Is Kenya Ready For E-Commerce And Online Payments?

Since I wrote about available online credit card payments in Kenya I have had the idea to write this post. I got a few emails about the post (even a phone call) and had a lot of e-commerce discussions with businesses.

As I see it there are two very different areas for online payments and e-commerce in Kenya.

Payments to Kenya

The one that is working and starting to take off since online credit card payments are very possible to Kenya 2010. The payment methods are known and the most common payment gateways are known and trusted by most people overseas.

These are mostly Safari Tour Operators and Hotels who have been accepting credit card payments for a long time via Email-Print-Scan-Email-Print. Their main obstacle before was, as always, Paypal but also 2Checkout as they would not allow payments for travel and accommodation. AlertPay, MoneyBookers and I&M changed that.

This is and will in my opinion be the main area for e-commerce in Kenya.

Payments within Kenya

Plenty of e-commerce sites targeting Kenya exclusively are being created these days. Few succeed but most hang in there. These are my thoughts.

Banks are not ready

Surprisingly the emails I got regarding the initial post was questions on how to make payments online – not how to receive payments online.

I have experience of three banks in Kenya. The first had no idea what I was talking about when I wanted to be able to make online payments and said it was not possible in the end, the second wanted me to deposit 110% of the maximum amount allowed in a sealed envelope with my lawyer and fill out plenty of forms. With I&M I got a debit card that I could use for online payments immediately. It worked out of the box. No additional forms.

It may have been that I was just unlucky but if most banks continue to operate like it is 1995 we have a long way to go.

People don’t like giving out their credit card information online

It took many years before the majority of the population started to trust online credit card payments in Europe. The situation seems similar in Kenya today. Brands like 2Checkout and MoneyBookers are not known in Kenya. I&M will hopefully create a trusted brand for online payments in Kenya. Thanks to Kenya Web Hosting for the input.

Cost, delivery and item types

When purchasing something online in Europe people expect it to be cheaper than in a normal shop. The online businesses are often located in the countryside with minimal rents compared to towns where shops were traditionally located.

The first online businesses to really succeed in Europe were CD and Book companies. They could offer a variety that none of the small bookshops in town could compete with and be 30% cheaper. And they would deliver the following day if the order was placed before noon.

This is what I expect from online businesses as a customer. If I have to wait five days to get my order and pay the same price for the same common item as in a traditional shop I will of course go to the shop instead.

Delivery is slightly expensive and sometimes hard in Kenya and logistics for e-commerce is important but with good planning and enough volume it should be a minor issue.

A note on goods that sold well online initially in Europe: They were distinct items, a specific book by a specific author or a specific computer model. These items are always the same but a shirt that you have not tried on may not fit. Online shoe sales became a problem for shoe retailers in town as customers would try out the shoes in the town shop and then go home and order them online.

Items sold, CD:s and books, were also not too expensive – this made people less reluctant to getting out their credit cards and typing those valuable numbers on the dangerous web.

Services that do not require delivery or products available nowhere else are perfect for online payments – common products must generally be delivered quickly and be cheaper than in common retail shops.

If people have no money for making regular transactions they will not make online transactions

From the post by Kenyan Entrepreneur that finally gave me the energy to write this post.

Obviously if there is no money it can’t be spent online but among early adopters of MPesa were people with small incomes who would save some money on using MPesa instead of traditional ways to send money to relatives and friends. They may not have a credit card but they trust the brand MPesa and with a simpler and more secure way of making MPesa payments online (using a simple mobile phone) they may rather buy food for and have it delivered to their families online than send the money directly without knowing what it will be spent on.

MPesa/ Zap

Personally I believe that given how immature the Kenyan credit card market is MPesa and Zap payments will be the most common online payment methods for quite some time. A lot of websites already use this – mostly just using standard phones with manual validation. This works fine but requires an existing trust between the visitor and the website or that the amount is not too high. I pay for all Kenyan domains this way and it takes a bit of time but works well.

When transactions are becoming more frequent manually handling transactions becomes too time consuming. There is really a demand for a simple solution that people trust. As described in the previous post there is already PesaPal and MonyAMickle but they are both based on registration and top up for the visitor before any payment can be made.

Two new solutions, iPay and Symbiotic, should be available that seem to allow direct payments but I have not found any pricing. They both claim to have an API ready for developers to use as well. Symbiotic’s solution is integrated with PayPal and WorldPay as well.

I would not be surprised if Safaricom comes up with a similar thing in a few months.

Ease of setting up an e-commerce site 2010

There is one big difference between the early days of e-commerce and today and that is how easy it is to set up an e-commerce site. Plenty of free solutions out there make it possible to have an online shop ready in a week.

The close to zero cost means that there are many people starting e-commerce shops without any investment. It also means that there are a lot of shops set up using out of the box functions without any further customization and since no money has been invested it does not really matter how the business goes. Very few businesses are ready to pay for or knows the Search Engine Optimisation usually required to start generating traffic. On the other hand; we will hopefully be spared failures like boo.com

The back side of this is that there are few e-commerce sites that are the companies’ main business where a lot of money is spent and results are expected. A few e-commerce sites with solid investors would probably make a huge impact on e-commerce in Kenya. I noticed the “Online Shopping will soon be available” news item at Nakumatt the other day. Maybe this will be THE e-commerce site in Kenya (I really hope they get anew web designer with some usability knowledge).

And finally two very encouraging e-commerce sites: Bagalicious and Ravenzo where everything just falls into place.