Many years ago, very little could be said about Africa and its tech coastline. It looked like the refuse dump for European innovation so much so that we accepted it that way. This could be blamed on the inaccessibility of information. And so came the new millennium when mobile phones started to make its way into the elite locations of Nigeria and other parts of modern Africa. This sparked a sense of curiosity in the minds of people. With the increase of these new gadgets came an rapidly growing need for more information and the internet equally paid a visit to the shores of Africa. For every new addition to the technology space came a rising increase for knowledge. The internet boomed because of this curiosity to see the possibility of building new frontiers of technology as well as solve problems that these new inventions posed.
Africa’s population is estimated at 1.2 billion people (15% of the world’s
total). By 2050, the population of 26 out of 54 countries in Africa will
at least double their size. Combine this population growth with the burgeoning
middle class and you have a compelling case for digital merchant expansion.
Currently, 35% of the continent’s 1.2 billion people are connected to the
Internet, compared to the global average of 54%. While ecommerce has been
slow to develop across the continent, all signs indicate that the African
market is ripe for a digital retail boom.
Africans work, bank, learn and access services online with an intensity that compensates for the absence of local infrastructure. These habits compounded by the absence of entrenched technologies or legacy infrastructure are clearly leading to cross-border ecommerce expansion, which means a bigger market for digital merchants. With connectivity rates dramatically increasing across the continent, there is a unique opportunity to be among the first to dominate this huge, untapped local market. Merchants who are now expanding there have the chance to play a significant role in shaping the market landscape from the scratch.
Africa also leapfrogged the rest of the world by becoming a mobile-first market. Jumping from typewriter to smartphone, the continent skipped a technological generation. Most Africans first encountered the Internet using a cellphone and many more are experiencing the Internet for the first time using a smartphone. This is paving the way for online retail growth and is revealing the way African consumers choose to pay.
Almost 280 million Africans have mobile wallets, which is three times more than the number of Africans with bank accounts. The prevalence of mobile money has democratized the financial services by mass adoption. It has gone a long way to improve consumer financial stability and broaden consumer cross-border spending access and habits. A great example is Kenya, where we have seen financial inclusion increase from 26% to 75% in ten years.
A key driver for this has been digital innovation. Across the continent, traditional commercial distribution channels are being bypassed (not replaced) in favour of online content consumption and service provision. 4G LTE connections have quickly emerged in 43 out of 54 countries in Africa which has been feeding the increasing appetite for paid media consumption.
As Africa undergoes an Internet penetration boom we are seeing shifts in the consumer profile. With more African consumers coming online their commercial habits are evolving faster than any other demographic in the world. By 2020, consumer spending in Africa is forecasted to exceed USD 1 trillion annually. The average African digital consumer is millennial (with an average age of 19.4 years). This is the first generation to have an education, a salary and a bank account. They are six times more likely to have a mobile wallet than the world average.
The lack of physical retail infrastructure to meet consumer demands has also created a favorable environment for digital goods and services. Online retail is an easy and efficient option for African consumers. It is predicted that by 2025 ecommerce in Africa will account for USD 75 billion in annual revenue or 10% of retail sales. With this increasing buying power, we are witnessing greater brand preference. African consumers are heavily influenced by US popular culture and media and will access content and social media only on smartphone devices. However, while the demand is for US brands, it is crucial for merchants to appear local from a business standpoint, specifically when it comes to payments, in order to reach the widest possible consumer base.
Africa is the center of the mobile money market, with Kenya leading the way. The country has the world’s highest mobile money rate and more than 50% of adults use M-Pesa (the biggest mobile money platform in the market) or one of its rivals. In 2016, Visa launched its mobile money app on the Kenyan market to compete with M-Pesa, admitting they hadn’t had much success promoting traditional credit cards in the country.
mobile money dominance is not only specific to Kenya. During our time in Ghana,
we learned 73% of transaction value comes from mobile money. Compare this to
ATMs at 13% and cards at 11% – the gap is fairly significant. Signs of mobile
money are everywhere from retail stores advertising that they accept this
payment method to the constant presence of kiosks on the streets for Africans
to top up their account. Merchants who consider expanding into Africa need a
local solution that prioritizes this payment method.
While it was slow off the mark, Africa’s digital landscape is undeniably gaining momentum and power. We believe Africa is well-placed to be the next big ecommerce emerging market with major revenue potential. Global merchants should prioritize this market in 2018 while the landscape is still wide-open and able to be shaped. Now is the time to formulate strategies to leverage this financial opportunity and to select the right partner with a proven record and local reach to navigate market complexities.
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