The African ecommerce ecosystem is displaying signs of steady growth. In 2020, the restrictions that were imposed out of necessity accelerated this upward trend, as more and more local players oriented toward launching online stores.
Cross-border ecommerce is gaining ground as well, with African consumers displaying a big appetite for items from abroad, which are mainly ordered via ecommerce platforms. Online commerce between the African markets has a massive potential, and it is expected to further develop in the next ten years, particularly with the creation of African special economic zones, as well as the emergence of streamlined custom processes and lower custom fees. Our goal here, at Jumia, is to become the go-to online platform for African shoppers by addressing this future online cross-border market.
In the short term, we expect cross-border ecommerce coming from China to continue to grow – and in the long term, we believe that cross-border trade from the US and Europe is also promising. We will keep on addressing the gap in supply of consumer goods in order to always better serve our consumers’ needs.
Taking the pulse of the African markets
Africa has a large share of unbanked population, according to the World Bank, with 62% of Sub-Saharan Africans not having a bank account – mainly due to poverty, financial illiteracy, and political unrest.
The good news is that technological advancements, smartphone affordability supplied by Jumia, and mobile connectivity have enabled those in the region to manage their money without having to open a traditional bank account. 21% of Sub-Saharan Africans have mobile money accounts, which are used to pay bills, save money, and access financial services like loans. A good case study is represented by Kenya-based M-Pesa (Safaricom), which has played a big role in financial inclusion via mobile banking.
Cash on Delivery remains the most preferred payment option for consumers who shop on Jumia, although the outbreak of COVID-19 has significantly shifted several of them toward digital payments in order to minimise the use of physical cash and further lessen the spread of the virus.
Online payments are still relatively new in many markets, but they are becoming more popular thanks to customer education, safe payment options like JumiaPay, and greater trust in marketplaces.
To drive the initiative, the ‘contactless safe delivery’ option has been implemented on the payment platform JumiaPay. This enables consumers to make prepaid payments for products online and have them delivered without direct body contact or cash exchange with the delivery agent. Moreover, we have adopted a local approach in each country where we operate our payment solution JumiaPay, we offer all relevant local payment methods (e.g. local cards, mobile money, bank transfers) and work with multiple local acquiring banks. This localised setup enables us to optimise both our payment success rate and cost efficiency.
Key challenges for marketplaces in Africa
Some of the challenges encountered by the African marketplaces when it comes to payments and financial services in general are:
Cash is still king in many of our markets, which obviously makes Cash on Delivery a more ‘natural’ option for our customers. We are still in an early stage of the online payment adoption in most countries, it will take time to win the trust of our users and convince them to test the convenience of online payments. The good news is that when our customers use our JumiaPay payment platform once, they usually keep on using it.
Consumer credit gap, and especially the lack of credit cards in circulation (except in some countries like Egypt, which has a sizable pool of credit cards), is making pay later or instalment options difficult to scale. In Latin America, the high number of credit cards has helped marketplaces like MercadoLibre to grow, by offering payments in 3/6/12 months. It is one of the reasons why many alternative lenders are launching in Sub-Saharan Africa.
Lower card acceptance rates versus mature markets (cards which are not enrolled for online payment or not 3DS enabled) – many banks are still progressively equipping their customers with secured cards for online payments.
Automation as well as speed of refunds to the cards can sometimes be a challenge (refunds processing can take several weeks, when it should ideally be close to instant).
The lack of standardisation of local regulations, e.g. AML/CFT requirements or licences to be obtained are country specific. The region also has multiple payment regulations that are quite similar, but there are always some specificities that need to be considered.
The lack of structured databases in some markets (e.g. credit bureaux or local sanction lists), making it sometimes more challenging to automate some of our services.
This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.
About Sami Louali
Sami joined Jumia since its launch in 2012, where he served as co-CEO of Jumia Morocco, co-MD of Jumia Marketplace, and most recently as EVP Strategy & Investor Relations. Sami is a French-Moroccan national with a Master of Science from École Nationale des Ponts et Chaussées in Paris, and an MBA from Collège des Ingénieurs in Paris.
About Jumia
Jumia is a leading ecommerce platform in Africa. Jumia is built around a marketplace, Jumia Logistics, and JumiaPay. The marketplace connects hundreds of thousands of sellers to millions of consumers. Jumia Logistics enables thousands of partners to deliver millions of packages. JumiaPay facilitates online transactions for Jumia’s ecosystem. We believe that ecommerce is creating new opportunities for SMEs to grow and job opportunities for a new generation to thrive.
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