In most countries in Africa, customers need to pay cash for their smartphones, something of an anomaly compared to most markets outside of Africa. To move away from the limited 100% upfront sale model, the key pain point for businesses to solve is how to sell a product on credit while having no clear guarantees of repayments, no reliable credit checks or carrier supported mechanisms.
In the past few years, the PAYGO model has reached the smartphone distribution business, offering the possibility for businesses to sell smartphones through multi-payment plans and lock the phones remotely in case of late payments; effectively de-risking the model while reaching more customers.
Today, we see the spread of this model in urban, peri-urban and even rural areas across Africa. Many Upya customers that already sell products under PAYGO, like Solar Home Systems or E-cookers, are diversifying their portfolio and customer base through the sale of PAYGO smartphones. We also see legacy smartphones distributors increasing their sales by adopting this “new” model.
So how does it exactly work and what are the technological prerequisites? We list a few below.
What is needed to make it work?
Lockable phones
Not all phones are lockable. Companies like Samsung and Transition, who carries the Itel, Infinix and Tecno brands, offer the lockability and remote management feature on most of their phones. Other companies like NuovoPay and Trustonic, work with an even broader set of Android phone manufactures (OEMs) by positioning themselves as device management companies – effectively offering the lockability feature for those devices. In most cases, these providers allow a business to lock the phone itself, not just the SIM card, making the phone completely useless untill, for example, a payment is made.
Customer data
Companies that have been in the PAYGO space for some time will tell newcomers: data is key. Understanding who your customers are is critical for the long-term success of PAYGO businesses.
First and foremost, as the customer is onboarded, agents have an opportunity to collect lots of KYC data (Know Your Customer) that serves to understand who you are giving the loan to (age, gender, occupation etc.) or track down very bad payers e.g “next-of-kin phone number”. Secondly, data will be used to understand patterns, define gaps and growth strategies for the longer term or conduct satisfaction surveys.
Pricing flexibility
Three pricing options are often used in the PAYGO Smartphones business:
- Downpayment
- Fix instalments for a defined period (e.g 6, 12, 18 months repayment plan)
- Loans plans, with interest rates and loan adjustments if early payments are made
1 + 2 are the most common and usually part of the same “contract”: a customer needs to pay a downpayment to start and then monthly fixed payments.
Agent and/or shop management
Most of the sales are done in person, through on the ground mobile agents, or personnel in shops. It is important to be able to:
- Make sure on the ground personnel knows what data to collect to onboard a customer
- Implement a swift customer approval process
- Ensure agents are aware of the pricing offers available and their regular updates
As for the business owners, they need to be able to keep a tab on overall performance of the agent or shop, and based on analytical data take the necessary corrective actions.
Few of these agents and shops have access to laptops or computers, and therefore most of the sales are done using a mobile app.
Mobile money tracking
In Sub-Saharan Africa, most transactions are performed through mobile money, or a variation of it. A new PAYGO smartphone customer will most likely make a first payment using mobile money, and just as likely, pay their regular instalments through mobile money, without interactions with agents or shops. The best way to identify who-has-paid-what is to link each payment reference to the serial number (or IMEI number) of the device bought by the customer.
Upya’s Field Solutions for PAYGO Smartphones
As the number of customers and repayments increase, it is impossible to successfully manage a PAYGO business without the right IT solutions. Distributors need a system that is integrated to OEM’s lockability mechanisms, that allows on the ground staff to collect any customer data, track customer payments and agent performance.
Upya’s solutions for PAYGO Smartphones has allowed distributors in Africa and Central America to develop their smartphones distribution business at scale. Digitalizing and monitoring their stock movement, agent or shop performance, customer transactions, after-sales, KYC data collection and much more. Learn more
