BigTechs, interoperability, e-commerce: challenges and opportunities of digital financial services

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Summary

P.4 GAFA and BATX extend their foothold in financial P.11 Mowali tackling payment interoperability in Africa services P.14 Mobile payment, the main growth lever for P.6 Traditional mobile money assets weakened by new e-commerce in Africa models P.16 Mobile money supporting the farming of the future P.9 The agent networks central to the differentiation strategies of digital financial service providers P.18 Conclusion

Challenges and opportunities of digital financial services Introduction

he digital financial services market has been shaken up in recent years by new players such as Apple, and Alibaba. The dazzling success of services like and WeChat Pay reflects consumer and corporate interest in new online payment servicesT and marketplaces that are seamlessly integrated into communication tools and services. Today, BigTechs such as these are focusing their expansion plans on Africa.

This new competition is putting pressure on the design and marketing models of telecommunications operators, the principal providers of digital financial services in Africa. Having long enjoyed almost exclusive competitive advantages, they must now rethink and evolve their positioning to reflect this new market reality.

One of these advantages is the distribution network. Although it is by no means unique, it is an asset that operators should treasure. What they need to do now is recreate value at 3 contact points across the network to turn them into growth levers.

Driven by strong consumer demand, interoperable digital financial services are fast becoming a reality. They are opening up new growth opportunities across the board, and will extend ecosystems and spur the creation of new services such as contactless and online payment.

E-commerce, which is really taking off in Africa, is also relying heavily on digital financial services to support its expansion. These needs open up real service development opportunities for all the sector players.

So, to stay ahead of the curve despite the profound changes brought about by new forms of competition like OTT (Over The Top) services, telecommunications operators must rethink their value proposition and their operating model.

At Sofrecom, our experts help you design and implement your strategies to achieve these objectives effectively. The purpose of this report is to analyse the digital financial services market and explore the new challenges that telecommunications operators must overcome to maintain their influence in the sector. Our aim is to continue supporting you and guiding your choices so that you achieve your business and human goals.

Rambert Namy Head of Business Consulting, Sofrecom

Challenges and opportunities of digital financial services GAFA and BATX extend their foothold in financial services Vincent Weber - Mobile financial services management consultant

GAFA1 and BATX2 have been engaged in the financial services sector for several years now. While their strategies and models vary according to the location, they have transformed the sector in under five years. These perpetually successful digital economy players now enjoy a prominent market position in financial services, and are continuing to innovate.

Developed countries: from mobile payment to of users’ everyday lives. As for , access corporate financing to payment transactions gives it more data to monetise. The discovery of its secret alliance In recent years, GAFA have really scaled up their with Mastercard in September 2018 shows just initiatives in the US and European financial 4 how important data is to the Google corporation. services markets. Initially, their approach consisted Thanks to this partnership, Google is able to match mainly in providing new digital payment solutions. online advertising with the offline purchasing In 2013, introduced Amazon Pay to habits of consumers. enable its customers to pay online. In the following

year, Apple launched Apple Pay, a payment app based on contactless NFC (Near-Field Emerging countries: specific approaches tailored Communication) technology. As for Google, in to local needs 2018 it brought all its payment services (including its mobile payment, electronic wallet and mobile But GAFA’s playing field is no longer limited to money services) under the umbrella of Google Pay. developed countries. They have taken several The approach is often the same, regardless of the initiatives that reflect their commitment to expand company: simplify the customer experience as far into emerging countries. In India, there are already as possible, and integrate payment into the digital more than 20 million Google Pay users. While it giants’ applications ecosystem. initially concentrated on payment services, Google is now seeking to monetise its user base and New financial services have subsequently been has already launched a range of instant loans in launched, very often through partnerships with partnership with four leading Indian banks – HDFC major banking operators. Thus, Amazon has been Bank, ICICI, Kotak Mahindra and Federal Bank. providing loans to merchants since 2014. The e-commerce giant also plans to partner with major Facebook is also asserting its position as an OTT players like JP Morgan in the United States to (Over The Top) financial services provider, by provide health insurance for employees. In March developing its first pilot projects and partnerships 2018, Apple announced the release of Apple Card with African banks. Marc Zuckerberg himself in the United States, backed by Goldman Sachs promoted the chatbot, a new virtual assistant and Mastercard. that helps customers use payment services and manage their banking directly from Facebook These companies have different strategic interests. Messenger. By natively integrating payment functions into its telephones, Apple is trying to enhance their value Thus, United Bank of Africa, Diamond Bank and proposition and make them an indispensable part Guaranty Trust Bank in Nigeria have taken the

1 Refers to America's Internet giants: Google, Apple, Facebook and Amazon. 2 Refers to China's Internet giants: , Alibaba, and .

Challenges and opportunities of digital financial services plunge: they have agreed to be “disintermediated” application that allows users to chat, transfer and allow Facebook to liaise directly with their money or buy goods online from independent customers on their behalf. retailers. It natively integrates with the M-Pesa payment platform and seems to draw extensively In this model, the bank provides the banking on the methods that have made WeChat Pay a service and Facebook distributes it. Facebook has success. made no secret of its ambitions to replicate this model in other African countries and Asia. Both GAFA and BATX have now made it very clear that they mean to expand their activities and sales in the financial services sector, especially China's Internet giants, BATX, are certainly not in developing countries. In Africa, mobile money lagging behind with their aggressive expansion operators will definitely have to update their models strategies in the financial services sector to withstand this new competition. In this race to diversify financial services, China's Internet giants are also performing extremely well. Their financial services platforms are a colossal commercial success in China, and are quickly becoming popular abroad. At the start of 2019, the Alipay service developed by e-commerce giant Alibaba had over one billion active users worldwide, and more than 40 million retailers in China accept Alipay payments via a QR (Quick Response) code. The same applies to WeChat Pay, which has capitalised on the user 5 base of its instant messaging system. Alipay's parent company, Ant Financial, is developing numerous international partnerships to increase acceptance of Alipay and enable Chinese tourists to use it in different countries. At the same time, since 2015, it has been buying or investing in various local players such as Paytm in India, Ascend Money in Thailand, Mynt in the Philippines and Telenor Microfinance Bank in Pakistan. In 2017, it even made an unsuccessful attempt to buy American company MoneyGram. This would have given it access to the African market. Some mobile money operators, like the pioneering M-Pesa, have anticipated the arrival of these players and are preparing to fight back. For example, Safaricom’s innovation laboratory has launched two initiatives based on different business models: • The first, Masoko, was launched in 2017 and is an e-commerce platform that connects Safaricom merchants and customers. The operator has copied the formula of global players like Amazon and Alipay. • The second, Bonga, is an instant messaging

Challenges and opportunities of digital financial services Traditional mobile money assets weakened by new models Sylvain Morlière - Senior mobile financial services management consultant, Sofrecom

Telecommunications operators have built the success of mobile money on a set of differentiating assets. For a long time, they enjoyed exclusive access to these resources. Other players could neither replicate nor buy them, which effectively shut them out of the mobile money market or considerably reduced their chances of success. Such assets included agent networks and USSD interfaces, which were robust barriers to entry.

Innovative technologies, changes in market conditions and new regulations have significantly What is USSD? weakened these barriers. USSD (Unstructured Supplementary Mobile internet usage is generally low in the prime Service Data) is a mobile 6 telecommunications protocol for sending mobile money markets. In most markets, the and receiving data. majority of mobile money transactions are still made via USSD (see insert). It works with even the simplest of mobile phones (99% of telephones are Historically, mobile telephone operators have compatible). All users have to do is enter enjoyed monopolistic access to USSD. They can a code (such as #000#) to access a list of grant user rights to third parties while retaining full textual options and therefore services. control and, in general, setting access prices. Because operators have exclusive access to USSD, they have always been on the Furthermore, any company that wishes to front line of developing mobile money provide its customers with a USSD application usage. must establish partnerships with every telecommunications operator so that it can be used on any mobile network.

This monopoly is now threatened. In Kenya, Equity Will USSD soon be replaced by mobile Bank was licensed as an MVNO (Mobile Virtual applications? Network Operator) in 2014. Thanks to this MVNO, The main threat to USSD usage is the widespread which operates under the name Equitel, the bank adoption of mobile internet services and has its own USSD channel. . The GSMA predicts that smartphones will account for two out of three mobile connections In April 2018, Senegal's telecommunications in Sub-Saharan Africa by 2025, and that mobile and postal regulator (l’Autorité de Régulation des broadband will account for nearly 90% of these 1 Télécommunications et des Postes) liberalised connections . access to USSD codes, thus providing value-added This would probably lead to users abandoning service providers with agnostic (multi-operator) USSD in favour of mobile applications that offer access to the USSD channel. a better user experience and a wider range of

1 GSMA, The Mobile Economy Sub-Saharan Africa 2018.

Challenges and opportunities of digital financial services The main assets of mobile money operators

Digital Agent Customer channels network data /USSD

Differentiating IT IT nature Customer platform functional base core modules

Know-how Licence (or /Marketing Reach partner) budget

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functionalities. In China, for example, where mobile Now, although agent networks have generally been internet usage has spread fast, the majority of considered hard to replicate, some players besides payments are made via mobile applications. telecommunications operators have succeeded in setting them up. Thus, banks in several countries Thanks to QR (Quick Response) code technology, have created their own networks of independent these have increased merchant payment usage. In agents. Sub-Saharan Africa, some innovative players are now offering mobile financial services only. An example is Under this model, which is known as agent banking, the mobile payment service, Wallet, in Nigeria. Cooperative Bank deployed over 11,000 agents in Kenya in early 2017. At the same time, Equity

Bank said it deployed more than 25,000. In West Agent banking: when banks imitate the mobile Africa, Société Générale plans to hire 8,000 agents money distribution model by 2020 to support the development of its mobile The agent network is a key asset in the mobile money service Yup. money operating model. Some analysts would even argue that it is the main “brick” in the model, as it plays a critical role in deposit and withdrawal Mobile internet usage, a gateway for new players transactions. Telecommunications operators have drawn on In addition, it gives mobile money services a their large customer bases to develop the usage decisive competitive advantage: the physical and take-up of mobile money services. They have proximity of the agents, their flexible hours and the recruited most of their users from their mobile short waiting time at service points make them far customer base, taking advantage of huge “fleet more attractive than traditional financial services. effects”.Their direct access to these customer bases

Challenges and opportunities of digital financial services has given them a considerable advantage over other rise in internet usage has enabled other players to financial service providers. collect large volumes of such data.

Nonetheless, other digital players now have platforms will probably know exactly substantial user bases in countries where mobile how to make the most of the opportunity. But other money is flourishing. For example, Facebook has players, such as Tala in Kenya, will also be able over 4 million users in Ivory Coast, over 5 million to access large amounts of data stored in users’ users in Ghana and nearly 20 million users in mobile phones or saved from their browsing history. Nigeria1. This may be a major source of inspiration for At the same time, customer data is no longer the mobile money operators as they work on updating sole preserve of operators. In the past, they had their models, as well as an opportunity to develop exclusive access to large user data repositories.The strategic partnerships.

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1 We are social, Digital in 2018 in West Africa.

Challenges and opportunities of digital financial services The agent networks central to the differentiation strategies of digital financial service providers Julien Guyotte - Senior mobile financial services consultant, Sofrecom

According to the GSMA, there were nearly three million mobile money agents operating worldwide at the end of 2017. These agents play a key role in the operation of mobile payment services. Formerly the preserve of telecommunications operators, independent agent networks are now also being set up by their competitors. Given the growing competition in the digital financial services market, differentiation will come in two forms: value creation by the distribution network and value creation for the agents themselves.

Agents collect deposits and convert notes and coins into electronic money, and are therefore Agent networks no longer the sole preserve the primary supply channel for mobile money of telecommunications operators ecosystems. They are also the main physical points 9 of contact for users: as such, they play a crucial Some “over-the-counter” (OTC) money transfer operators have set up their own role in customer recruitment, support and advice. independent agent networks. Furthermore, agents are a key component of In Senegal, Wari has dominated the do- the value proposition of mobile money. The local mestic money transfer market for several service they provide delivers a powerful competitive years. The simplicity of Wari's offering, its advantage over traditional financial institutions: no affordable prices and - above all - its incre- expensive and time-consuming journeys for users, dibly extensive sales network hindered the extended hours of business, and considerably development of local challengers for a long shorter waiting times than in banks. time. Not to be outdone, banks are adop- ting banking agent models: Equity Bank

in Kenya and the Société Générale group How can the service quality of agent networks be in French-speaking Africa are deploying improved? or planning to deploy independent agent The quality of a mobile money agent network relies networks on a large scale. on a now familiar set of fundamental factors: extensive territorial coverage, a comprehensive network adapted to the potential of individual optimise agent recruitment and hence prioritise areas, availability of e-money and cash, initial high-potential areas. Agents will be therefore be and further training for agents, implementation placed in money transfer corridors, based on of network management tools, and an attractive criteria related to the specific socio-economic commission scheme. characteristics of the country concerned (rural/ New management tools have been developed urban areas, primary/secondary sector, etc.). The to boost the performance of agent networks and, most advanced management tools can also be ultimately, increase the value created for users. used to support sales operations and generate These tools are based on extensive analytical action plans. Based on the analysis of performance capabilities. They can be used, for example, to indicators and directly “pushed” on sales teams,

Challenges and opportunities of digital financial services they explain in detail the actions to take on the in major discussions on this issue, and companies ground. like Airtel Uganda1 have set up mobile teams to replenish the network. Operators are also exploring The management of cash and e-money reserves is a major area for improvement. Sofrecom has so-called “multi-CU” (currency unit) models, which observed that depositing and withdrawing large may be offered to agents who sell both mobile sums of money is still a challenge in several money services and prepaid telephone credit. Under countries, especially in rural areas. Some tools can these models, agents no longer have to “stock” both predict demand or anticipate stock shortages by e-money and telephone credit: they have a single analysing usage trends and external data. Mobile e-money account, and the e-money is instantly money operators who can guarantee that their converted to telephone credit when prepaid airtime agents have a ready supply of cash or e-money will is sold. have a decisive competitive advantage. Besides straightforward loyalty programmes, a high Agent training and information are still key to value-added service package will also be needed network performance and user satisfaction, to ensure agent loyalty. The provision of credit on given that agents are on the front line of user contact. The majority of mobile money operators preferential terms will no doubt be a powerful tool. are only just starting to explore the new forms of In fact, working capital requirements are often a interaction enabled by technology in this area. hindrance to agents (who tend to run a parallel Interactive media especially can provide more business). Mobile money operators are able to grant effective training. Therefore, some operators are credit based on a precisely documented level of experimenting with video tutorials, social media, risk, which is calculated using agent activity data. chatbots and voicebots (interactive vocal servers) to 10 Examples of such arrangements include the loans inform, train and assess their agents. offered to business owners by Kopo Kopo in East Agent recruitment and retention strategy is likely to Africa, Equity Bank in Kenya, and Airtel Money - in play an increasingly important role given the growing partnership with Jumo - in Uganda. Coupled with number of digital financial services being launched. other value-added services (inventory, order, invoice The Helix Institute estimates that, in 2015, around management), these solutions will be effective two thirds of digital financial services agents in retention levers, encouraging agents to conduct Tanzania, Uganda and Senegal were working with their financial transactions through a single service. more than one provider (the median value was three). Compensation is still a key factor in agent motivation. In addition to an attractive commission To attract agents and secure their loyalty, digital scheme, digital financial service providers may financial services providers must develop a explore opportunities to generate additional convincing value proposition. This will necessarily earnings for their agents. Thus, the skills and require effective support for agents. The replenishment of cash and e-money reserves, for tools used in the distribution of mobile money example, is one of their main concerns (insufficient services could be extensively monetised: customer reserves may result in unnecessary travel, the registration on behalf of non-competitor third-party temporary closure of sales outlets and therefore players, parcel collection points for distance selling a loss of earnings). Some providers have engaged services, etc.

