Across Africa, smallholder farmers struggle to get a fair price for their crops because they usually have to go through middlemen or agents. The process is often opaque because the smallholder farmers – who represent 90% of agricultural output in the continent – are unable to verify the price at which the middleman sells the produce to food processing companies or the market. In response to this problem, financial services company Mastercard launched a pilot programme called 2KUZE, which is a platform linking smallholder farmers directly to markets and buyers, therefore bypassing middlemen. The 2KUZE app, which has been tested on 2,000 farms in Kenya and will also be rolled out in Tanzania and Uganda, can be used on a smartphone, tablet and even a GSM mobile phone. The app is an example of the company leveraging technology to boost financial inclusion across the continent, according to Raghav Prasad, president of Mastercard’s sub-Saharan African division, who spoke to African Business at the company’s 2018 Connecting Tomorrow Forum in Barcelona in September. “Africa is in a wonderful position to take advantage of the latest technology to leapfrog, and it is also a great opportunity for us because of the room to scale,” Prasad says. “Because of some of the challenges facing many African countries such as limited infrastructure, you can’t scale payments in Africa using the same old playbook of having terminals, which could cost hundreds of dollars each to set up, and plastic cards that cost three dollars apiece. “In Africa, we have gone full-in on technology which allows us to scale in the most cost-effective way possible. However, one of the biggest challenges we face in Africa is that the opportunity is so vast, you need to work out how to operationalise at a reasonable cost to serve.” Mastercard currently operates in 32 markets in sub-Saharan Africa, with the most recent additions being Chad, Central African Republic, Guinea-Bissau, Liberia, Sierra Leone, Rwanda and The Gambia. The company has formed partnerships with fintech companies including M-Pesa and Tigo Pesa. One of its most successful products in Africa is Masterpass Quick Response (QR) which was initially launched in Pakistan, but has successfully been implemented across the continent. “Around 2,000 merchants a day are using QR across Africa, and the next step for us will be to increase the number of transactions between merchants and customers,” Prasad says. “The QR system also helps boost cross-border transactions because you can use it in other African countries where we have launched the system.” Fintech is a compelling growth sector, with 58 per cent of the world’s 174m mobile money accounts registered in Africa, and the sector growing in value to reach more than $3bn by 2020, according to figures released by the pan-African banking group Ecobank in February. Despite the optimism surrounding fintech, cash remains the overarching payment method, with 95 per cent of people using it to conduct transactions. One of the main reasons Africans still use cash is down to the lack of cashless infrastructure in many countries. But this provides an opportunity for financial service companies such as Mastercard. “We recognise that changing consumer habits is a journey and we work with our partners to take consumers on that journey,” Prasad says. “The good news is that the regulators across Africa recognise that cash is holding back the pace of development across the continent, and they are open to new innovations which help them make progress in what I call the ‘fight against cash’.” “We’re starting to see the impact of this in Nigeria where we are seeing a huge transition from ATM usage to point of sale usage, and we’re hoping over the next few years we can drive the journey faster.” Intriguing technology While the opportunities provided by fintech are evident, blockchain is an intriguing technology that is yet to have practical application for Mastercard. “Blockchain is an interesting technology that could have a significant impact on the economies of Africa,” Prasad says. “We believe that it has some very significant potential in terms of cross-border payments by making them significantly faster and cheaper. The web of correspondent banking that’s in place globally today means that if I want to send money from Nairobi to Dar es Salaam, for example, it’s not a straightforward transaction because the money goes all the way to New York before arriving at its intended destination. Blockchain could be used to dramatically cut the inefficiencies in this process.” Blockchain also has some applications in terms of fraud prevention across Africa. According to Kasper Rorsted, CEO of Adidas, over 30 per cent of the company’s merchandise on sale in Africa is counterfeit, but it is very difficult to determine which products are real and which are fake. Blockchain could help merchants and customers alike to identify the fakes, says Prasad. “We believe by leveraging our connections to merchants you can actually provide digital providence so a consumer knows that they are buying an authentic product,” he says. “Mastercard has built its own blockchain and we are working with some global partners to proof test it. The technology can certainly create efficiencies, speed up transactions, reduce costs and to bring in new business models. “However, we are very mindful that blockchain is one of the most hyped technologies out there so we don’t want to get carried away about its capabilities.” In the meantime, the firm continues to implement its plans to expand its offerings in the countries that it already operates in, and it is also looking to enter into the remaining 14 countries in sub-Sahara Africa. One key market the company hopes to target is Ethiopia, which is undergoing political and economic reforms under the stewardship of Prime Minister Abiy Ahmed. “We see Ethiopia as one of the most exciting opportunities for us in Africa because, with the opening up of the economy, there is potential to tap into a population of over 100m people,” concludes Prasad. This article was first ran on African Business Magazine.
