Archive for the ‘Platforms’ Category

Emergence of a decentralized digital economy? Snippets from Nigeria and Kenya

Continuing the conversation from the recent posts on app enabled demand redistribution as well as digital platforms being used by informal sector economic actors to boost their own productivity and efficiency, I thought to share snippets from these two recent articles I just came across, as cases in point.

From Nigeria, West Africa: How WhatsApp groups are fostering collaboration in Ikeja Computer Village

“I stay because it has helped my business in so many ways. Right now, from the comfort of my shop, I can reach out to other vendors when I need an item so that when they respond, I know exactly where I’m going to get it.”

And, from Kenya, East Africa: Drivers’ group launches Bebabeba taxi app

As I mentioned in my previous post, anyone can afford to build their own app to manage demand and supply, and, spurred on by the introduction of global players like Uber or Taxify, local drivers’ associations are doing exactly that, except now, its on their terms.

Lessons from African Fintech for the Gig Economy

Earlier this week, I had the opportunity to share my research on the past decade of mobile ecosystem development across the African continent with Dr. Antti Saarnio, founder of Zippie; co-founder of Jolla (developers of the Sailfish OS, among other things).

“We want to test our product first and foremost in Africa because there is an extensive and established informal economy,” he said.

That captured my attention immediately, since few think of the Africa’s vast “informal” commercial operating environment as a strength to be leveraged for competitive advantage, preferring to hope against hope that it will disappear into thin air to be replaced by the more familiar structures of the formal and organized sectors.

And, it got me thinking about the African fintech space, and the lessons it may hold for the rapidly proliferating gig economy in the ‘developed’ world. And, since at this point of time, all I know of Zippie, Dr. Saarnio’s latest venture, is that it’s a blockchain based mobile OS – not the kind of thing that you’d expect to be piloting in Africa – I asked him to elaborate on his thinking a little further.

Easy, he said. Not only does the informal economy dominate, with established norms and coping mechanisms, but its a mobile first and mobile only environment where people are already comfortable with the exchange of value in digital form, be it airtime or currency. People are already incentivized to think about boosting their productivity through newfangled digital tools on their smartphones. More often than not, the younger urban population is educated and tech-savvy, and in places like Kenya, ready to try something new.

I couldn’t argue with his assessment. In fact, I’d take it a step further, based on my own decade’s worth of research into the informal sector’s financial behaviour and cash flow management practices. The developed world economy is beginning to show signs of convergence, in pattern and in the types of challenges faced when attempting to manage in highly uncertain situations, on irregular and unpredictable income streams, often with the very same elements of seasonality – time of abundance and scarcity – as seen in rural Phillipines or India or Malawi.

For instance, Finnish farmers are being driven to use high interest payday loans to tide over the lean times because few other coping mechanisms exist in Finland’s highly formal commercial operating environment. Wedded to the land, they face the same challenges as a farmer in India, Kenya, or The Philippines. Yet no microfinance institutions catering to farmer needs would dream of showing up in rural Finland. Similarly, in the UK, lower income workers, dependant heavily on gig economy apps to generate revenue, can face significant differences in their cash flows from month to month, but again have no recourse but to use their credit cards or high interest payday loans to tide them over. The systems in their operating environment are designed for the past generations’ periodic and regular wages and paychecks, and cannot cope with the irregular cash flow patterns, as prevalent in the informal economy.

That is, the characteristics of the gig economy and the informal economy, when seen from the perspective of the end-user, are more or less the same. Ironically, however, those in the developing world have numerous solutions available to them – albeit informal, social, local – available to them to cope with shocks and volatility. These coping mechanisms have developed over decades (and centuries, in the case of India), hence the well known resilience of the local rural or informal economy.

As uncertainty increases globally, there are numerous lessons to be learnt from the mostly ignored informal economies of the developing countries which have provided incomes and employment for the vast majority of their populations, in times of conflict or peace, making sure that food reaches the urban table from the farms out in the countryside, regardless of the adequacy and availability of either systems or infrastructure. This is one situation where the formal economy’s inbuilt rigidity and dependence on predictability and periodicity are its embedded weak spot at a time when flexibility and negotiability are required to ride the shocks and volatility.