1 Distribution 2.0: The future of mobile money agent distribution networks, GSMA 2018.

Challenges and opportunities of digital financial services Mowali tackling payment interoperability in Africa

Interview with Juan Dominguez, Head of financial services strategy and development for the Middle East and Africa, Orange

In late 2018, Orange and MTN Group announced a joint venture, Mowali, to enable payment interoperability across Africa. Let's look back at this sea change in the world of digital financial services.

What is the reasoning behind the Mowali operators. Our platform and processes are project? standardised to facilitate integration and provide a seamless service. We have been talking about interoperability for a long time now. The whole sector agreed on its utility Mowali is not in competition with mobile money very early on. In fact, a few years ago, the GSMA set operators. Like Visa/Mastercard which are not in up an interoperability working group involving the competition with banks, Mowali “only” facilitates main mobile money service operators, including financial flows between end users (customers, MTN Group and Orange. The operators agreed to merchants, etc.), irrespective of the service work together to accelerate the implementation of 11 interoperable mobile money services across Africa provider, the country of origin or the country of and the Middle East. destination. Thanks to, or because of the exponential growth The operators continue to be responsible for their in mobile money services and users in the past positioning and differentiation strategies: it is up to few years, the limitations in terms of usage have them to create service offerings, a great customer become more apparent. The current “closed loop” experience and attractive prices to capture new model no longer meets the demands of users, who users and increase usage. want to send money to more people and pay for a wider variety of services through their own mobile network or another. Numerous other interoperability initiatives are So, MTN Group and Orange decided to take being put in place locally or regionally, often proactive action, using the GSMA's work as a at the instigation of governments. Is Mowali springboard to launch an innovative new service relevant in this context? as quickly as possible. There was no longer any Mowali is very relevant. Ultimately, the needs of doubt that it was necessary, not only to secure the sector's future but also to satisfy consumer both end users and companies are very similar expectations. from one country to another. So, we firmly believe that a global solution is the most appropriate for Africa. How is Mowali positioned in relation to existing mobile money offers? Developing an interoperability platform is a complex and costly process. Sharing and therefore Mowali was designed to provide technical optimising investments and operating costs will intermediation for mobile money operators. We minimise the unit costs charged to users. That is aim to be an “enabler”, in other words to help them the key to profitability. It will be harder for regional deliver new services to their users. or local initiatives to handle the same transaction Our services are unconditionally open to all volumes, which will automatically affect unit costs.

Challenges and opportunities of digital financial services How will operators benefit from interoperability? Opening a new bilateral transfer corridor is generally very time consuming. With Mowali, all Although mobile money services have existed for several years, most operators still give priority operators integrated with the platform will be able to acquiring new customers and increasing and to instantly offer transfers to any other connected diversifying usage. operator. An attractive service offering is still crucial to A similar situation applies to merchant payments. recruit new users and increase usage. However, the complexity of bilateral integration is hindering In closed-loop systems, merchants must not only the launch of new services, as mobile money sign specific agreements, they must also establish service providers must connect to the information processes with each mobile money operator.This system of each individual partner with whom is all going to change now: once connected to they want to launch new services. Furthermore, Mowali, merchants will be able to accept payments customised processes must be created for every partner. from any connected operator. This will obviously generate more business opportunities in both the With Mowali, we hope to overcome these national and international markets. obstacles by standardising procedures and enabling operators to access numerous partners Financial flows may also be arranged between via a single connection. companies and individuals, governments and

citizens or companies, or even between companies. 12 What are the main use cases? The possibilities are endless: payment of wages, supplier invoices, social security benefits, taxes, There are two use cases where demand for interoperability is the highest: person-to-person etc. The ball is now in the operators’ court. It is up cash transfers and merchant payments. to them to devise the services of tomorrow.

