Here is an article I wrote on the rise of e-commerce in Kenya that was published in this week’s edition of the East African Newspaper. You can read it here>. Below is the full unedited version:

Having worked in Internet services for over a decade, its amazing to see that it has taken over 10 years for Kenya to finally get on the e-commerce bandwagon. There have been many obstacles to  making e-commerce a reality due to factors such as a lack of legislation, adequate internet infrastructure and innovation. However, it seems that 2010 will be the year that all of this changes owing to the rapid proliferation of e-commerce service providers in the country. It would appear that the main catalysts for local e-commerce services have been the ICT Bill, the go-live of the  TEAMS and SEACOM high speed undersea cables, as well as the rapid and widespread adoption of mobile money.

Over the last 6 months or so, several e-commerce service providers have set-up shop and are working frantically to tap into this emerging opportunity. What is interesting to note is that unlike more developed economies worldwide, e-commerce in Kenya and other emerging markets will take a non-conventional route. This is due to the fact that credit cards are not as widely used or as popular in many emerging markets. More specifically, the mobile phone is fast becoming the preferred channel for making payments for products and services. Safaricom’s wildly successful M-Pesa is now used by over 8 million users from all walks of life in Kenya as well as other parts of East Africa. To this end, the bulk of e-commerce service providers are hinging their offerings on mobile money (first) prior to credit cards.

Probably the first local e-commerce service provider to set-up shop several months ago was PesaPal. PesaPal already have three merchant web sites using their services. PesaPal uses mobile money in the form of M-Pesa and Zain’s Zap services at this time. Basically, the way the service works is that one registers as a merchant or a buyer on their service. Thereafter, a merchant is able to sell to buyers on their web site who then pay for products or services using M-Pesa or Zap. The innovative aspect of the service is that PesaPal have managed to integrate the web to mobile money transactions which essentially eliminates the need for more traditional online payment methods. PesaPal is also gradually expanding their payments to include credit and debit cards, as well as PayPal which is a global internet payments service.

Another e-commerce provider who has also started local mobile money based e-commerce services is Intrepid Data Systems. Intrepid Data Systems which hitherto been largely a web agency has launched a product called “iPay”. iPay works in a similar manner to PesaPal using M-Pesa and Zap although as of this writing their web site does not yet indicate how many merchants or buyers are using their services. Their services are a little different from PesaPal in that buyers do not have to register to use it although merchants do. iPay, like PesaPal has also been designed so that third-party developers are able to integrate the service to popular content management systems (CMS) and online shopping carts which is absolutely essential if they are to succeed. Yet another mobile money based e-commerce service that will be going live in February 2010 in both Kenya and Tanzania is Nilipe.com. Nilipe works along similar lines to PesaPal and iPay whereby merchant web sites have been integrated to both M-Pesa and Zap. However, Nilipe.com is positioning itself as a regional player and will offer the service on other mobile networks using their mobile money platforms. Nilipe.com’s focus is also to be as cost-effective as possible so that even very small merchants can access the service for a fixed annual fee. Nilipe.com also point out that a buyer does not have to register to use the service whereas they also do not hold merchant payments on their system and remit directly to merchants.

In addition to the various mobile money based e-commerce service providers, there are others who have opted to go the traditional payments route with credit cards. The most visible of these service providers is I&M Bank who launched their own local e-commerce service over the last few weeks. The service being offered allows locally based merchants in Kenya to sell their products and services online using credit cards. The service has been certified by VISA International and uses Iveri which is a leading South African online payments processing service provider. I&M Bank has already signed up a few clients who represent some of leading brands in Kenya. The main advantage of their service is that a merchant can sell their offerings online worldwide on their system and payments are received locally in Kenya. In the past, merchants would have to set-up e-commerce services internationally which would subject them to high service costs and expensive remittances to Kenya.

Also offering credit card based e-commerce services is JamboPay. JamboPay is an online payment gateway with an embedded micro payment system. Both buyers and merchants are required to register for the service online. Thereafter, buyers have online accounts where they can top-up their balances using debit or credit cards, direct bank deposits, and eletronic funds transfers. Once topped up, buyers can then buy products and services online on JamboPay registered merchant web sites. Apparently JamboPay has around 7 merchants using its services already. A final credit card based e-commerce service provider in Kenya is SleekPay. SleekPay works in a similar manner to JamboPay using credit cards online whilst requiring buyers and merchants to register with them for their services.