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China's Mobile Payment Revolution Is Going to Africa

The Huffington Post The Huffington Post 26/02/2016 Claire van den Heever
MPESA © Bloomberg via Getty Images MPESA

CAPE TOWN, South Africa -- With the launch of Apple Pay in mainland China on Feb. 18, Apple has become the first foreign player to secure a place at the table for China's enormous mobile payment market. The company will be battling for market share with e-commerce giant Alibaba's Alipay and Tencent's WeChat Wallet, which dominate China's mobile payment arena.
By the end of last year, a staggering 358 million Chinese were using mobile phones to purchase goods and services, according to research from the China Internet Network Information Center. Outside of China, financial institutions are eagerly looking for ways to build entire ecosystems around their users, following the success of digital leaders like Tencent and Alibaba, Beijing-based managing director of Accenture Albert Chan toldBloomberg.
Africa's largest lender by assets, Standard Bank, has opted for a more direct route: joining forces with WeChat to secure a piece of Africa's growing mobile payment market. The Standard Bank-backed WeChat Wallet was launched in November 2015 in the continent's most industrialized nation, South Africa, and gives users access to a variety of the Chinese version's most popular offerings, including peer-to-peer money transfers and in-app payments for taxis and other services.

The fact that mobile money services like M-Pesa and WeChat Wallet do not require customers to have bank accounts is key.

Mobile money hasn't taken off in South Africa to the extent that it has in Kenya, where M-Pesa has transformed the way that Kenyans spend, move and borrow money. Launched in 2007 by leading mobile network operator Vodafone and Safaricom, the service allows users to deposit money into an account stored on their mobile phones, and to send and receive balances using PIN-secured text messages.
"If you look at the landscape in Africa from a mobile money perspective, Africa is leading the charge globally," WeChat's head of South Africa Brett Loubser toldMemeburn.
M-Pesa sprung from a need to transport money quickly and safely, in a part of the world where most consumers still pay with cash. Sub-Saharan Africa's relatively high number of unbanked individuals is one reason for this trend, and the fact that mobile money services like M-Pesa and WeChat Wallet do not require customers to have bank accounts is key.
WeChat Africa is not just a replica of the platform's offerings in China or other markets. The company understands the importance of localization.

It is difficult to say why M-Pesa hasn't enjoyed much success in South Africa when 25 percent of people were still unbanked in 2014, but the country's rigid regulatory framework is often blamed. In this respect, WeChat's smartest move in Africa yet may be partnering with Standard Bank. Among other benefits, the partnership allows WeChat to piggyback on the infrastructure of Standard Bank-owned payment network, SnapScan. Integration with the region's predominant in-store payment system means that merchants supporting SnapScan can automatically accept WeChat Wallet payments. It also gives WeChat access to South Africa's growing e-commerce space, in which an increasing number of websites accept SnapScan as a payment method.
WeChat's widespread adoption is often attributed to integration with third party apps, of which it has literally millions. The company recently opened a $3.5 million venture capital fund specifically to invest in young tech outfits that demonstrate potential for partnerships, according to the Financial Times. South African micro-jobbing service, Money for Jam, or M4JAM, became the recipient of such an investment in early 2015.
But WeChat Africa is not just a replica of the platform's offerings in China or other markets. The company understands the importance of localization, a fact which its joint venture with South African media giant Naspers makes especially clear. Indeed, adapting to China's unique market needs has been central to Tencent's success from day one.
Tencent, Alibaba and Baidu's red envelope rivalry may remain limited to China for now, but a battle for access to Africa's burgeoning mobile Internet market could be on the horizon, too.

WeChat first went digital with China's age-old tradition of giving gifts of cash in red envelopes during Chinese Lunar New Year in 2014, using virtual red envelopes, or hong bao, to entice people into trying its payments platform. It wasn't an entirely original approach. Alibaba had already succeeded in generating an enormous amount of hype by offering discounts on its e-commerce platform during the Chinese holiday Singles Day in 2009.
Today, digital red envelopes are an immensely popular way of buying customers, with Alibaba and Tencent engaging in what the Financial Times called "red envelope wars" as coupons, discounts and giveaways became ammunition in the battle for users' loyalty. Search engine Baidu's relatively less successful Baidu Wallet promised to part with some 6 billion yuan -- around $900 million -- in coupons to attract users during the holiday.
Gaining market share in Africa is a very different kettle of fish. Although, in some respects, the latent potential of its 1.1 billion-strong market may resemble China's 40 years ago, attracting customers within each of the continent's 54 nations will require local expertise and composite approaches to match. WeChat's physical presence in Africa is currently limited to Ghana, Nigeria and South Africa, where it is focusing most of its energy. Tencent, Alibaba and Baidu's red envelope rivalry may remain limited to China for now, but a battle for access to Africa's burgeoning mobile Internet market could be on the horizon, too.
When it comes to Africa, China's digital leaders' most valuable experience, perhaps, is in spurring growth in underserved markets.

But regardless of how nuanced the efforts made by the WeChat-Standard Bank partnership are, and what strategies other players -- Chinese or otherwise -- adopt, the challenges of doing business in Africa remain very real. For now, payment platforms that only require basic mobile devices have access to a larger share of a market that is comprised mostly of non-smartphone users. A lack of infrastructure can mean that mobile signal all but disappears less than an hour's drive from South Africa's third-largest city.
When it comes to Africa, China's digital leaders' most valuable experience, perhaps, is in spurring growth in underserved markets. But they didn't reach this point without a revolution.

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