Challenges and opportunities of digital financial services Will interoperability put mobile money operators of the market increase tenfold, everyone will be a in a stronger position? winner! Interoperability will definitely put operators in a stronger position, as they will be able to provide their customers with new services. It will also ease So, how do operators’ strategies need to change? interaction with banks, large retailers, fintechs, Today, many operators offer only “traditional” etc. In this respect, the advent of interoperability mobile money services: cash-in, cash-out, peer-to- will force the digital financial services market to reorganise itself. peer transfers, etc. What differentiates them most from each other is the size of their agent network By connecting with mobile money operators, banks and customer base. will be able to address new market segments for example. Fintechs, which sometimes struggle to Interoperability is going to “erase” these find trade opportunites, will have scores of new advantages to some extent. So, it is vital that partnership possibilities. operators develop innovative new services and an Above all, the market is poised to grow massively increasingly fluid digital experience. These new thanks to new usages. Of course, the competitive elements should underpin their positioning and pressure can only grow, but if the size and value their added value going forward.

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Challenges and opportunities of digital financial services Mobile payment, the main growth lever for e-commerce in Africa

Interview with Sami Louali, EVP strategy, investor relations and financial services, Jumia

Established in 2012 in Lagos (Nigeria), Jumia operates in 14 countries. This leader in the e-commerce space, which the Financial Times has described as Africa's “first unicorn”, has had to deal with the same challenges as its western counterparts in terms of procurement, logistics, etc. However, it has also had to contend with issues specific to Africa, such as the payment methods commonly used by consumers.

14 What is Jumia’s business safe. We therefore invested in a international cards, local cards, model? tool that allows our customers instant wire transfers, over-the- to pay cash on delivery. After counter cash payments, etc. We When we first started out, Jumia a period of adjustment, we have therefore set up a payment positioned itself as a conventional managed to organise flows solution called “JumiaPay”, in e-commerce company: we efficiently by building our own which all payment types are bought products and resold logistics marketplace, which managed within a single account them. In 2014, we decided to enables us to deliver either to facilitate the buying process. switch to a marketplace model. directly or through a partner. Today, nearly 90% of our sales are made by our partners. Our What progress is needed to marketplace sells everything from Don't cash payments have their facilitate online payment? fashion to household appliances, limits? From a technological perspective, hi-tech products and food. It also Accepting cash payments helped more must be done to achieve provides meal delivery and hotel us get our business off the uniformity. Most payment and flight reservation services. ground. But there are indeed a lot operators provide APIs for Lastly, we have an app called of downsides: the delivery person connecting to their systems; “Jumia One”, which customers must carry change, which raises however, these APIs vary from can use, for example, to pay their security issues, and the financial one country to another. So, a utility bills, recharge their phones flows can be difficult to reconcile. substantial development and or (soon) print out cinema tickets. We have also noticed that when integration effort is needed. The customers have the option to pay user experience also needs to

on delivery, they tend to change be improved, as it is not really What arrangements have you their minds more easily and send suited to online shopping (if they made regarding payment? things back. So, prepayment has are using their smartphone, There was very little mobile become a priority. Unfortunately, consumers have to switch money in Africa when we first the payments market is very back and forth between the started out in 2012, and bank fragmented in Africa. For e-commerce app, the mobile cards were neither popular nor example, in Nigeria there are money app, their texts, etc.).

