[BLOG] E-Commerce in Africa, is it ripe?
In simple terms, E-business can enable small scale businesses in emerging markets gain greater bargaining power in the global economic exchange despite their limited capital, and mobility. The world economy is moving online.
Today people are meeting online and eventually getting married, people who do not have the capital to establish physical stores are getting rich maintaining only online shops, small musicians who find it difficult getting producers are uploading their tracks on the internet to be downloaded by millions of people around the world, even politicians are using video-sharing tools like ‘Youtube’ to reach potential voters, etc.
Therefore, the action or inaction of African businesses to take advantage of e-business will determine how much they grow in the coming years.
But lack of bandwidth is not the only factor hampering the development of e-commerce and online business in Africa, the continent also needs a much more sophisticated financial infrastructure.
To make e-commerce happen you need a complex ecosystem for making and processing online payments. Africa's bandwidth problem is well on the way to being solved, but the online payments system still has a long way to go.
The first step in an online transaction is a person with a valid credit or debit card - so we need our issuing banks to speed up the rate at which they are rolling out cards to their customers.
Debit cards are likely to dominate, because most Africans have little experience of handling credit and credit cards carry huge risks for banks. The continent needs a cadre of acquiring banks that are prepared to accept online payments on behalf of their merchant customers.
At the moment, the business case for making the necessary investments is still difficult. An acquiring bank who wants to get into e-commerce will need to buy the appropriate licenses from the card associations like Visa and MasterCard, install card processing systems, and hire skilled staff to manage those systems, and understand and manage its risk of being exposed to fraud.
It's a big ask, "whoever takes the lead is going to incur a cost, and it's not yet clear whether the returns will be worth it. But there is hope: The retail sector is expanding as Shoprite and others roll out their operations in the rest of Africa.
As these stores start to offer point-of-sale card transactions, more cards will come into circulation and there will be more consumer demand for online shopping. Sooner or later, the balance will tip.
In the long run, the best hope for success is for governments to take the lead.
Isaac Twumasi-Quantus is Webmaster, Editor Africa Business Communities in Ghana.
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