Pay on Demand can lift millions from poverty–Mastercard

Pay on Demand can lift millions from poverty–Mastercard

March 4, 2020 0 By mykenyancareers

NAIROBI, Kenya Mar 4 – Mastercard has released a white paper revealing that giving people the ability to pay only for what they use, as they need it, can lift millions of people across Africa out of poverty and make prosperity possible.

The paper,
titled Pay on Demand: The Digital Path to Financial Inclusion,
explores how digital inclusion has been proven to provide better access to
financial and other services. This ultimately drives financial inclusion which
leads to improved economic possibilities for individuals and businesses.

Mastercard’s report,
based on research from in-depth face-to-face interviews with consumers across
Nigeria, Kenya and Uganda, shows that a focused deployment of solutions like
Pay on Demand is key to increasing connectivity. However, for these solutions
to function effectively, it is critical that all stakeholders – governments,
Mobile Network Operators (MNOs), financial service companies and regulators –
come together to unlock opportunities to enable greater financial inclusion.

Technology and
connectivity enabled by MNOs initially made digital inclusion possible. Mobile
devices became a viable instrument of digital inclusion when prepaid plans
allowed individuals to recharge for as low as 10¢ at a time. Currently, prepaid
connections are at 98.8% in Kenya, 97.5% in Nigeria, and 99.1% in Uganda with
smartphone penetration in Africa projected to reach 66% by 2025, up from 36% in
2018. Pay on Demand applies the same principle for goods ranging from mobile
phones to solar panels, water filters or laundry machines. The model, often
underpinned by the Internet of Things (IoT), further bridges the ownership
divide by providing affordable services and assets, driving the next wave of
inclusion by keeping people connected.

Jorn Lambert, Executive Vice President,
Digital Solutions, Mastercard, said: “The growth of digital technology has
presented people in Africa with access to innovative, affordable solutions that
help them meet their basic needs, ultimately leading to greater access to
capital that can scale businesses and increase prosperity. The Pay on Demand
model is an incredible example of this, which has already empowered millions of
people by making solar energy more accessible and affordable. But now, with the
expansion of Pay on Demand to any connected device like smartphones, water
filters or white goods, we have a real opportunity to positively impact the
lives of a billion people, in the same way the telecoms industry did two
decades ago. To further scale the model effectively and create a digital
economy that works for everyone, key players in the ecosystem must collaborate
to drive a new wave of inclusion through connectivity and smart devices.”

Demonstrated Impact

By giving customers the flexibility to pay for
services via their mobile phones on terms that work for them, Mastercard’s
research shows that Pay on Demand business models resolve real pain points.
This can be the difference between being able to switch on electric lights in a
home, and an entire family living with paraffin fumes from a single lamp. The
need for off-grid solar lighting products is particularly prominent in
Sub-Saharan Africa. Sales of off-grid solar lighting products topped 2.25
million (937,618 through Pay on Demand) across the region between January and
June 2019, higher than any other region in the world.

In all three countries
where users were surveyed, access to basic necessities was the number one
driver of Pay on Demand use, with electricity top of mind for all users. The
main aspirational products acquired through Pay on Demand were digital TVs,
followed by smartphones. These assets are vital to connecting people to the
larger world, whether it’s by powering electric devices or having internet
access so a child can do their homework.

Although smartphones
are highly coveted through Pay on Demand, the desired price for them amongst
users differs across all three markets. It is $200 – 250 in Uganda; $55 – $110
in Nigeria; and $100 – $250 in Kenya.

Mastercard’s research
also shows the far-reaching impact of Pay on Demand. “We were touched by the
emotional benefits that switching on a light can bring, or the dignity that
comes from having a phone that is always charged. As the Pay on Demand model
scales, more consumers will gain access to useful products that support
happier, healthier lives as well as financial services to secure their future,” Lambert
added. 

One of the indirect
benefits of Pay on Demand is that it helps individuals and micro, small and
medium enterprises (MSMEs) establish a digital transaction history, making
other financing solutions accessible, such as credit, loans and insurance. By
having relations with formal financial institutions, MSMEs can benefit from
convenient and secure payment methods, and obtain financing to help them scale.

Gaurang ShahMastercard, Senior Vice President, Digital
Payments & Labs, Middle East and Africa, said: “There are 44 million MSMEs
in sub-Saharan Africa, 97% of which are micro enterprises. Forthem,
the assets made possible through Pay on Demand create improved opportunities
through increased connectivity, and new revenue opportunities through being
part of a financial system. This initial access to financial services is the
first step on the road to prosperity and can help realize the true potential of
inclusive growth across the continent.”

A wide range of
products and services are available through Pay on Demand models, including
solar lanterns, grid components, smartphones and agricultural equipment.
Leveraging its Quick Response (QR) payment technology, Mastercard works with
M-KOPA to provide a simple and inexpensive way to power the homes and
businesses of Ugandans through a Pay on Demand solar program. The market for
Pay on Demand solar home systems is the most mature of all the industries
leveraging Pay on Demand models, and often acts as a test case for how the
model can be applied to other products and services.