Inclusion is a laudable goal — bringing the 1.7 billion unbanked and underbanked people worldwide into the global digital marketplace is a nearly uncontested good. But it’s also a notoriously difficult problem to solve, particularly in places like sub-Saharan Africa where mobile penetration is high. However, the majority of consumers are still using feature phones, not the smartphones that connect to the internet and the app economy that could accelerate that access.
In those environments, Mastercard’s Executive Vice President of Digital Solutions Jorn Lambert told Karen Webster, the landscape has historically been very much defined in terms of the “haves and have not’s” across a range of things, including access to mobile technology. But, as of 2020, the trendlines are beginning to evolve differently.
“Today, if you look at the African population, the region is poised for quite a rapid change from feature phones to smartphones, giving people access to, frankly, information, experiences and services they’ve never had,” Lambert said, noting the price of the phones and data are falling, while 4G is supplanting 2G/3G in developing economies worldwide. Mobile technology and the host of capabilities it opens up for consumers and small- to medium-sized businesses (SMBs) throughout the region are on the precipice of being exacerbation of inequality to the first step to building “digital inclusion and ultimately through that financial inclusion.”
And to help push that over the tipping point, he noted, Mastercard and Samsung have partnered to build the last mile bridge necessary to power that transition into smartphone technology in Africa — its new Pay on Demand platform, and new solution allows consumers to access devices on a pay-as-you-go model.
The era of streaming services and sharing, Lambert told Webster, has changed the shape of what “ownership” means, which is less about owning a good and having or not having the funds to procure it — and more about owning access and being able to leverage that access well. Consumers in Africa, he noted, have lacked that access, because of technological lag pushed by a knowledge gap that kept devices out of the hands of consumers.
Mastercard hopes to be able to change the math, and thus accessibility of those devices and power all the innovations that can follow when hundreds of millions of consumers who’ve been sitting out the app economy suddenly get meaningful access to it.
“I think it’s not so much about the tech, the tech is there and we have ways to make it really work to make it accessible for everyone. It’s really about getting the right parts together, bringing this to consumers and the market, and unleashing the innovations that haven’t been able to happen and now can.”
Filing The Remaining Gap
The price of smartphones has declined in recent years, but not to the point that the average emerging middle-class consumer in Africa would find them affordable as a single purchase. Financing, however, would make mobile devices affordable, the problem is that those plans have not until now existed in Africa. A customer could either pay for the item outright, or live without the item. There was no model to wrap the cost of the phone into the monthly subscription cost or an on-demand/as-used plan.
Lambert told Webster that there was a simple reason for that.
“People [in Africa] have no credit score, so there is really no way for the mobile phone operators to evaluate risk,” Lambert explained, adding that it made it hard for mobile phone operators to extend credit to these folks.
What Pay on Demand does is step in and replace that large upfront payment for a phone with access to the phone subject to use for a minimum charge and then at a charge based on how much the customer uses it. Undergirding that to provide access, he noted, is a lending marketplace populated by Telcos, NGOs, alt lenders and even traditional banks, to provide those consumers with the host of options for financing those phones.
“A consumer will pay a small upfront fee with the assumption that the consumer will pay a certain amount per month as a user. And as they do that, they pay for their usage above that, which isn’t all that much.”
The technology, he noted, is similar to a one offered last year to consumers in Kenya interested in purchasing IoT enabled solar panels. A similar principle is at play here, though with an eye toward unlocking the fuller capabilities smartphone technology can open up.
The platform is secured by Samsung’s embedded Knox security platform to ensure the integrity and safety of consumer data and transactions. The platform also taps into the payment capability inherent in mobile technology — with an opportunity for consumers to obtain a virtual card that can be used to pay for their device and then as part of a digital wallet to make transactions possible everywhere Mastercard is accepted. African consumers, he noted, are used to mobile money, and in fact, have higher mobile wallet adoption rates in some places than consumers in developed markets. The addition of the Mastercard credential opens the number of digital nodes into which those consumers can plug into to transaction — making it more a compliment and extension of local wallets than a competitor.
But the most interesting part of the platform, he noted, is what they don’t know yet, but will see as it expands in Africa and beyond globally — the new things it enables for both consumers and SMBs in a region.
Changing Modes Of Ownership And Expanding Opportunities
Across the Africa continent, there are many micro-merchants successfully running a business, and leading successful entrepreneurial lives — who are nearly impossible for any financial institution to evaluate because they are cash-based, and thus invisible. An entrepreneur, if she works via the Pay on Demand platform, will get a smartphone, which in and of itself is a useful tool. But she will also create a data profile, a record of payments for a product she is purchasing — a way to emerge from the cash shadows and into the digital payments light that make her evaluable for financing for things that aren’t phones. In this case, opening one door can start opening many doors.