All Hail the Business Model Behind the Global Gig Economy

Uber driver Mohammed, New Delhi, 26th November 2018

The first world’s ardent embrace of the gig economy is already over. Buyer’s remorse is setting in, even though it may have helped global unemployment hit its lowest point in forty years. What will remain, however, is its impact on the usually overlooked Rest of the World, where the ability of an app to drive demand and scale reach, affordably and instantly, is currently transforming informal economies across the African continent, opening up whole new opportunity spaces for the social, mobile, youthful generation. Easy to set up and deploy, this app driven business model offers a flexible and negotiable solution to the age old problem of demand and supply in a mobile first world. My only question is whether it’ll turn out to be as world changing as prepaid mobile airtime?

Africa’s Delivery On Demand Apps are Transforming the Informal Economy

When women in rural Rwanda can buy sanitary napkins and contraceptives, on demand, simply by pushing a few buttons on their phones, you know the digital informal economy is here to stay. And, its not just imported apps and social enterprises pushing this digital commercial activity. The “uberization” of the African informal economy is well underway across the entire continent, inspired in part by the visible success of the now ubiquitous ride hailing apps.

The concept of using your phone to access a product or service, on demand, has taken root as a viable and feasible business model for startups from Angola to Ghana to Nigeria, and Rwanda, of course. And, its spreading beyond the usual suspects to yet-to-be recognized nations like Somaliland as well as it’s far less stable neighbour, Somalia. The impact of this will be felt long after Uber itself has lived or died, as the case may be.

For the vast majority of the workforce in the informal sector, this approach to business development increases their reach and customer base, with net positive impact on their income streams and cash flows. You don’t have to sit and wait passively for a customer to show up if she or he can ping you for an order on your phone. Your discoverability has been exponentially boosted by technology.

Its far to early to gauge the impact on the entire informal economy’s productivity, but certain sectors are already evidencing the effects:

  1. Transportation – of people, of vegetables, of cargo – you name it, you can now find an app to transport it. Startups are responding to the wide variety of local needs in addition to launching Uber clones in their local metros and regions.
  2. Services – grocery shopping, laundry, housecleaning, plumbers, electricians, artisans et al – all of these are coming online, albeit unevenly across segments and geographies depending on the individual startups and their capabilities.
  3. Goods – From consumer products to fresh produce, live goats to tractors for rent; the low costs and barriers to entry of an app that collates and coordinates demand and supply is an easy win for entrepreneurs who can work out the kinks in their operations.

In addition to what the apps can deliver to your doorstep, this “uberization” of the informal economy is also transforming mindsets and behaviour, of both the buyer and the supplier. There are two approaches to leveraging technology to boost your business – doing it yourself via social media platforms, thus building your brand; and downloading an app that takes care of promotion and discoverability for you.

Each has its pros and cons, but from our earliest discoveries whilst conducting user research among social commerce merchants and customers in Kenya, we can see the differences emerge between traditional traders in the informal marketplace, and the tech savvy traders straddling the virtual and the real. Long established business development strategies that worked in the cash intensive informal economic ecosystem are being forced to transform in response to these tech enabled ‘interventions’- whether to the benefit of all is also too early to tell. But if the patterns of mobile phone adoption are any indication, there’s a tsunami of change underway.

From the Caterpillar to the Butterfly: Africa’s Mobile Boom Years Are Over, Here’s What Next

For the past 15 years, Africa watchers have been waiting for her mobile phone industry to reach a critical landmark – almost full saturation of the market. This milestone may be close at hand, as recent news and data show. In June 2018, Kenyan mobile subscriptions reached 98% penetration, a 13% jump over the previous year, the highest ever recorded, even with all the caveats of youthful demographics and many users owning more than one line.

And, it isn’t just Kenya, long known to be early adopters of innovation and technology. The African mobile market, as a whole, maybe reaching saturation point as the latest IDC data shows. Phone sales continue to show signs of decline. Unlike previous slowdowns of smartphone sales1 which were economy related and feature phones continued selling, this time the decline can be seen in both categories, implying the great African mobile subscriptions growth boom may now be over.

Even Nigeria, recently found to have more people living below the poverty line than India, has achieved more than 80% mobile phone penetration, with hopes that the end of 2018 will see 100%.

