Emerg­ing Al­ter­na­tive Pay­ment Meth­ods

T-pay Of­fers a So­lu­tion to On­line Pay­ment Is­sues in the Re­gion

Arabnet - The Quarterly - - Content -

An in­ter­view with Sa­har Salama on the di­rect billing so­lu­tion of­fered by T-pay

Pay­ment is­sues are a ma­jor ob­sta­cle for the growth of the e-com­merce sec­tor in the Arab re­gion. With a lack of trust in on­line trans­ac­tions, con­sumers revert to cash on de­liv­ery as a safer op­tion. For mer­chants, this trans­lates into high rates of re­turn and re­duced prof­itabil­ity. But hope is not lost for al­le­vi­at­ing the is­sues of on­line pay­ments. More star­tups, such as T-PAYTM, are step­ping up with al­ter­na­tive pay­ment so­lu­tions.

“In a re­gion where credit card pen­e­tra­tion is low, mo­bile pen­e­tra­tion is high, and the con­ver­sion rate for buy­ing on­line dig­i­tal goods through a credit card is low, we saw a gap in the mar­ket. Cur­rent on­line pay­ment meth­ods are not able to ful­fill the de­mand for e-com­merce and dig­i­tal goods and ser­vices,” says Sa­har Salama, Gen­eral Manager at T-PAYTM.

What is the value that T-PAYTM brings to users? T-PAYTM helps busi­nesses of­fer­ing dig­i­tal goods and ser­vices over­come the set­backs in their growth, mostly due to is­sues of pay­ment meth­ods or the lack of them.

With T-PAYTM, con­sumers will only have to en­ter their mo­bile num­ber to pur­chase dig­i­tal goods or ser­vices, and the trans­ac­tion will be added to their monthly mo­bile tele­phone bill by their mo­bile car­rier, if they have a post-paid num­ber, or will be de­ducted from their ex­ist­ing ac­count for those who have a pre-paid num­ber.

T-PAYTM also al­lows mer­chants seek­ing to reach higher on­line pay­ment con­ver­sion rates to reach all mo­bile users. With the abil­ity of­fered for users to pay for their dig­i­tal pur­chases from any desk­top or mo­bile de­vice through a sin­gle, click-to-buy ac­tion, us­ing a Di­rect Car­rier Billing sys­tem rep­re­sents the ul­ti­mate con­ve­nience at zero cost.

What are the chal­lenges that are slow­ing down the mass adop­tion of al­ter­na­tive on­line pay­ments in the re­gion? There are three main chal­lenges: The first one is the limited reach that e-com­merce and dig­i­tal ven­dors have on the un­banked, and this can be over­come through the telecom­mu­ni­ca­tions op­er­a­tors (telcos) who have a wide reach in their mar­kets.

This brings us to the sec­ond chal­lenge, which is rep­re­sented by the high cost struc­tures of billing at telcos, due to in­ef­fi­cien­cies in op­er­a­tion costs and tax struc­ture. When on­line pay­ment mar­gins are low, the high cost of billing through a telco be­comes a bar­rier to e-com­merce and dig­i­tal mer­chants. The chal­lenge is to find mod­els in mo­bile pay­ments that are cost ef­fec­tive, with a larger reach, of­fer­ing ef­fi­ciency in op­er­a­tions and com­pet­i­tive­ness in com­mis­sion charged.

The last change is to ed­u­cate con­sumers and of­fer them in­cen­tives to use mo­bile pay­ments through telcos.

What are they key fac­tors to achieve crit­i­cal mass adop­tion? The con­ver­gence of ser­vices and part­ner­ships is a crit­i­cal fac­tor. Build­ing mu­tu­ally ben­e­fi­cial re­la­tion­ships with all the par­ties in­volved to find the best so­lu­tions that of­fer value to all the play­ers of the value chain is the way for­ward in the fu­ture.

The sec­ond key fac­tor is of­fer­ing added value for the var­i­ous part­ners, from es­tab­lish­ing re­la­tion­ships with cus­tomers, in­creas­ing user loy­alty, en­hanc­ing brand value and ex­pand­ing the reach.

The third key fac­tor is cre­at­ing a real ecosys­tem where all play­ers work to­gether to of­fer the best qual­ity of ser­vices that will help achieve mass adop­tion of new and ef­fi­cient pay­ment meth­ods.

How do you see on­line pay­ments in the re­gion grow­ing this year? With the to­tal value of mo­bile pay­ments set to reach US$670 bil­lion world­wide by 2015, the Arab re­gion has a huge un­ad­dress­able mar­ket, pri­mar­ily dom­i­nated by a young, un­banked pop­u­la­tion that has no means to con­duct on­line pay­ments. Cur­rently only 22% of in­ter­net users in the Arab world use credit cards, which have a pen­e­tra­tion rate from as low as 1.5% to 8% in most of the coun­tries in the re­gion.

The world­wide mo­bile pay­ment trans­ac­tion value has sur­passed US$235 bil­lion in 2013. The Mid­dle East’s share of this mar­ket is min­i­mal but is ex­pected to grow at a com­pounded an­nual growth rate of 80 per cent un­til 2017, when it will be worth US$27.6 bil­lion.

This growth will change with the cre­ation of an ecosys­tem, value propo­si­tions from all frag­mented play­ers and op­ti­mized com­mis­sion charges that are com­pet­i­tive in the mar­ket. I see that the only pay­ment method that will grow in the re­gion this year is the Di­rect Mo­bile Billing method.

What is the big­gest op­por­tu­nity in on­line pay­ments this year? The an­swer in my opin­ion is di­rect billing. It is ex­pected to of­fer a US$13 bil­lion rev­enue op­por­tu­nity by 2017. It will un­lock the po­ten­tial of on­line trans­ac­tions by un­leash­ing the power of mo­bile mon­e­ti­za­tion.

Sa­har Salama, Gen­eral Manager at T-PAYTM

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