iVeri’s implementation of e-commerce by debit card looks set to widen the user base
There was a period a few years back when African Governments seemed to devote an enormous amount of energy to putting in place legal frameworks for e-commerce. Despite all this effort, once the legal hurdles were cleared, the practical difficulties of implementation remained formidable. And once those were overcome….well, there were just not a lot of credit card holders. So iVeri’s Barry Coetzee decided to try and sort out online ordering for debit card holders, of whom there are a larger number than credit card holders. Russell Southwood spoke to him recently about how he’s done it.
Even in pretty well developed market like South Africa, only 21% of people have personal Internet access and only 3-4% have credit cards. So in 2007, there were 6.1 million credit cards against a whopping 21.8 million debit cards. But if you take a mid-range market like Kenya for the same year, there only a (projected) 100,000 credit cards as against over 1 million debit cards.
The barrier that iVeri’s Coetzee needed to overcome was that debit cards were not accepted for online transactions in South Africa: “The rules around PIN numbers meant that the device where the PIN was entered must meet Visa and Mastercard requirements. Something like an ATM doesn’t hold the PIN number when you’ve entered it.”
After two years work and a lot of discussions, a South African bank has signed up to accepting debit cards through a national chain of cyber-cafes (called 3@1) with 52 sites. Each of these sites will install a standard banking terminal attached to a PC. From the merchant perspective, it means that those who want to accept this category of customers will have to install a software update as will the PC that is used to make the transaction.
The software enables the merchant’s site to sense the terminal and change the payment method accordingly. Once the terminal is sensed, the website shows instructions asking the user to swipe their card in the terminal and enter their pin. At the end of doing that, the user is instructed to look back at the screen.
Coetzee had already noticed that cyber-cafes were being used for this kind of transaction. Someone would take a friend with a credit card to the cyber-café, get them to make the transaction and pay the friend in cash. The use of debit cards opens this type of transaction to a much wider group of people. Coetzee is looking at going into the free Inter cafes in universities because a lot of parents give their children debit cards.
There are four merchants in the pilot phase (including Mango Airlines), two of whom have already implemented: “We’re saying to the merchants: do you want access to this retail footprint? Once the merchants say yes, they will market it to their customers. But the big target once the implementation moves out of the pilot phase is e-Government for payment of things like car licences and electricity bills. Or paying bills to the municipalities.” Not surprisingly, the airlines and the mobile operators (selling airtime) like it. In Kenya, one of the energy companies is very interested.
Coetzee believes that it’s ideal for what he calls “rich data merchants”: these are companies like hotels, car hire and airlines where it’s complicated to do a booking and the product is data:”You can’t do that kind of thing on a mobile phone. But not all transactions will be ideal for this kind of approach.”
The challenge has been to get the credit card companies comfortable:”They’ve dealt with Card Present and Card Not Present but they had no rules or framework for Merchant Not Present”.
Since, in effect, the approach shares the payment terminal amongst several merchants, the costs of delivery for the scheme are kept low. The cost per terminal is between US$100-120.
With the potential user base in a country like Kenya being over a million, this kind of e-commerce suddenly begins to make a lot of sense, particularly if the kind of thing you’re paying for usually involves a lot of queuing.