The number of mobile subscribers grew astronomically in 2017 and its penetration increased to 84% in comparison with 53% in 2016. With an increase in the number of affordable phones entering the Nigerian market and looking at the trajectory of growth between 2016 & 2017 (31% growth year-on-year), there is a strong indication that by the end of 2018, there might be a 100% penetration of mobile subscriptions.2

Healthier West African economies such as Ghana and Ivory Coast have already crossed the magic 100% threshold, as has conflict riven Mali.

Achieving this landmark has not been consistent across the continent, and some countries like Malawi and Chad are still below the halfway mark. However, it is known that Africa may never achieve the same level of penetration as seen elsewhere, given that 40% of the continent’s population is under the age of 163. And so, the current decline in new phone sales can already be considered the signal of a mature market, showing signs of saturation.

From the caterpillar to the butterfly

In a very short generation, Africans have gone from being mostly isolated – from each other, and the rest of the world – to being plugged in, all because of this very powerful device in their hands. The decline of phone sales, or the slowing down of subscriber growth numbers, should be cause for jubilation. The continent is now connected to the rest of the world, and Africans are talking to African across the span of mountains and deserts. Traditional pastoralists receive satellite data informing them of the best locations for forage for their livestock, and they can access insurance in times of famine and drought. Urban youth are trading bitcoins, while their mothers gather in social media groups to trade in goods and information. The entire operating environment of the African economic ecosystem has been transformed.

Where just over ten years ago, Nokia’s greatest concern was how to design ever more affordable and robust mobile devices which could connect people across languages and literacy barriers, now we have a population that has a decade of experience in information technology, regardless of their education levels. Even the most remote or marginalized have seen the phone, and can access its use, through intermediaries and access points. Digital Africa has become a daily matter of fact rather than an unusual achievement for the development crowd. You can see it in the tenor of the research articles, and read the difference between the way the growth of the mobile ecosystem was covered in 20054 and the way its taken for granted now.

The end of an era – double digit growth of the African mobile market – signals the beginning of a whole new phase of development and opportunity – a connected continent, ready for commerce and communication with the world.

Ten years of transformation

Over the past decade, mobile phone ownership has gone from a novelty to commonplace. It has bridged the rural – urban divide, strengthening linkages, both social and commercial. In turn, innovation diffusion pathways have proliferated from the urban centers, and the adoption of new ideas and goods has accelerated, changing aspirations and expectations, particularly among the younger generation. The global African does not need to leave her childhood village in order to speak to the rest of the world or be recognized for her achievements. Social media is there to give him a voice, and a platform.

It is this new reality that has not yet be recognized by the long established experts on Africa and its many varied challenges and unmet needs. The mindset, worldviews, and the consumer culture have changed far more rapidly than the now obsolete snapshot of the poverty stricken, marginalized African that media and researchers base their assumptions and their writing on. Policymakers and programme designers are even less in the know, and the gap between generations has never been wider.

On the upside is a whole new playing ground – my friend and colleague Michael Kimani calls it the informal economy’s digital generation. Young people like himself, graduating with university degrees into a business landscape without the jobs to hire them, are turning to the platform made available by their smartphones to establish themselves and earn a living. In the four short years I’ve known Michael, I’ve seen him grown and evolve into the voice of African blockchain and cryptocurrency, soon to be an educator on the subject, and already organized as the Chairman of the Blockchain Association of Kenya.

“What a great time to be alive,” Michael’s joyful voice still rings in my ear after our call last week. The digital future is all around him, a playground for him to build and make whatever his mind’s eye can envision.

The end of the world for a caterpillar (the decline of sales & subscriptions) is the birth of a whole new one for a butterfly (the global digital African with a powerful computer in his hands).

We need to throw a party and celebrate!

 

1 Smartphone sales, driven by more affordable Chinese brands, may continue to see growth, but as the IDC states, this growth may come from those transitioning from featurephones.
2 Jumia Mobile Report 2018 in Nigeria
3 The Mobile Economy: Sub-Saharan Africa 2018, GSMA Intelligence
4 Cellphones Catapult Rural Africa to 21st Century, August 2005, New York Times

Pondering India’s Cashless Future

Chhotu here accepts digital currency payments via the mobile platform on a daily basis.

His QR code is prominently displayed upfront next to the bottles of sauce, and a sticker displays the icons of all the payment apps acceptable to his Bhim app.

