tools, we run it against this, we do lots of checks and this happens in split seconds. Therefore, we can straight away identify if a transaction is suspicious. If it has gone through our anti-fraud check, then what happens is that we go ahead and process that transaction. That gives our merchants the comfort that they can comfortably accept the payment from a customer knowing that the card is not compromised.
From the third point of view, it’s scalability – we talk about cross-border transactions, and to me, when you want to grow e-commerce within Africa for example, or even outside the continent, cross-border payments are quite important. At Unlimint, we offer more than 1,000 different payment methods. Let’s go back to the merchant in Nigeria who sells a pair of shoes and has a customer in the Philippines, for example.
Now, if that customer in the Philippines wants to buy a pair of shoes from Nigeria and have them sent across, that customer might prefer to pay for the shoes with Dragon Pay, which is a local Philippine payment method. We’ve got that availability, so our Nigerian merchant’s customers can pay with their preferred payment method wherever they are on the globe and our Nigerian merchant will receive a settlement in Naira. So, we’ve solved that problem from a scalability point of view, where possible.
In Africa, where certain challenges exist, we still solve them one country at a time, but seeing it from a global point of view, we can right now help the merchant from a scalability point of view, process cross-border transactions and get payments settled in their local currency. In addition, one of the biggest tools that we offer at Unlimint is our global merchant dashboard.
The metrics, the KPIs, the management information, and the reporting that’s available to our shoe seller in Nigeria are so good that they allow the entrepreneur to make informed decisions and I see it as an enabler for the merchant in allowing him to grow his business because payments are generally a one-dimensional solution; someone wants to pay and you record the card details, if it’s mobile money or a bank transfer, the payment transaction is executed and everything is behind you and you move on to the next sale for example.
Over time, however, you start to build data and the merchant can decide that aside from doing sales, he needs to see what’s going on in the business. Our merchant dashboard allows them to do this, they can start to analyze and begin making better business decisions about what they’re doing. We can give a breakdown by country, by currency, by days, and by popular times.