Mobile payments gain traction

A wave of innovation in mobile payments looks set to reshape the mobile apps market in SA.

Lance Harris
By Lance Harris, freelancer
Johannesburg, 12 Aug 2014
Brett Loubser, WeChat, says the company is positioning itself as an online-to-offline enabler.
Brett Loubser, WeChat, says the company is positioning itself as an online-to-offline enabler.

After years of promise, mobile payments finally seem set to break into the mainstream. Growing penetration of smartphones into the South African market, paired with maturing payments technologies, is clearing the way for wider adoption of mobile payments and mobile apps in industries such as retail. Although there is no single big leap forward for mobile payments, a range of existing technologies such as QR codes, mobile vouchers, and near-field communications (NFC) are starting to gain traction in the local market. Companies are increasingly using them to create more engaging shopping experiences for their customers, or simply to make it easier for users to pay at the point of sale (POS).

Take SA's wiGroup as an example. This company provides a retail POS platform that enables mobile transactions such as mobile money transfers and mobile vouchering at more than 40 000 till points at retail chains such as Shoprite Checkers. Over the past 18 months, the company's platform has processed transactions worth around R2.2 billion, says Howard Moodycliffe, head of marketing at wiGroup.

And with international companies such as Starbucks processing billions of transactions worth billions of dollars a year, this represents just a small indication of the future potential of the South African market, he adds. Integrating mobile payments into the point of sale could just be the beginning.

In future, mobile applications could replace the traditional POS counter, allowing an agent to sit with customers and advise them based on their purchase history, their wish list and related products, says Chas Simpson, consulting and solutions director at InventCommerce.

"Mobile applications will radically change the way retailers conduct business," Simpson says. There is an opportunity here for brick and mortar retailers that have lost market share to the likes of Kalahari and Amazon to claw some customers back, he adds.

Payment could be handled with a simple swipe or click, with the whole process blurring the lines between what we've traditionally thought of as the offline and online shopping experiences. With high adoption of mobile phones in SA, contactless payment methods such as NFC could be successful here, Simpson says.


In future, mobile apps will be used to blend mobile apps with real-world shopping in a number of ways, Simpson says. For example, users could browse goods in a store window and then order and pay for it, straight from a smartphone with integrated NFC. Or a location-aware app could alert shoppers if they're in the area and an item they've expressed interest in has gone on sale.

WeChat, the mobile text and voice messaging communication service developed by Tencent in China, is another company that is eyeing the mobile payments space in SA. The company ? Naspers owns a significant stake in its parent, Tencent ? sees potential building payments into its instant messaging platform, says Brett Loubser, MD of WeChat Africa.

"There's some really exciting potential in this space, especially if we look at the adoption of African mobile payments services such as M-Pesa in Kenya," says Loubser. M-Pesa users transact by sending text messages to each other; there's no reason instant messaging could not be used for the same purpose in SA, he adds.

It's absolutely critical to cater for the full spectrum of phone types.

Howard Moodycliffe, head of marketing, wiGroup

By building payments into its platform, WeChat could one day allow consumers and companies to transact directly with each other. WeChat already allows vendors and customers in China to transact via Tenpay, Tencent's third-party payment service. Users can capture their credit or debit details on their mobiles and use it to transact. WeChat also works with offline businesses to promote WeChat Payment through QR codes. "We're positioning WeChat as an online-to-offline enabler," says Loubser.

Smart finger

Not all of the mobile payments innovation is taking place in the services and software space ? better and cheaper hardware is also having an effect on the market. Software developers are, for example, making more use of integrated features such as cameras and precision GPS in the mobile apps they develop, says Craig Nel, sales consulting senior manager at Oracle South Africa.

Another example is the usage of sophisticated biometrics solutions in newer smartphones such as Apple's iPhone 5S and the Samsung S5, which have impressed consumers. These smartphones use a combination of biometric sensors, processors, algorithms and modules for accurate identification of a user by his or her fingerprint.

This technology could soon allow users to sign into online and mobile banking apps with their fingerprint, make online and mobile payments, and purchase merchandise without making use of codes or credit card details, says Simon Leps, CEO of Fontera Digital Works. Rather than needing to remember complex passwords or PINs and presenting cards, users could make secure payments with the touch of a finger.

Loubser says mobile payments face two major challenges in SA: the regulatory environment and the fragmentation of the market. With a wide range of mobile payment methods contesting for dominance, it's difficult to get consumers and retailers on board, he adds.

Retailers have traditionally held back from mobile apps, payments, gifting and vouchers because they've not wanted to bet on a single app, says Moodycliffe. These apps need to integrate at the POS if they're to offer a robust and secure experience, and retailers haven't wanted to integrate them one by one.

With companies such as wiGroup offering platforms for mobile apps, a thriving app ecosystem is starting to emerge in the retail market, he adds. By installing a platform layer that any app, system or mobile payment services provider can plug into, retailers like Shoprite Checkers and Pick n Pay are making in-store mobile transacting a success.

Mobile applications will radically change the way retailers conduct business.

Chas Simpson, consulting and solutions director, InventCommerce

Another challenge companies need to keep in mind is that there are still many feature phones and basic phones in the market, despite the growing volumes of smartphones that network operators shift. "It's absolutely critical to cater for the full spectrum of phone types," says Moodycliffe.

Smartphones also have some limitations, says Nel. "Although we've seen the capacity of smartphones and tablets increase significantly in terms of processing power, memory and storage, we're still some distance away from having the capacities needed to do everything on-device," he adds.

"This is the biggest challenge for organisations when it comes to consumer-facing application design. We can now quite accurately determine the location of our potential consumer; however, when it comes to providing context-aware content, we need to do some serious analytics ? more often than not accessing some big data application or appliance in the back-end."

The key to working around the limitations is to take a mobile-first approach to designing apps and infrastructure, says Nel. Companies should build platforms for mobility rather than trying to move existing systems and processes into the mobile world.