The Bhim system, launched by the Government of India, is a godsend to micro businesses like Chhotu’s – it allows him to accept payments from a wide ranging variety of apps and systems with the use of just one QR code.

Mr. AutoRickshaWallah on the other hand, preferred to negotiate with me in cash, agreeing to an amount upfront, based on my destination than to go through the hassle of using his digital meter.

By law, he must accept digital payments, if asked by a customer. But, he says, this is very rare; he might accept a Paytm fare once a week. The balance is all in cash.

One size does not fit all

The need for cash in hand during the course of each of these service providers drives their payment acceptance behaviour. Chhotu may not need as much cash on hand once he has set up his inventory and supplies for the day, barring the need for change whereupon he can suggest the customer move to a digital option if required. Plus, at the end of his shift at 10pm he’s happier if the bulk of his sales is in digital form for safety and security.

Mr Autorickshawallah, on the other hand, feels the need for cash available to purchase fuel, food, and pay out wherever required for parking or other purposes (like the police!).  He’s on the move and the signal may or may not work when the time comes for him to accept payment.

Digital adoption is unevenly distributed

Their customers are also from different demographics. Where Chhotu is set up, the market is full of young people with disposable income, out for the evening with their friends. Hearsay has it that mobile apps are selected and used based on their marketing incentives – most offer cashback on digital payments as a driver for user acquisition, but users have gotten clever and download them all so that they can take advantage of different promotions and offers to maximize their benefits.

Mr Autorickshawallah’s customers come from a wider range of demographics, and not as likely to be as comfortable juggling digital payments as Chhotu’s youthful crowd. He’s in his vehicle and on the move, and must ensure the payment gets made, unlike Chhotu who can take the risk of waiting since he and his stall aren’t going anywhere.

Is Cashless in India’s Future?

While digital payments, cards, and mobile apps were certainly far more visible than ever before, and definitely since the demonetization of two years ago, there is a very long way to go before cashless becomes as broadly accepted and mainstream as mPesa in Kenya. Unlike mPesa, the Indian digital currency ecosystem is linked intimately to bank accounts, and thus, there’s an entire ecosystem of services and goods providers that needs to shift over to the formal economy and its financial institutions before cashless becomes seamless at the borderlands of economic strata and demographics.

The current formal financial ecosystem is not designed to address the needs of the informal and unorganized sectors. And this is the iron that post demonetization analysis shows was not struck while it was hot enough to enable the broader change in culture and behaviour to stick once currency was back in circulation.

Lessons from the Informal Economy: Managing on Irregular Payments in the Gig Economy

Last week, an unusual report was released in Great Britain. Lloyds Banking Group (LBG), together with the Resolution Foundation, addressed the question of earnings volatility in the UK, a first for a developed country with a formal economy. Their research and analysis made use of anonymised transaction data from over seven million LBG accounts. That is, technically speaking, the financially included in the erstwhile first world.

To their surprise, accustomed as they were to only considering income changes on an annual basis, three-quarters of all workers did not receive the same paycheck from month to month – the problem being most acute for low-paid workers in the gig economy or on zero-hours contracts.

As the Guardian, when reporting on the household financial management behaviour of gig economy workers discovers:

The Resolution Foundation found that for those on the lowest annual incomes, the average monthly fluctuation in pay was £180 – which can make the difference between paying the rent or feeding the family.

As my research over the past decade, on the financial management behaviour of the lower income demographic (also known in older publications as the Bottom or Base of the Pyramid) in the informal and rural economies of developing countries has found, irregular and unpredictable cash flows from a variety of sources is the norm.

What is different here, however, are the coping mechanisms.

Many are forced to turn to crippling payday loans or high-cost credit cards to make it through to the end of the month

In the developed country context such as the UK, gig economy and lower income workers have no recourse to customary and established coping mechanisms that can be seen across the developed world, from rural Philippines to upcountry Kenya.

Seasonality in rural regions, closely intertwined with the natural year and its direct impact on farming activities is a recognized and known fact of life. Incomes are seen to change by as much as 50% between the high and the low seasons. And, among urban traders and merchants, festivals and harvests mean peak consumer activity, and everyone prepares for the rush.

