Africa has gained a reputation as a global leader in mobile innovation, and major Western companies are vying to establish a foothold in the ever-growing market. The most recent entrants are Google and Facebook, which are, through differing tactics, attempting to extend their influence among the continent’s mobile users, with potential implications for the mobile money ecosystem.
Move Over M-PESA, Google Launches Beba
Google’s latest attempt to break into the African mobile payments market has materialized through the launch of its “Beba” (Kiswahili for “to carry”) card, which enables commuters to pay for bus fare by tapping the card to an NFC-enabled mobile phone on Nairobi’s
Citi Hoppa or Metro busses. The cards, which are available from designated Beba agents, have the potential to save the Kenyan commuters a mountain of shillings as, left unregulated, bus conductors often hike up fares sporadically. By standardizing fares across all bus lines, sending immediate SMS receipts following each transaction, and providing the option to view all transactions online, the Beba service adds a layer of transparency to a notoriously chaotic industry.[1]
The most striking feature of the Beba card is the cost to consumers: next to nothing. Bus riders can get the card for free, and there are no associated transaction fees. The only costs are those levied upon users by mobile operators, which may charge users to transfer value from mobile money accounts to their Beba cards. In contrast, Kenya’s flagship mobile payment platform, M-Pesa, charges a fee (though nominal) for each transaction, a necessary cost for the platform to remain profitable.
Google’s unusual business model, which creates no immediate revenue, has ignited suspicion regarding the company’s motives in launching the card. Perhaps the company is attempting to repair its tarnished reputation in Kenya following the ill-fated incident with Mocality, in which Google representatives were accused of using the Kenyan-developed business database to promote a competing product.[2]
By subsidizing the creation and distribution of the Beba cards, and providing an affordable and valuable product to Kenyan consumers, Google could potentially mend their image among Kenyan consumers. Further, if the cards gain traction in Nairobi, it may help Google establish a foothold in the larger East African mobile payments market. Since users must have a valid Gmail account to use the card, Google will gain access to a cache of data on Kenyan consumers, which they can mine in the future to develop targeted products and services.
Facebook Goes Low-Tech to Go Viral
Facebook, via a recently launched Orange platform, is also attempting to bolster its popularity among African mobile users. The platform, which uses USSD technology on low-end mobile phones, expands access to mobile Facebook among all Orange subscribers, even the large percentage of African users without a smartphone.[3]
The service has already seen widespread success. In Egypt, where it was launched last year, over 350,000 customers registered in just one month, and Orange plans to extend the service throughout Africa in 2012.[4]
Like Google’s Beba service in Kenya, the service does not directly result in additional revenue for Facebook. Rather, the cost of accessing the service (either per session, daily, weekly or monthly) goes to Orange, with Facebook benefiting indirectly through a larger African customer base.[5]
As with Google, the wider user base will enable Facebook to collect data from a wider population, which it can then leverage for product development moving forward.
Perhaps the larger mobile audience will give Facebook a greater opportunity to monetize its mobile presence, which it has struggled with in its home market.[6] Namely, Facebook might look to develop services that will be profitable in the African context, such as an expanded “App Center”[7]
with apps catering to low-end, feature phones. With a larger global audience, Facebook may also gain additional revenue through Facebook Credits, which comprised the bulk of the company’s non-advertising revenue last year (Facebook takes 30 percent of revenue processed through credits).[8] Facebook payment applications like Mi-Pay also have the potential to gain traction among the African user base, offering customers the option to top-up prepaid accounts without leaving Facebook.[9]
Expanding Facebook applications and payment offerings within the African market could put the company in direct competition with “homegrown” competitors such as MXit, a South Africa-based social networking and m-commerce platform with over 10 million active users in South Africa (in contrast to only 4.6 million Facebook users).[10]
Digital Scramble for Africa?
These services are not the first foray into emerging markets for either Facebook or Google, both of which have launched (or are planning to launch) other initiatives catering to emerging markets.[11] However, the continued interest of Western companies in the African mobile market have raised red flags among industry watchers, many of whom worry that companies like Google are colonizing the African digital landscape by “buying up enormous amounts of virgin digital land at virtually no cost.”[12]
While increased accessibility to global platforms like Facebook and Google presents numerous advantages for African consumers, such as integration into the global online ecosystem, might these companies be using their powerful branding and low prices to crowd out locally-developed mobile products and services? Given that services such as the Beba card and USSD-based mobile Facebook are practical and affordable, what are the true costs to Africa’s flourishing mobile ecosystem? According to a recent Economist article: “[Google’s] decision to go slow on seeking profits from Africa by offering cheap deals has been attacked by African would-be rivals, which say that such tactics are only extending Google’s unfair advantage.”[13]
However, while these concerns are valid, they may be nulled by the inherent advantages of early entrants to the African mobile market like M-Pesa and MXit, or locally-relevant companies such as MPAYER and Kopo Kopo in Kenya. These companies may be able to maintain a competitive edge over Western companies, as they have already established themselves as the dominant players in their country or region, and thus have loyal consumer bases. However, the continued development of innovative and affordable products will be key to all players interested in capturing a significant share of the African consumer base, both in mobile payments and beyond.
