On why I don’t hate on PayPal for not operating in sub-Saharan Africa

4 Responses

  1. tms ruge says:

    These are indeed very valid reasons and we can’t blame Paypal entirely. I think the blame has to be put squarely on rule of law. When you don’t have a legal environment that isn’t corruptible, it’s hard to trust that you can chase down claims and hold those who are breaking the law accountable, it’s hard to do business.

    It’s even harder to do it in 53 different municipalities and legal systems. The blanket policies do hurt legit business environments and I think this is where Paypal can exercise a little scrutiny via IP address checking. Just because West Africa has figured out how to scam the system, doesn’t mean East or Southern Africa should pay the consequence either.

    My feeling is there there just isn’t enough critical mass for Paypal to be bothered with it. Out of 900,000 million people, only 65 million have access to the internet. A miniscule portion of that uses or even knows what Paypal is. I’d wager that it’s waaaay below half million.

    The elite of us think it’s unfair, but from a business perspective, it doesn’t even register on the horizon for Papypal, thus, not a priority in their books.

    It’s the price we pay for living both in Africa and riding at the front of that digital innovation bullet.

  2. Paschal says:

    This means cracking down on fraud and improving justice systems. It means a better regulatory environment, or at least, enforcement of regulations on the books.

    The same could have been said of cellular companies, but they figured out that pay-as-you-go worked better for them and the market than payment plans based on credit. Similarly e-commerce companies can be profitable in sub-Saharan Africa if they adapt to the environment. Fraud and regulation are a problem? Mobile banking and money transfers are proving that money can change hands securely with minimum fuss.

    Also, the size of the market should not the issue, the amount of money should be the focus. Remittance figures are in the billions for the region. Does Paypal want a slice of that?

    I get the sense that these e-commerce companies are simply not interested in doing the work to figure out how to operate profitably in Africa. Required reading for them: Africa Rising by Vijay Mahajan.

  3. tms ruge says:

    Spot on with ‘Africa Rising’ recommendation. I think all companies weary about investing in Africa should read that book! In it he states that sometimes you have to create the market, where none exists. This provides a first mover advantage.

    And at $40 billion annually, I am thinking paypal has an opportunity to wrestle the market from Western Union, Money Gram & direct bank transfers. I could even see them paving the way and building something that will bridge the gap between the various e-wallet payment walled gardens the the telcos are erecting.

    Since non of them are going to build an open system, I think we need an outside force to unite them transactionally. And paypal could do this, if only they weren’t blinded by the Nigerian kiddy spammers.

  4. Dramane says:

    It’s true that Africa is kind of left out of the e-commerce system. But some African banks have been putting in place solutions they call “electronic purse” which is practically based on the Visa Credit Card for people who want to do transactions online. But still, Europeans banks block these operations based on their African origins. It’s sad.

    Best.

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