Knowing this, the informal economic ecosystem leverages social networks and trusted relationships to carry them through hard times and the low seasons; looking forward to the peak sales periods and the harvests to cover the difference. Numerous risk mitigation behaviours and coping mechanisms are established within households, customized to rural and urban contexts, as well as the context of the primary income source. These were the same coping mechanisms heard to be in use among India’s informal sector when hit by the liquidity crunch of the demonetization of 2016.

Just the way you can purchase one single cigarette or a 100 grams of shredded cabbage, depending on what you have in your pocket, you can find ways to adapt your daily lifestyle to your income in the flexible, negotiable, and reciprocal people’s economy of the Global South. The informal economy’s commercial operating environment is designed to maintain the dignity of their customer base.

These options are not available in the UK, or other developed and advanced nations of the Global North. Thus, gig economy workers forced to manage on unpredictable and irregular income streams from a variety of sources in the formal economy struggle to afford their groceries and expenses. In fact, I’d be curious to know if prepaid mobile subscribers (pay as you go) are increasing in proportion to the precariousness of employment and volatility of income discovered by the analysts at Lloyds.

If, as the researchers at the Centre for Global Development have found, the gig economy and the informal economy are the present, and the future of work in Africa, then there are lessons from the established customs and coping mechanisms which can inform beneficial solutions and tools for the developed world, for the UK, and for the Global North.

It’s time we recognized the truth about the future of work in Africa: it isn’t in the growth of full-time formal sector jobs. The future of work will be people working multiple gigs with “somewhat formal” entities. This is already true, and it will be for the foreseeable future.

This is true for the whole world now, not just Africa. And, it will change the way we think of platform design, payment plans, as well as policy frameworks, for our near and emerging future.

Chinese investments in African tech will transform the fintech landscape

A recent article brought to my attention this report on the pattern of funding experienced by fintech startups in East Africa and India with rather damning results. 90 percent of the capital invested by “Silicon Valley-style” investors went to startups, technically in East Africa, with one or more North American or European founders.

These results put an entirely different spin on more recent articles on the rise of African fintech and the millions of dollars raised by startups in Africa. Village Capital, too, has been making an effort to promote their recommendations for structural change in the ecosystem in order to enable the emergence of hundreds more fintech and DFS (digital financial services) startups deemed necessary to transform the economic landscape in Africa.

But the challenge, as framed by this snippet from the report, will remain, as it “reflects deep cultural trends in American life”, of bias, stereotyping, and inbred prejudice. So called “first world” technology such as artificial intelligence is already dealing with the problem.

China’s interest in African tech, particularly trade related such as in commerce and payments, is being noticed

Simultaneously, and recently, I came across this op-ed for the WEF making the case for why the tech sector is China’s next big investment target in Africa.

Given China’s position as a leading and rapidly accelerating technological superpower in the world, making strides especially in the fields of logistics (smart cars, drones, e-commerce) and energy (solar panels, smart metering, etc), it makes sense that the most logical industry for the next stage of Sino-Africa collaboration is technology.

But that’s not fintechs and DFS startups, you say, comparing these apples to the Village Capital’s report on oranges?

Perhaps this is why Alibaba Group, the unparalleled pioneer of e-commerce and payments in China, has started to show an interest in Africa. Not only did they collaborate with UNCTAD on the eFounders programme to train over 100 African entrepreneurs in the next couple of years, they recently announced a fund of $10 million to invest on the continent over the next 10 years. Furthermore, Alibaba’s subsidiary Ant Financial has signed a partnership with the United Nations Economic Commission for Africa and the IFC to promote digital financial inclusion. While these are preliminary steps, we are hopeful for more serious commercial involvement in Africa from a company with a $500 billion market cap.

DFS, DFI, what’s the difference between digital financial services for financial inclusion and digital financial inclusion? The target is clear. And been noticed from the other side, as this rival opinion piece in the Financial Times shows, albeit with a greater sense of urgency and panic in the tone and style. It may also explain why Village Capital woke up this week to trumpet the results of their analysis on funding patterns from over a year ago. From the FT:

The Trump administration has made a perceived global rivalry with China the centre of US foreign policy. This competitive stance has coloured the view of African countries in Washington and a tale of Chinese mercantilism in the region has come to dominate the narrative, under which China greedily demands privileged access to Africa’s natural resources in exchange for no-strings-attached infrastructure financing.

