E-commerce powers growth of Kenya’s IT security market

In May of this year, Martin Muckle’s ducks lined up in a row.

He completed the design of his website — airtime.co.ke —that would allow users to buy airtime credit from any of Kenya’s mobile providers at discount rates through an online portal.

“Airtime.co.ke is a site that illustrates how e-commerce can be done better than “live” commerce. It is cheaper, faster, and more convenient than offline methods of buying airtime,” said the website developer.

“I’m banking on the fact that the convenience of not having to battle across town through increasing traffic, find parking, pay for it, then battle all the way back again just to make a simple purchase will increasingly tempt Kenyans into making online purchases,” he said.

After years of relying on foreign service providers, Mr Muckle finally had access to a local payment system when I&M got the rights from VISA to establish the first such platform in Kenya.

Using the platform, people can buy and sell thins online, pay for the goods through cashless methods, such as credit cards, whose numbers they input in the website in return for goods and services.

Electronic commerce (e-commerce) is currently estimated to be worth Sh9.6 billion, most consumers who participate in e-commerce buy telecom products, which make up 45 per cent of the transactions processed through electronic trades.

The tourism sector accounts for 38 per cent of e-commerce transactions, while services and retail goods contribute to 10 and 7 per cent respectively.

Until last year, a number of bottlenecks prevented Kenya from joining the global e-commerce chain, including slow internet connectivity and reliable payment systems.

While the arrival of several international fibre links in the last 12 months resolved the connectivity bottleneck, e-commerce required a reliable financial settlements system.

This is where Arun Mathur, the CEO of I&M Bank, saw opportunity and decided to push his team to develop a portal that would allow the bank to become an active participant in the Sh9.6 billion dollar industry.

“This is the future for banks. Technology is providing the bridge to new business opportunities for financial institutions. The days of brick and mortar establishments are nearing their end and we must change,” said Mr Mathur.

In January this year, I&M launched a payment channel that would allow it to tap into a global commercial activity that was bypassing local banks and companies.

I&M’s e-payment portal aimed to localise the online payments system by providing Kenyan firms with a local gateway to receive money from any corner of the world.

Besides raising the cost of online transactions, the use of offshore gateways had meant local businesses could not immediately receive the cash, making them incur heavy losses in the event of exchange rate fluctuations.

It also forced local consumers to make special arrangements to pay for goods online – a process that proved more time consuming than walking to a shop for a simple cash transaction.

The fruits of I&M’s e-commerce gamble are captured in the new look Serena hotels website – a vibrant online portal that allows users to book and make payments for any of Serena’s 33 properties in Africa and Asia using a single window.

The website’s redesign shows the hotel chain’s strategic shift to capture a larger share of e-tourism revenues it was previously missing out on due to lack of a reliable payments channel.

Until it signed on to use the e-payment portal, Serena had to rely on international vendors to process payments from foreign tourists.

It now handles a full suite of online reservations and payments that have helped bring the hotel closer to its customers.

“Before the solution was made available, we used manual credit card authorization where a client could scan their credit card and sign an authorization form before we process their credit card and this was a very tedious process and took a lot of time,” said Harris Macharia, the E-Commerce manager at Serena.

For larger players like Serena, the portal presents the opportunity to cash in on payments made by credit card, most of whom are internationally based.

For smaller players operating in the local e-commerce field however, the I&M portal is still out of reach for a number of factors, including the low penetration of credit cards in Kenyan society.

In response, many of Kenya’s budding e-commerce websites have turned to more widely accessible payment channels such as M-Pesa to access the over 60 per cent of Kenyans who are unbanked or do not own a credit card.

Older e-commerce websites such as styleconnection.co.ke, totallytoto.co.ke and kalahari.co.ke almost solely rely on M-Pesa to facilitate payments.

Vuma.co.ke, a Sh3 million music downloads website which was launched in October last year, has combined the two payment systems in order to capture sales from both Kenya and abroad.

Its creator, Sidney Wachira installed gateway integration for both M-Pesa and credit card vendor Visa to access a cross-section of customers both locally and abroad who are interested in local music.

“While Vuma targets Kenyans in Diaspora with over 30,000 individual tracks, we faced technical challenges in ensuring a secure and safe platform during payment integration,” said Mr Wachira.

Mr Wachira believes that e-commerce will allow small businesses become more visible and competitive, as it shifts focus from having an expensive physical location to virtual shop which allows for more competitive pricing.

To bridge the gap, I&M is currently mulling plans to roll out pre-paid cards for younger or unbanked individuals who do not have access to cards to broaden the reach of e-commerce in the country.

Already, companies like Nakumatt and Uchumi are utilising this avenue, allowing their local customers to top up values on their cards in the same manner that airtime is loaded on a mobile phone.

In addition, the bank plans to integrate a feature that will link mobiles to websites, allowing for payments to be made using mobile cash options such as M-Pesa.

“Given the dynamics of this market, introducing a m-commerce feature is imperative if you want to succeed locally,” said Barry Coetzee, CEO of Iveri, who developed the portal for I&M bank.