Erik Hersman
Erik Hersman

The problem with e-commerce and online payments in Africa

A lack of true online payment options is crippling African e-commerce, and South Africa is no exception. The inability to accept payments for products and services on equal footing with the rest of the world means that many viable business options are not available for merchants in Africa.

The few options there are for African e-commerce take a certain amount of business history, wealth or contortions to attain. Let me give some examples.

  • You have a business big enough to set up a merchant account that accepts the normal Visa and MasterCard level of service (business history).
  • You have multiple addresses outside Africa yourself, allowing you to set up your business entity in another country (wealth).
  • You have relatives or friends in another country who allows you to set up your business address in their country, and then remits your balance to you each month via their bank (contortion).

Anywhere in the world, unless you’ve already got the money or have the proven business that allows you to qualify for a standard merchant account, you only have one real option — PayPal (some would add WorldPay to this, but it doesn’t have the low cost of entry that PayPal does).

Not in Africa, though. You see, in Africa PayPal only allows you to send money to people; you can’t receive or withdraw it, which of course defeats the purpose of trying to run a business.

Is there a solution?
Though there aren’t any options right now, beyond the traditional bank merchant account that is neither simple nor quick to set up, that doesn’t mean that something cannot be done.

What needs to happen is for someone to look hard at the potential usage in Africa, and then figure out how to marry that to a mobile solution. The challenge is not just to serve the needs of the wealthy, but also to make a solution that works for the average African.

In South Africa, Wizzit is probably the best option for mobile payments, but it has now online component for e-commerce — and it’s tied to one bank. In Kenya, Safaricom runs a mobile payments solution called Sambaza — it’s tied to one carrier and also doesn’t provide for e-commerce.

I would submit that the solution for Africa needs to be bank and carrier agnostic.

So, the beginnings of possible solutions are being seen, but no one has created the ultimate e-commerce option for Africa. Of course, if PayPal were to just allow us all to go through a little more stringent verification to ensure that we are real people with real businesses in Africa, then it would scoop up most of the online business overnight.