Challenges and opportunities of digital financial services Some countries are more Credit can also take the do not necessarily have access advanced than others. In Kenya, form of advance payments to to the Internet. They place for example, M-Pesa provides merchants. Is that something orders on the site on behalf of a very simple payment system Jumia might consider? their friends and family, and for e-commerce. As a result, the Of course. We have been offering receive a commission. The order conversion rate is higher. this type of financing for over a “Jumia Force” is also tasked We also use aggregators to year, through an SME lending with training potential sellers to handle payment methods that marketplace accessible only to distribute their products outside are not directly integrated in our sellers. How does it work? We their usual geographic area. JumiaPay. In this area, service collect information on our sellers levels, incident resolution times (sales volumes, service quality and the reconciliation of financial assessments, delivery lead times, What proportion of your flows need to be improved. It etc.), and we share it with lenders business is generated by B2B is worth noting though that the (banks, microcredit agencies sales? market is very young – many of and other financial institutions), Right now, Jumia is a B2C the stakeholders are only two or which can grant loans almost platform. We are in discussions three years old, so the sector will instantaneously. We have already with several players in the become more mature. raised over €3 million in credit. At fertiliser industry, for example, first, the initiative was managed to make it much easier and completely offline. Now, the Mobile money services may cheaper for farmers to order entire process has been digitised: also be expanded to include their fertilisers, and to deliver from onboarding through the savings and loan facilities. greater price transparency. application process to the loan How could this impact your The next long-term step is to offer. The next step is to digitise 15 develop B2B sales, as is the business? payment by setting up automatic case in Europe. Our presence in Consumer credit is not very monthly repayments based on 14 countries is a very valuable common in most of our markets. the sales volumes we finance. We asset in this respect! As it becomes more widespread, therefore create a virtuous circle, we will be able to offer new enabling our sellers to finance products and increase our their needs, invest in more business volume. Mercado Libre, inventory, stock new types of for example, which is a Latin products, and prepare for major American equivalent of Jumia, commercial events like Christmas generates more than 60% of its and Black Friday. sales volume from consumer credit. At Jumia right now, the figure is 0%! So, you can imagine Your business's growth how impatient we are for similar potential also depends on your credit solutions to be developed ability to reach sellers and here! However, they must be buyers in rural areas. What is adapted for e-commerce. A your strategy? handful of options already Alibaba has handled this issue exist in various countries, but perfectly well in China by the administrative processes supporting buyers and sellers to are very long. It is important set up an account and manage to be able to handle electronic their online store, inventory, signatures and make instant etc. As for Jumia, it has created credit decisions. Credit can a “Jumia Force”: a network also take the form of advance of more than 50,000 agents payments to merchants. Is affiliated with Jumia, who sell that something Jumia might Jumia products to their relatives, consider? friends and acquaintances, who

Challenges and opportunities of digital financial services Mobile money supporting the farming of the future Antoine Navarro – Mobile financial Ronan Paillon – Mobile financial services management consultant, Sofrecom services consultant, Sofrecom

Agriculture is a dominant industry in developing countries, yet farmers often struggle to earn a living income: in 2015, 85% of people below the poverty line lived in rural areas. Low productivity, climate hazards and difficult access to high value-added markets are the main barriers to development. By enabling access to appropriate financial and non- financial services, mobile technology plays a key role in rural and agricultural development. Let’s imagine the daily life of tomorrow's connected farmer: more productive, financially included, perfectly integrated in the value chain and respectful of the environment.

16 Mali, 2030. Badra is a sorghum farmer in the Sikasso region in southeast Mali. He has been a member of an agricultural cooperative for several years. Thanks to digital tools and tailored partnerships, he has been able to consolidate his business, stabilise his output and earnings, and embark on new projects without having to worry.

Using the loT and mobile tools to produce a If the humidity rate is too low, Badra gets water better harvest from the cooperative shared tanks. The smart sensors on the tank tell him exactly how much At the start of the crop year, the GPS tracker in water he can take, based on the size of his farm the cooperative tractor tells Badra that one of his and the fill rate. Thus, all the members of the neighbours has just dropped the tractor off in the cooperative are treated equally. shared hangar. He immediately books the tractor on his mobile, and the hiring fee is debited from To help himself to water, he scans the tank QR his mobile money account. When he has finished code and is recognised immediately. The tank sowing, he checks the ground temperature and the dispenses the water on a pay-as-you-go basis, humidity rate recorded by the sensors installed all taking into account the rules of the co-op and the over his land. amount of funds in his mobile money account.

