In recent years, e-commerce has seen phenomenal growth in Africa. With the advent of mobile technology and increased internet access across the continent, more Africans are embracing online shopping. However, one crucial aspect that drives this growth is mobile payments. In this blog post, we’ll explore how mobile payments are driving the expansion of e-commerce in Africa. What’s more, we’ll examine how businesses can adopt new innovative ways to accept payments and enhance growth.
E-commerce trajectories in Africa
Africa is rapidly becoming a hub for e-commerce, with many online marketplaces and B2B platforms emerging across the continent. The International Trade Association predicts that Africa will surpass half a billion e-commerce users by 2025. Again, the data suggests a steady 17% compound annual growth rate (CAGR) of the e-commerce landscape in Africa. Rising internet penetration rates and increasing consumer demand have driven this significant growth.
The mobile economy in Africa will expand quickly over the next few years by developing local marketplaces tailored to meet regional demands and desires. According to GSMA statistics, by 2025, 61% of African connections will be made via smartphones (33% will be on 4G). Furthermore, the increased adoption of digital financial services, especially mobile money, is helping to propel e-commerce growth. Again, with many consumers needing access to traditional banking services, mobile payment solutions have emerged as a popular alternative to online transactions. Mobile payment solutions have made it easier for African businesses to reach new customers and expand their operations.
One of the critical ways mobile payments are driving the growth of e-commerce is through the development of e-commerce platforms. Additionally, these platforms enable sellers to reach a wider audience. Equally important to note, is that buyers can easily compare prices and purchase from the comfort of their homes.
Jumia, one of Africa’s most profitable e-commerce players, serves over ten countries. From fashion to electronics, there is an extensive selection of goods for sale on the platform. Besides that, local enterprises play a considerable role in last-mile delivery services. The platform shifted from a retailer to a marketplace model, which now accounts for nearly 90% of sales. With clothing, appliances, gadgets, food delivery, and flight/hotel bookings, customers have many items to choose from.
Other examples of African e-commerce platforms include Konga and Kilimall. Konga is an online marketplace based in Nigeria that offers various products, including electronics, fashion, home appliances, and more. Their platform allows sellers to register and sell their products to a large customer base. Similarly, Kilimall operates in Kenya and serves as an online shopping mall that offers a variety of products from local and international brands. They aim to provide customers with an affordable and convenient shopping experience. Both platforms have gained popularity among consumers due to their range of products, ease of use, and reliable delivery services.
Equally important, the advent of Platforms such as M-Pesa, Airtel Money and Tingg is making it easier for consumers to make payments and for retailers to accept them, driving the growth of e-commerce in Africa.
One of the critical aspects of e-commerce is payments. According to FYST, mobile-based money transfer services have helped underbanked people access digital financial services. These services have evolved from remittance to digital wallets.
In South Africa, debit cards are popular for online purchases, followed by bank transfers, but digital wallets are catching up. Nigeria’s online shopper count will increase to 122.5 million by 2025, and digital wallets may double their market share to over 15%. Cameroon’s internet penetration rate is low at 35%, but with 47% smartphone penetration, there is potential for growth in mobile commerce.
Below are reasons why mobile payments are vital drivers of e-commerce growth in Africa:
1. Increased financial inclusion: Mobile payments provide access to financial services for underbanked or unbanked people. Mobile payments drive e-commerce growth by allowing more people to make online purchases.
2. Convenience and accessibility: Mobile payments are easy to use and accessible, making them an attractive option for customers. This convenience can drive e-commerce growth by making it easier for people to shop online.
3. Improved payment processing: Mobile payments can be processed quickly and securely, which can help to reduce transaction times and increase customer trust in the e-commerce process. Payment processing drives e-commerce growth by improving the overall customer experience.
4. Expansion of e-commerce markets: Mobile payments can help to expand e-commerce markets by enabling cross-border transactions and increasing the customer base for merchants. This can create new business opportunities and drive growth in the e-commerce industry.
Challenges of E-commerce
E-commerce in Africa is growing at an impressive rate, but it’s challenging. One of the biggest obstacles is a need for more trust in online transactions due to poor internet connectivity and limited access to digital devices.
Another challenge is fragmented markets. Businesses in Africa face a complex web of regulations, languages, and market preferences due to the continent’s diverse cultures, languages, and economic conditions. This can be costly and time-consuming, particularly for small and medium-sized enterprises (SMEs) that need more resources to adapt rapidly to different markets. Different payment methods, delivery requirements, and customer support issues can make it challenging for e-commerce businesses to scale across the continent and achieve their growth potential.
In addition to these issues, there are also concerns about the security of online payments, which can deter customers from using e-commerce platforms altogether. While there are challenges facing e-commerce growth in Africa today, many entrepreneurs remain optimistic about the prospects for this dynamic industry on the continent.
E-commerce has come a long way in Africa and is expected to grow even more with the rise of mobile payments. The convenience and flexibility of mobile payments have made it easier for consumers to shop online and pay seamlessly. Marketplaces and B2B platforms have also played a significant role in driving this growth by providing a platform for businesses to trade goods and services.
However, there are still challenges facing e-commerce in Africa. Some of the bottlenecks include poor infrastructure, low internet penetration rates, and inadequate logistics systems, among others.
Nevertheless, the future looks bright in Africa, with increased smartphone adoption rates and technological advancements. As we move into this digital age, where everything happens at our fingertips through our mobile devices, shopping seems no different. Learn more about mobile payments and how to get started