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TechInAfrica — As Facebook plans to launch its digital currency, Libra, it has been made sure that the African market emerges. But it is obvious that Libra would be surpassed by Chinese companies that have strong market share and effective distribution channels in the continent’s markets, where financial inclusion still needs to be encouraged.
Chinese companies have risen as strong operators in Africa. They have prevailed in defeating the region’s connectivity difficulties to get to unreachable customers. They are building the platforms to offer financial services and could in the long run branch out into digital currencies. Facebook needs to watch out for Chinese companies that are growing rapidly in Africa to guarantee Libra’s long-term success in African markets.
Apprehending constraints on internet access, Facebook’s large number of accounts in Africa may not convert into solid user engagement. While smartphone penetration is surging in the continent, Africans are still inconsistent in online activity.
The blame is also mainly put on high costs. Prepaid mobile data plans in African markets reflecting some of the world’s most expensive internet plans and it makes regular usage unaffordable for them.
Recognizing that high internet costs impede its user growth and engagement, Facebook has invested in services and telecoms infrastructure to increase internet access. In 2016, the social network offered free internet. Sporadic online access among African users could be the obstacle to Libra’s widespread implementation.
Another hindrance is Africans tendency to get online via mobile phones. Chinese companies are providing the majority share of devices. Chinese companies act as a gatekeeper in getting Africans online and use devices as a distribution and promoting channel for new services. Take Transsion as an example. This biggest handset manufacturer in Africa dominates 33% of the smartphone market and 60% of the feature phone market and supplies its phones with its own pre-installed apps.
Utilizing this strategy to decrease services is reminiscent of Apple, which uses the iPhone’s 39% market share in the US to rotate to services via its App Store. If Transsion happened to pursue what Apple’s competitors said as monopolistic behavior, Libra could face difficulties in getting into African consumers.
Chinese companies bring an abundance of experience in cashless payments that would be a competitive advantage if they launch a digital currency in sub-Saharan Africa. In China, Tencent’s WeChat and AliPay completely dominate the economic scene that cashless payments in Yuan are the default means of exchange. This speaks to a market 50 times larger than a similar market in the US.
Additionally, partnerships between African mobile-money providers and Chinese payment platforms, reflecting large African-Chinese trade streams, fill in as a potential on-ramp to capture future African users of Chinese digital currency.
Reminiscing the hype of Chinese software and hardware in Africa through companies like Transsion and TenCent, and the tendency of mobile money utilizing, it is not difficult to envision sub-Saharan Africa is among the first places to use Chinese virtual currency. Facebook can look to it and to other Chinese players in fostering the acceptance of Libra in Africa.
Source: theafricareport.com
