How Africans can now dial into phone ownership
Nokia was known to be innovative, until it misjudged the smartphone era. Its latest software may help millions upgrade to better phones
When you buy a car and finance it, the asset you borrow the money against is the car. The same is true when you mortgage your house. Using the asset you are buying as collateral is part of the system.
But what happens when you are too poor to participate in the financial world, as millions of Africans are? What happens when a bank account and its monthly fees are too expensive? If you can’t even afford a bank account, how do you get into the financial system so you can buy yourself a new phone?
Phonemaker Nokia has an idea — and the software to make it work. Why not use the handset itself as the asset?
It’s an obvious idea but a reasonable person, such as a banker, might ask: how do you prevent the renter from running off with it?
That is where Nokia’s new software, called HMD Softlock, comes in. Loaded onto the phone, it can lock the device if instalments aren’t made. Until now, it has been too complicated to use.
This is a new way to finance a phone, says Florian Seiche, CEO of HMD Global, which makes Nokia’s handsets. “Using direct consumer financing, you only have to pay a part of the purchase price upfront. And then you do little instalments over time, which makes the customer base that can get access to a smartphone much wider,” he tells the FM.
Seiche last month visited SA and several other African countries, where Nokia still has a strong brand and sells millions of entrylevel phones. In 2021, for the first time, Nokia sold more smartphones than feature phones in SA (though the number was marginal, at 51%, according to research outfit World Wide Worx).
There is certainly room for growth in smartphone sales in Africa.
It’s often forgotten how widely used feature phones still are in Africa, in many cases because people are just too poor to afford a smartphone, or to access credit.
“If you want to provide credit to someone who otherwise wouldn’t qualify, you need to have the ability to secure an asset that you loan against, and in this case the phone itself is the asset,” says Seiche.
“I think this service, which sees consumers financing their own devices, is an impressive development here.”
HMD says its software is the missing link in the credit process.
“The one important enabler is a remote-locking capability, because only then can you really give that asset to a consumer who otherwise wouldn’t qualify for traditional credit,” says Seiche.
For first-time smartphone buyers, this is a boon that wasn’t previously available. Ultimately Seiche expects people will buy tablets or other devices, once they have experienced this form of credit.
“Africa is the region where we can demonstrate the best of what a smartphone can do for a current feature phone user,” he says.
“This has been top priority for us for a long time, but only in the past two years have we really seen that momentum become a reality. Across the continent, we see great opportunity to build on the success we’ve had in SA and a few other markets.”
At one point Nokia was selling three out of every five phones sold in the world, but that was the 2G feature phone era.
Then, like so many dominant firms, it overestimated itself and underestimated the desire for more functional smartphones. It was caught napping when the iPhone launched in 2007, and never managed to catch up. Stephen Elop, who was Nokia CEO from 2010 to 2014, infamously likened the firm to “a burning platform”.
Nokia was bought by Microsoft, where Elop was head of the Office business unit. He adopted Microsoft’s mobile operating system instead of becoming just another Android manufacturer. It backfired spectacularly, as did Microsoft’s $7.2bn purchase of the Nokia handset division in 2013.
Two years later, Microsoft wrote off that amount and retrenched 9,000 people.
Out of those ashes, a bunch of Nokia staff formed HMD Global and licensed the handsets from Nokia, which still makes network equipment.
The second coming of Nokia has played to its low-end strengths, while including high-end technology in its simple, elegant and cost-effective handsets.
To differentiate itself from other Android phonemakers, it offers a simpler experience of Android, without the software “skin” that other manufacturers include.