He purchased these sensors through the Thanks to the mobile services provided to farmers, cooperative. Connected via the LoRa (Long Range) Badra can rest assured that his seedlings will grow well. He thinks one of his seedlings is diseased, network, they have a 10-year service life and use so he takes a photo of it and sends it to the very little energy. An intuitive user interface gives farming community; in this way, he establishes him access to a range of essential indicators, that the seedling has a mildew infection and finds and he has chosen to share the data with the a solution that has been tried and tested by other cooperative. As a result, the co-op agricultural farmers in the region. consultant can anticipate his needs and provide him with appropriate advice during his weekly As the cooperatives in his region work together to rounds. resolve the most common problems, it is easy for

Challenges and opportunities of digital financial services him to get hold of a video in his local language that He then sells the flour online, by placing an ad explains how to treat his seedlings with a natural, on the ”sugufyè” app. He finds a buyer easily and low-cost pesticide solution that is made out of local goes to the market a few hours’ drive away with the plants and is not harmful to the soil. The pesticide assurance that he is not going for nothing, and that solution is applied using a crop-spraying drone at there will be some buyers there. low flight altitude. Guided by artificial intelligence, the drone detects infected seedlings and sprays Badra is thinking about buying another plot of land with precision. for the next crop year. Thanks to his income, the stability of which is proven by his healthy mobile

Quality and traceability to ensure a fair income money account, he will be able to get a low-interest for farmers loan. Especially since the cooperative will stand surety for him, and deduct the repayments from the On the day the sorghum is harvested, Badra's money for future crops. cooperative comes to collect the fruit of his labour. The cereal is weighed on a smart scale. Samples To avoid problems in the event of a bad year, he are also taken for quality control purposes, using takes out crop insurance for his two plots of land. a mobile laboratory that sends the results to an The insurance company's drones will map his fields expert in Bamako. The crop is then bagged. All the and will be able, if necessary, to appreciate any bags have an NFC chip to guarantee traceability damage caused by drought or floods. and reassure wholesalers that the sorghum grains comply with the requirements of Codex Standard 172-1989 of the Food and Agriculture Organization of the United Nations (FAO). 17 This quality certification enables some co-op members to access export markets more easily, and to increase their income. The money is paid into Badra's mobile money account. At any time, he can check sorghum prices in Mali and worldwide to make sure his crop has been sold for the right price.

Financial services designed to support farmers

Sorghum is grown in cycles. In October, once he has sold everything, Badra knows he won’t have any more large cash inflows until the following year. To overcome this cash flow problem, he has opened a savings account with his bank. Money is transferred to his mobile money account every month, so that he can manage his cash flow more effectively. A small amount is also saved in a special sub-account until the next crop year. Thanks to a partnership between the bank and an agricultural supplier, Badra will benefit from negotiated prices when he purchases agricultural machinery and inputs. To generate recurring revenues, the farmer also turns part of his crop into flour using the cooperative's self-service, solar-powered mills.

Challenges and opportunities of digital financial services Conclusion

There is no question that, over the past ten years, Africa has been very proactive in terms of creating new and innovative payment services, developing smartphone-based services and changing user habits.

While this is a unique situation, driven by Africa's vitality and the need to bypass its lack of infrastructure, we should bear in mind that payment mechanisms are changing profoundly and radically all over the world. If I had to explain in one word why a “payment revolution” is looming, I might say it is because EVERYTHING is changing.

Emerging trends everywhere point to the same movement of change, which can be described quite simply as a major reconstruction of the value chain. 18 Digitisation is facilitating the entry of Internet giants in the market. For data analysis experts, gaining access to individual payment data is like striking gold, first of all because it gives them detailed knowledge of individual needs, and secondly because the payment medium (the mobile phone or smartphone) is a fantastic sales and advertising channel and therefore an additional source of revenue.

Obviously, the changes in the mobile payment services market will bring major challenges both for traditional banks and telecommunications operators. They cannot afford to loosen their grip on flows such as money transfers, or relinquish their role in financial inclusion. Market share recovery must be their top priority.

The forces of change are building up and must be addressed immediately, in a structured manner. The challenge is to continue innovating to generate growth and income. The rest... is already another story. It is up to the various players in the sector (banks, operators, credit institutions, etc.) and the authorities of the region to anticipate future developments, measure their importance for Africa’s development, and make sure that these fabulous technological, commercial and regulatory opportunities are effectively used to boost Africa's economic development and the well-being of its people.

Claire Khoury Head of communication, marketing and CSR, Sofrecom

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