Compared to regions like the United States and Europe, online shopping is still a developing market in South Africa, but Internet usage figures are currently at 4.6 million (9.5% of South Africans are online as of 2008, according to Arthur Goldstuck of World Wide Worx) and are set to grow 13% to 5.2 million people this year.
The small numbers of online shoppers in South Africa is partly due to the fear of credit card fraud, but mainly owing to the fact that many South Africans, particularly the youth, do not have access to credit.
The lack of credit cards in the 14-24 age group (and in the population at large) is what drove the development of MiMoney and the identification of its key target market.
The 14-24 age group, despite not having credit cards, are active online users in South Africa.
While about eight local players have developed or are in the process of developing so-called “Wallets” to enable payments online or via mobile phone, these wallets are, as a rule, linked up to a bank account, or to a credit card, and are restricted in their use to a particular online offering or loyalty scheme.
“What sets MiMoney apart is that it is not simply a wallet, but rather a real electronic currency that can be utilised to make purchases at an increasing number of retailers,” says John Campbell, business manager for MiMoney.
In the USA and in other countries, eBay popularised the use of PayPal, an electronic wallet charged by a credit card. eBay was the first to create a unique trading space between people around the world, whereby even individuals looking to sell just one or a few items could find a global market. Individuals are not necessarily qualified to accept credit card payments; a problem exacerbated by the reigning fear of giving strangers one's credit card details.
PayPal presented the ideal solution for making these exchanges possible because it provided a third party moderator for the fund exchanges. eBay users could exchange products for money, without the credit card risk involved, relying on PayPal to guarantee that the money was available in the buyer's wallet, and would be transferred into the seller's wallet once the goods had been successfully delivered. Funds could be then converted back into real money if desired.
In South Africa, however, the Reserve Bank does not allow the conversion of PayPal dollars into the local Rand, which limits the use of this payment mechanism in the local market. Also, in order to make use of PayPal, account holders must have a credit card.
“In a largely un-banked society, the PayPal model does not present a practical solution. MiMoney addresses these problems by converting hard cash into electronic money, and appealing to the South African consumer by being free from any surcharges and banking fees,” Campbell says.
Customers get MiMoney onto their phones via EFT transfers to the MiMoney beneficiary account; from certain resellers, at Ster Kinekor self service terminals and from multifunction self-service terminals being rolled out across the country. When purchasing from a MiMoney enabled website, the customer simply enters the 18 digit number of the voucher (the micode) and their mobile number into the designated fields on the payment page. Standard Bank then confirms the authenticity of both numbers, and transfers the value from the customer to the merchant's account.
MiMoney works as currency by forwarding the serial number of the voucher and the cell phone number of the user to the merchant. The merchant receives confirmation from MiMoney of the authenticity of both numbers, and Standard Bank puts the money into the merchants account.
The team behind the service was adamant that the product be completely free of convenience charges for the user, so a R100 note converts into a R100 MiMoney electronic voucher, received as a text message on the user's phone, with no leakage whatsoever. The voucher makes it possible for youngsters to pre-book movie tickets via the Ster Kinekor website, mobile site, call centre or at the cinema's self-service terminal without (their dad's) credit card.
Other merchants that will accept MiMoney payments are Mr Delivery, Mxit, eXactMusic, eXactMobile and Kalahari.net with a large roll-out to numerous other retailers, both online, call centre and in store coming soon.
MiMoney's next step is to introduce a wallet which will be loaded onto the phone to make payments more straightforward. It will be possible, for example, for youngsters to start mini-businesses and use MiMoney as the payment mechanism between themselves, their customers and their suppliers. Businesses can convert MiMoney back into hard cash by setting up a basic account with Standard Bank for these purposes.
MiMoney will become the electronic currency engine driving many online retailers and small businesses. It was built to be the interoperable currency used in a number of channels and wallets, rather than designed for just one wallet.
When purchasing ringtones, games and music from eXactMobile and eXactMusic, consumers can now save on the surcharges that are normally incurred when airtime is used for this purpose. MiMoney has plans to boost mobile music sales by cutting out the third party beneficiaries and ensuring only the artists make profits off the sale, resulting in better prices for consumers.
The MiMoney self-service terminals will soon be up and running all over the country and will perform as multifunction terminals, offering not only MiMoney, but also music and airtime, and the opportunity to pay for electricity and water. These terminals will carry no extra transaction fees.
MiMoney has been optimally designed to meet the online and retail payment requirements of the youth, un-banked or credit card-less South Africans, and those who fear to use their credit cards due to a perception of high levels of credit card fraud.
The team behind MiMoney are confident that similar to the uptake of mobile phones in South Africa, and the subsequent learnt behaviour involving the purchase of airtime, punching in the “micode”, sending text messages, and the popularity of MXit across the population, that if the new mechanism works and if it is cost-effective, then people will adapt to it. MiMoney provides the solution to South Africans looking to make electronic transactions securely and effectively, without the demand of having a credit card, a boon in a time when people are nervous about relying on credit as it is.
For more information, see: www.mimoney.co.za
