The latest report from the GSMA exposes a massive gap in mobile internet access, fueled by the unaffordability of smartphones in low and middle-income countries (LMICs).
Access to the digital economy via a smartphone provides essential mobile services that are vital for supporting economic activities, enabling e-commerce, online education, and digital healthcare services, to name but a few.
One in five mobile internet subscribers worldwide still use a 3G smartphone or feature phone to access the internet. This number grows to more than a third in Latin America & the Caribbean and MENA, and almost two-thirds in Sub-Saharan Africa.
Affordability (particularly of internet-enabled handsets) remains the greatest barrier to mobile internet adoption across the countries surveyed by the GSMA, especially in Sub-Saharan Africa.
How Fintech Solutions are Driving Digital Inclusion
Unsurprisingly, this has created a thriving African Fintech market where companies such as Watu, M-Kopa and M-Pesa are growing rapidly thanks to their flexible digital micropayments, creating payment schemes to millions of new customers for whom owning a smartphone was previously out of their financial reach.
Watu aims to redefine financial inclusion for millions across Africa. From transforming Boda Boda riders into business owners to championing sustainable mobility with electric motorbikes and smartphone financing, Watu is empowering a whole new consumer demographic with its mission for digital inclusion.
As part of this effort, the company recently began offering smartphones on a Buy Now Pay Later (BNPL) model. Watu Simu provides affordable and convenient Samsung Galaxy smartphone financing options and is working with Samsung to offer its customers devices pre-loaded with the features they need to markedly improve their daily work and home lives.
Empowering Consumers Through Device Financing
Effective device financing or Buy Now Pay Later schemes require collaboration across the entire ecosystem; the financier scores the customer via a loan management system and provides access to credit, the mobile operator or money partner facilitates the repayments, and a locking partner will help mitigate risk and delinquency of those repayments.
The channel also needs to be on board with a consumer-facing retail footprint to access mobile devices and, often, a team on the ground to distribute and onboard customers to the program. The final element is the OEMs who enable locking technology on the devices and work with us, the locking partner to enable micropayment security.
Understanding the population’s personal income situation is key to providing purchasing power that previously didn’t exist to underbanked individuals. 90% of adults across Africa’s emerging markets earn daily incomes rather than regular salaries, meaning traditional credit options are not an option. The introduction of micropayments from these providers means customers can opt into a model where they pay daily based on the whole cost of the item divided by 365 days, instantly changing the affordability and accessibility of the device to them.
Financed phones are a productive asset in people’s lives and a key part of how everyday earners generate income and participate in the digital economy. Small market stall traders, for example, are finding their business can double overnight thanks to newfound access to digital payments and banking, social media advertising and credit to buy stock, all via their new smartphone. This is a trend seen across all LMICs – one in three smartphones sold in India, for example, are on a financing plan.
Building Trust in Micropayment Systems
The uptake and success of all these services relies not only on creating enough awareness of their existence, but also in generating trust in what is, for many, a completely new concept. It is hard for consumers to understand and value the benefits given they have never previously owned a smartphone or accessed the internet, so the idea of managing one’s finances, business and lifestyle, all via a mobile device can take some convincing.
There are also barriers to overcome from the existing negative perception from some consumers regarding fair financing practices in emerging markets. Mainly created by over-complicated consumer barriers to entry. For example, two of the most well known brands, Safaricom’s Lipa Mdogo Mdogo and Vodacom’s Easy2Own, both require a user to be an active customer of an MNO for at least one year before they qualify for device financing and satisfy credit scoring criteria.
Convincing Retailers
The entire system relies on a wide variety of retailers and financiers offering budget-friendly micropayments; however, all too often, payment defaults and fraud remain significant risks for high-value devices.
Trust and fair financing practices lead to “stickier” customers, repeat business, and stronger brand loyalty.
Device locking technology developed by Trustonic is a crucial enabler of device financing. It allows mobile operators, financiers, and retailers to safely offer credit to customers, including those who are unbanked or not under the credit system. As a result, financiers can reduce their risk of bad debt and safely offer micropayments by ensuring repayment.
Trustonic’s Telecoms Platform is a SaaS solution that improves payment behavior. The technology works by using the science of ‘nudge’ to remind individuals to pay bills on time via notifications and customized messaging. The customer is nudged into taking action by gently ramping up the use of persuasiveness techniques and the urgency of the messaging.
This means operators and retailers are more likely to succeed at influencing users to pay their bills on time. If a customer misses a deadline, the solution enables operators to restrict access to certain features on the device, such as their apps, until payment is received.
As a final measure, if a customer still does not pay, operators can lock the device completely. Unable to use their device, the incentive to pay what they owe increases significantly, and the likelihood of future late payments decreases. Once the bill is settled, the phone can then be unlocked and made accessible to the user again.
For those yet to offer Device Financing, Trustonic allows them to do it safely, mitigating non-payment risk, keeping interest lower, and making devices even more affordable.
Micropayments Enhance the Entire Ecosystem
Our Telecoms Platform is a completely transparent process with clear benefits for all parties, supporting an ecosystem allowing consumers access to previously inaccessible devices. It builds trust and brand loyalty while helping them begin to build up a positive credit score. This, in turn, leads to ongoing satisfaction and, ultimately, retaining and growing the customer base.
Closing the usage gap is estimated to add $3.5 trillion in total additional GDP during 2023–2030. More than 90% of this benefit ($3.2 trillion) would accrue to LMICs, given they account for the vast majority of the unconnected.
As more operators, retailers and financiers begin to embrace device financing via micropayments, it unlocks internet access for millions in regions previously deemed unprofitable, improving rates of digital inclusion and, ultimately, quality of life for millions of customers who need it the most.
