“We believe that digital payments can be more effective in promoting economic growth, financial inclusion and formalising the economy by becoming a mechanism for trust. If you can connect an unknown buyer and an unknown seller to transact digitally, then you increase the number of potential customers for that seller and the number of things that the buyer can purchase,” he explained.
AzamPay’s value proposition in Africa is to first transform B2B transactions from cash to digital payments and it is spearheading this through its SARAFU platform, a B2B supply chain product. The platform only provides digital payment options for orders and deliveries.
In May, SARAFU processed over Tsh5-billion and the intention is to rope in more retailers onto the platform in the coming months. It is also planning a launch of AzamPesa, a mobile money wallet similar to M-Pesa or Tigo Pesa. “Our overall approach is to build a digital ecosystem around e-commerce. The vast majority of transactions in Sub-Saharan Africa are still in cash, the opportunity right now is to expand the digital pie,” Ahmad explained. The company’s strategy is to create value propositions for the merchant and the consumer that push more of those transactions to digital platforms.
Less cost, bigger pie
For mobile money companies to convert more transactions from cash to digital, they need to segment the market more effectively. “The P2P transaction fee business model does not address all the use cases,” said Ahmad. While virtual goods such as airtime, TV payments and electricity are heavily skewed towards digital payments, most consumers prefer to pay for point of sale goods in cash because it is more convenient and to avoid the transaction fees.
Mobile money companies need to strategise around how to lower fees while creating varied value propositions for different kinds of end-users. “If ten percent of transactions in Tanzania are digital, ninety percent are not. Our thinking is how do we start to expand the pie into that ninety per cent” he said.
Offering convenience at no cost was one value proposition that turned customers towards digital payments on the company’s SARAFU platform. The fact that retailers can now order all their goods at competitive prices during convenient hours with free same-day delivery was an advantage they could not pass up.
The Tsh5-billion transactions the company processed on its platform last month was closer to zero 18 months ago, Ahmad stated. “That has also given us the opportunities to now look at providing credit service and other types of financial services for the retailers. At the same time Sarafu also a benefits manufacturers as we can access data on where and how their products are selling,” he said.
Consumer data is where credit cards and other traditional payment rails still have an edge over mobile money products. Credit cards obviate the need for a merchant to determine the creditworthiness of a consumer.