But that story is outdated and fails to capture an emergent area of true competition — that among US and Chinese tech giants.

Given what we’ve seen in the Village Capital report linked in the first paragraph, will Chinese funding patterns be any different? Two key factors are being highlighted by both sides:

Read On…

Will the global trade war lead to more sustainable (and local) consumer products?

In a study titled “Competing In the Age of Multi-Localism”, ATKearney said mounting trade tariffs and other pressures have upended the global strategy – think mass-market production and achieving economies of scale – that has been a business hallmark since the early 1990s.

“It’s no longer a viable strategy for many companies,” the study said. “The age of multi-localism has arrived.”

The above snippet is from a recent Forbes article and caught my attention immediately. The implications for global value chains, not to mention product development, manufacturing, and the logistics of distribution are enormous.

“A one-size-fits-all business strategy across markets appears to be more unworkable now than ever,” the study said.

Its taken a wee bit more than a decade, but this is possibly the best news I’ve heard in a long time. The report from AT Kearney is available here and my previous musings on emerging markets, globalization, and product development can be found here.

This conversation with continue.

The Mobile as a Post Industrial Platform for Social and Economic Development: Top 3 Trends in Africa

Source: CHI2007 “Reach Beyond” http://www.chi2007.org/attend/plenaries.php

Just over a decade ago, in San Jose, California, I was invited to speak as the Closing Plenary for the CHI 2007 25th Anniversary Conference. The theme was “Reach Beyond”, as this was the 25th Anniversary conference of the Computer Human Interaction society, and as the closing plenary, I was tasked with articulating the vision for the next 25 years of man machine interfaces. This was in May 2007, mere weeks before the launch of the iPhone. That’s important to note, because Apple’s little phone transformed the world of humans interfacing with computers in its own way. You must remember that back then we didn’t really send texts in the United States, and the mobile and it’s role in society had nowhere near the transformational impact it was having in the developing world. mPesa had just begun to catch attention in Kenya – particularly the Central Bank’s – and there were no such thing as apps or smartphones. This is the background and context in which I gave my talk, which sank without a trace in the history of impactful communication ;p

It was in April 2006, that I first wrote about the mobile phone as a post industrial platform, and as a driver for innovation, in its own right. Two snippets:

One of the recurring patterns I’ve been seeing of late is how mobile phones – not just the handset, but the system as a whole, have become drivers of innovation in emerging economies.
[…]
Not just in India or China; this phenomena of the handphone – freed from the shackles of state sponsored infrastructure required for landlines in the majority of these developing nations – has demonstrated its effect in improving the micro economy and providing opportunities for the entrepreneurially minded in hitherto backward regions around the world.

Today, 11 years and 4 months later, I would like to highlight the undeniable impact of the mobile platform in Africa’s development story by introducing the top 3 trends that are sweeping across the continent (and capturing global imagination) very briefly in 3 paragraphs below:

  1. Fintech solutions – Whether its mobile money transfers, instant mobile loans, or cross border payments and more complex back-end solutions; the financial services industry is being disrupted by the mobile platform, on smartphones and on feature phones. Mobile technology is rapidly becoming the default solution delivery system for the last mile of money in sub Saharan Africa.
  2. Solar power – This in turn is accelerating the rapid adoption of small solar systems for domestic energy needs in offgrid locations; a new pay as you use or “prepaid” solution for acquiring solar powered products and for charging can be seen to be launched in a yet another African country every month it seems. My favourite example is the solar powered cold room lockers that one can rent via micro mobile payments. In another year, I expect that one could replace the word “solar” with utilities, with the visible increase in solutions for potable water, and a plethora of government services shift online to the platform.
  3. Agritech – From the very basic “farmer information systems”, agritech is rapidly evolving to more nuanced and complex solution delivery via the ubiquitous phone. Whether its using the smartphone capabilities to identify the army worm pest infesting the fields, or decision support systems that let you choose the ideal species of tree to plant, given soil and drought conditions, agritech is a newly emergent megatrend on the mobile for African agriculture.

And the future, the next ten years? What will 2027 or 28 bring about? And, will we still be using the handheld device we have in our pockets right now? I can’t see it yet, but my gut tells me that easy access to powerful computing within reach of each and every one of us is something that will only be transformed but not replaced.