Financial Sector Development in Africa: Opportunities ... - World Bank

60 Porteous
MasterCard. PayPal’s growth was originally driven by e-commerce on the
Internet, but its capability has been extended to include payments by
mobile phones as well. The number of PayPal mobile users is currently
doubling annually. As a global electronic payments engine, PayPal’s core
competence lies in risk analytics, so it can manage the risk of fraud while
still speeding up payments. In 2009, PayPal opened the application programming
interface (API) to its payments engine so that outside developers
could incorporate it into their own solutions. Roth (2010) describes
how this move has unleashed a number of creative new businesses, such
as Twitpay, a payment service for users of the popular microblogging site
Twitter, which uses PayPal’s engine. For Roth, the increased competition
to provide forms of electronic payment between the large established
providers such as MasterCard and Visa (which have their own mobile
offerings) and newer competitors such as PayPal presages an era in which
money becomes “flexible, frictionless and (almost) free.”
Even as MasterCard and Visa have significantly expanded their presence
in Africa through licensee banks in the past decade, PayPal has also
expanded its international network to include some developing countries,
such as Mexico and Brazil, in its full-service offering. To date, users in just
one African country (South Africa) 12 have the ability to send, receive, and
withdraw funds to a bank account or card account, although users in a
number of African countries are listed as being able to receive
payments. 13
Internet social networks have a larger reach than PayPal and are now
starting to add financial services to their offerings. In September 2010,
Facebook joined Mxit and some other social networks with the rollout of
its own virtual currency system. Called “Facebook Credits” and available
for purchase in mass retailers, the currency will enable users to pay for
games and purchase digital goods on the Facebook network. In rolling out
its virtual currency program, Facebook is responding to a need for a
micro-payments system for the increasingly diverse entertainment offerings
on its site, such as Farmville, as well as generating alternative forms
of revenue from its client base.
The introduction of person-to-person transfers of value on these
Internet-based social platforms may even result in some platforms
becoming the “Western Unions” of the third-generation era—able not
only to connect people for information (as Western Union originally
did via its telegraph service) but adding a convenient, easy payment
service for remittances to be sent between already identified and linked
friends.