To serve an emerging market like Africa with its own peculiarities, demographic dynamics and infrastructural inadequacies with consumer products require a peculiar, well thought-out and scalable payment solution. Africa has a huge market size with over one billion people and yet less than 25% have access to formal banking services and only about 3% have debit/credit cards. It is predominantly a cash society. This solution addresses this landscape.
Photo of Richard Parkinson and Jean-Michel Robiou, Google.
Director, Global Cash Management
Senior Treasury Analyst
Google is a leading internet company, with headquarters in Mountain View, California and offices all over the world. In 2014, it reported revenues of $66bn and a net income of $14.4bn with international revenue accounting for 57% of the total revenue.
Google provides a marketplace (Google Play) for developers all around the world to sell their software and games to buyers across the globe. This is a huge business for the developers and it was reported that $5bn was paid to developers last year from this marketplace.
For Google Play to be successful, Google treasury needs to work with its product management and engineering teams to give buyers a mechanism to pay for the software that they purchase, as well as put in place payment mechanisms to disburse to the developers. Given the nature of this business, where buyers consume the products they purchase almost instantaneously, not all forms of payment work – a cash solution was not appropriate.
In markets where bank account, credit and debit card penetration is high or where Google Wallet, PayPal or other stored-value solutions are commonplace, implementing a payment solution to support the marketplace is simple. However, Africa is predominantly a cash society so implementing a marketplace like Google Play requires the ingenuity of the team to come up with a payment solution that is workable. As Ronni Horrillo, Assistant Treasurer for Google explains “given the issue about penetration of other forms of payments, we needed to come up with something new and innovative to address that.”
Google reviewed all the different forms of payment option in the market, considered the adoption rates and decided to go with the M-PESA solution (where ‘M’ stands for mobile and ‘pesa’ is Swahili for money). As mobile phone penetration is estimated to be up to about 80% in Africa, and given the usage of GPRS enabled phones, a payment solution on a mobile phone network infrastructure is the best way to reach the majority of the population with a consumer internet product.
Google partnered with Mobile Money, a mobile phone-based money transfer and micro-financing service, launched in 2007 by Vodafone for Safaricom and Vodacom in order to get this project up and running. The M-PESA solution uses the funds transfer capability in the Mobile Money product. Google has created a merchant account on the Mobile Money platform. Buyers and residents that they need to collect funds from transfer the funds to Google’s merchant account.
Once the telecommunication company receives this payment, an automated message is sent to Google with which they close the customer’s obligation to them. That message serves as the confirmation of payment and it comes with identification metrics from the customer, helping Google to close the sale and release software to the customer.
The benefits of this solution include:
An efficient payment solution for partners and customers in Africa.
Improvements to the cash conversion cycle as collections and disbursements cycles are optimised.
Expansion of the market reach for Google products in Africa.
Through this solution, people on the continent are able to monetise their online real estate as well as software, apps and games.
Best practice and innovation:
The Mobile Money solution is innovative in that it provides a payment option that meets market need. Google’s adoption of this solution also demonstrates best practices in the areas of technology, reconciliation and audit, as well as fraud prevention, KYC and anti-money laundering.
To serve an emerging market like Africa requires a particular, well thought out and scalable solution. Africa has a huge market size with over one billion people, yet less than 25% have access to formal banking services and only about 3% have debit /credit cards. As Horrillo points out “our solution has identified the peculiar situation to this continent, leveraged a mobile money product, worked with telecommunications to make collections from and disbursements to our customers easier and faster, thereby optimising the cash, collection and disbursement cycles for our business. Furthermore, we continue to work with internal stakeholders, carriers/telecommunication companies and to some extent banks as we scale the solution to each of the 54 countries in Africa.”