News Column

Making It Easier for Clients to Do Business With You

July 11, 2014

Management Magazine

Businesses globally have been using electronic payment systems as a way of making it easier for their clients to do business with them. Advanced economies like the US and Canada use electronic payments more than cash as emerging economies such as Brazil and Mexico seek to increase efficiency by linking cash and e-payment systems.

Nigeria'sCentral Bank has adapted a policy aimed at reducing the use of cash. This is expected to drive the development of a cashless payment system so as to reduce the cost of banking services and improve the effectiveness of monetary policy. In East Africa, Kenya has been a leader on mobile money, with Safaricom's M-Pesa. In 2012, the Commercial Bank of Africa launched M-Shwari, a paperless banking service that allows customers to open and operate an M-Shwari bank account through their mobile phones, via M-Pesa, without having to visit banks or fill out any forms.

DansonMuchemi, chief executive officer, JamboPay clarifies that it is not entirely possible to avoid exchange of physical cash. He says a system that majorly uses electronic money and also allows for the use of cash can exist and is referred to as a cash-lite system. On the other hand, a cashless system is one that allows businesses or individuals to perform transactions through electronic payment and there is no physical exchange of cash.

Make your business cash-lite

A firm can set up an in-house system that processes payments or can outsource the function to firms that offer payment solutions. Setting up an in-house processing service requires setting up a secure server - a computer that uses encryption to make it hard for intruders to intercept confidential information. The site will then need a system that will manage the security of a message transmission on the internet through the use of an internet protocol known as Secure Socket Layer (SSL). SSL uses a cryptographic system that uses two keys to encrypt data - a public key known to everyone and private key known only to the recipient of the message.

The site will also need to be registered to a digital authentication site which will issue it with a digital certificate which validates that the site receiving customer information is the right one. This will ensure that customer information is encrypted and that the site is legitimate.

A firm will then need to purchase or develop shopping software that will allow and enable customers to choose a product and add to a shopping cart after which they can click a check out link that will take them to your secure server where they can enter their credit card information. Finally, you will require systems that will process the customer's credit card information entered to the server and validate it with the card provider and transfer the funds to your internet merchant bank account.

Written by MANAGEMENT MAGAZINE // July 11, 2014 // 0

The option of outsourcing

On the other hand, you can outsource the online payment solution function to another firm and give them permission to accept cards and other form of electronic payments on their site.

When a customer enters his information on your site when buying goods or services, the outsourced payment service authorises the transaction and transfers the funds to your account. They will then charge a service charge or a processing fee for every transaction done. Muchemi cites efficiency, speed and traceability of transactions as the main advantages of a cash-lite system. This will foster economic gains for countries as it will mitigate against corruption through manual handling of cash which is also associated with higher costs and more risk of loss. Corporates and Governments will be able to deploy resources easily and more effectively. "People can be able to trade and sell anywhere in the world through e-commerce as a result of the link between the suppliers and consumers being broken down to a phone or computer screen." He says.

A cash-lite system has many opportunities to offer. The broken link will greatly enhance and ease the volume of transactions in Business to business (B2B) commerce - business conducted between companies, Business to Consumer (B2C) - business between firms and the consumer, and Business to Government (B2G) which refers to transactions conducted between firms and government. This will be done with minimal exchange of cash.

Growth of payment companies

This system also provides more opportunities for firms offering online payment solutions such as JamboPay, Network Security provider and professional IT training providers that will in turn lead to more job creation. "The acceptance and willingness of corporates and public institutions has been overwhelming and has seen JamboPay grow in five years in terms of operations and expand to other countries such as Tanzania, Rwanda, Uganda and Senegal," says Muchemi. The company recently signed a revenue collection contract with Nairobi County Government; it also has contracts with National Hospital Insurance Fund, Nairobi Water, Nation Media Group, Kenya Institute of Management among others.

Illiteracy in the use of information technology among a majority of the local people is seen as a bottleneck when it comes to bridging the digital divide. Muchemi advises firms to adapt the agency model to enable them reach more people and create compatibility between the two world in terms of a network of cash merchants willing and able to accept cash for electronic value and vice versa. "We have to review our payment regulations and come up with business models that will enable service providers reach clients from all spectrums of life to enhance the effectiveness of a cash-lite system."

Long-term gains

In response to fears that the high cost of information technology will hamper access of majority of people to the system; he admits that the cost of setting up IT infrastructure is high but in the long run it will lead to a lot of savings and efficiency.

The East African countries according to him can transition to a cash-lite system through investment in the right infrastructure, harmonisation and digitisation of systems and operations that will lead to provision of high quality e-payment services as the market environment is good and ready for such a system. "Attaining an inclusive cash-lite system that maximises network effects and minimises unit costs and offering convenience for the may take time but not forever.

All players such as financial industry, telecom operators and governments will have to work together with a clear vision to transition to from where we are to the future," he concludes.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters