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How digital payments can drive business growth offline and online

Stephanie Odili

By Stephanie Odili on Aug 22, 2019

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According to a 2014 article by Mckinsey, in most of sub-Saharan Africa, only a small percentage of upper-income households enjoy the convenience of card-based, online, and mobile banking payments, while most consumers still pay with cash. One of these studies shows that more than 90 percent of retail transactions in parts of Kenya remain cash based. Given the lack of digital-payment penetration; consumers, banks, and governments in sub-Saharan Africa are still bearing the high cost of cash payments—costs associated with manual acceptance, record keeping, counting, storage, security, and transportation.

While cash-based transactions were even significant in the countries with the most developed retail banking sector, the channels through which the non-cash transactions flowed tended to vary significantly by country.

For instance, the majority of remittance senders who sent money, excluding money brought in person, in the East African countries of Kenya, Uganda, and Tanzania reported using mobile money services are stated below:

statistics showing remittance senders: 90% Kenya, 60% Tanzania and 68% Uganda

In stark contrast, Nigeria — being the most populous country in Africa — offers especially exciting investment opportunities for providers of financial services. Nigeria alone has an estimated 34.8 million consumers who are using only informal cash payment options. In Nigeria, the country’s financial inclusion efforts move at a slow pace. the Lagos Business School (LBS), has revealed that

statistics showing 49% of Nigerians have viable bank accounts which is about 98 million Nigerians

This means that businesses that only accept digital payments are now having to limit their scope to only 90 million Nigerians who have bank accounts. Which makes people think about offline businesses.

Offline business, the oldest business since history, also referred to as a brick and mortar store, is a traditional street-side business that offers products and services to its customers face-to-face in an office. It can also be a store that the business owns or rents. The local grocery store and the corner banks are examples of brick and mortar companies. Brick-and-mortar businesses have found it difficult to compete with mostly web-based businesses like Inc. (AMZN) because the latter usually has lower operating costs and greater flexibility. According to Hubspot, brick and mortar businesses are relics of the past. Offline business usually grew its users, customers, products purchase etc by word of mouth, distribution of business cards, door to door sale and marketing, events engagements through speaking platforms, etc. To pay for a product in a typical brick and mortar store, all you need is cash or a credit card. Now, we make use of QRs, barcodes, Paypal, etc.

Currently, we are in an age of online business, online payments and online transactions. Everything we need to do, sell, or pay for, can be done online. Although, the retail industry is at an inflection point, several brick and mortar companies with large footprints are struggling, while e-commerce companies that once launched pop-ups as mere marketing tools have realized the value of storefronts. Online commerce has led the way and established a surrounding ecosystem that will gravitate to include online to offline commerce. The next phase is the enabling of the ecosystem with a network. It keeps growing and is now evident that businesses will thrive best when they have an online presence and use digital payments. Basically getting businesses to be aware that in their move to digital payments, they’ll be limiting their business. Therefore, they should begin to consider other forms of digital payments USSD, QR, voice messaging etc, which are actually are more secure, more widespread and more inclusive.

Digital payments are technically defined as any payments made using digital instruments. In digital payments, the payer and the payee, both use electronic modes to send and receive money. No hard cash is used. The most common form of digital payment method is found on all e-commerce websites. You can pay on these platforms using any of the methods such as debit card, credit card, internet banking, or payment/mobile wallet. Another way to resolve online payments is to integrate a payment gateway. Doing so will allow online merchants to accept credit card payments with the gateway handling the processing. This lets merchants focus in what they do best— to market and grow their business. Also, payment gateways provide more than just accepting credit card payments, such as alternative payment methods, fraud protection and customer support. Business Standard says that online retail has not only captured a larger share of mind space; it has been grabbing market share rapidly. Flipkart, one of the largest online retailers in India, grew five times in volume of products sold between 2013 and 2014. USSD is also a lesser-known form of digital payment where you do not need to have a smartphone or internet connection. For example, by dialling *4255# on Eyowo, you are given many options to mobile services.

Most experts in the digital finance field agree that USSD  is the most efficient channel to access financial services for rural people and the underbanked. Well, USSD (unstructured supplementary service data) is a text-only service that allows anyone with a phone (even those without internet connection) to access text-based applications in real time. This real-time connection is what makes the USSD technology different from SMS. There is a two-way communication of information when the communication line stays open. It is why users receive an instant reply message and the reason why the technology is suitable for mobile chatting setups and many other applications. As a business owner, you need to drive business growth, which is why it’s important you know the benefits of this digital payment—USSD for instance—and how it will benefit your business online and offline.

Firstly, USSD banking can work on any mobile device including feature phones at a minimal cost. Secondly, USSD technology can integrate with your ERP/CRM systems to request updated customer information, no matter the industry. As a result, it promotes data accuracy and better customer service. Also, it is the ideal platform for mobile marketing. Companies can send basic marketing surveys and questionnaires that can be immediately answered by users, providing customer feedback cost-effectively and reliably. USSD is also a preferred way of communication for service companies such as financial service providers and insurance companies to gauge the interest of customers by offering the choice to request callbacks after presenting their offers. Interestingly, USSD is extensively used by product shipping suppliers, e.g., takeaway menu and food delivery providers, to enable two-way communication between customers placing orders and confirmation of the shipped product. Another benefit of USSD, is the ideal gateway for retailers to communicate special offers to customers and send coupons and vouchers for next payment purchases. It is a cost-effective, easy way of communicating with your customers.

Recently, QR codes—or Quick Response codes—have been adopted by a growing number of players to facilitate retail payments. There are broadly two ways in which QR codes can be used for payments. In the first case, a merchant is given a designated QR code by their acquirer —take Eyowo as one—that is linked to their bank account in the backend. Customers must scan the QR code using the camera on their smart device and then enter the amount to be paid and their individual PIN in order to complete the transaction. An example of this method is Eyowo. Eyowo’s diverse digital payments platform is an example of how digital payments can drive growth offline and online. With the availability of USSD, QR codes, phone number, etc., payments can be made online and offline which drives faster and better payment services. The world is so much better with it.

We live in a connected world, therefore we cannot and should not be limited to a specific segment, especially when it comes to payment. Reach is growth. There’s room for more innovation with how business can communicate payment with the users and customers. If you have access and can eat a whole pie, why want a quadrant? For you to serve all types and kinds of consumers, you need to think digital payments.