Spotify Turns to Telcos to Facilitate Africa Payments

Africa, with its internationally recognised musical expertise – and rising cell phone use – is central to Swedish music streamer Spotify’s plans to increase its attain to a billion prospects.

As African artists akin to Nigeria’s Burna Boy and South Africa’s Black Coffee are streamed the world over, the continent was seen as an apparent selection and is the house to greater than a 3rd of the corporate’s 85 new markets.

The downside is cost on a continent the place many individuals usually tend to have a cell phone than a checking account.

That means Spotify’s first activity because it implements a plan introduced in February to virtually double its footprint is to win over the telecom firms that always equate to banks.

Phiona Okumu, Spotify’s head of music for Sub-Saharan Africa, informed Reuters the corporate secured “alternative payment methods”, specifically M-Pesa, when it moved into Kenya in February.

Owned by Kenya’s greatest telecoms operator, Safaricom, M-Pesa is used to ship cash, save, borrow, and make funds for items and companies.

“A lot of African countries are unbanked so that means they don’t use credit cards and this is very true for a lot of east African (countries) and in Kenya you use M-Pesa for the most part,” Okumu stated. Elsewhere in Africa, Spotify is looking for different collaborators.

“We are having conversations with the right partners to ensure that we are providing solutions to payment problems that several African consumers face in different parts of the continent,” Okumu stated.

Chasing the cellular cash

Irene Kophen, a Spotify Premium person based mostly in Kenya, stated she prefers M-Pesa moderately than financial institution playing cards as a result of she thinks cellular cash has made music extra accessible.

“Most of us have access to our phones, but not many of us have cards, or bank accounts,” the 31-year-old informed Reuters.

Costs related to opening financial institution accounts, the gap to monetary establishments and the issue in assembly “Know Your Customers” necessities due to inadequate proof of address have added to the attraction of utilizing telephones to pay.

“The past few years have seen an emphasis on shifting towards expansion of innovative banking services through mobile technology to capture lower income segments and the unbanked,” a spokesperson for South Africa’s Absa financial institution stated in an emailed assertion.

By 2020, sub-Saharan Africa had 548 million cellular cash accounts, up 12 p.c from 2019 – greater than every other area on the planet, cellular trade physique GSMA stated.

That has supplied banking entry in a continent the place about 43 p.c of sub-Saharan Africans over the age of 15 had a checking account in 2017, in line with the World Bank, which has not supplied any newer knowledge.

Win, win

Spotify’s native rivals, akin to Kenya-based and Danish-listed Mdundo and Nigeria headquartered Boomplay have additionally began to construct ties with cellular operators.

Such partnerships are based mostly on telcom suppliers promoting music bundles that give prospects entry to a streaming firm’s Premium service and exclusively-curated music mixes.

The collaboration can profit either side by boosting income and serving to to extend subscribers, however for the streaming firms it’s all-but important.

“It is critical that streaming companies get this right, otherwise they will lose out on revenue from consumers who were willing, but unable, to pay them,” Charles Stuart, PwC accomplice and director of Technology, Media and Telecommunications, stated.

For the telecom firms, which additionally embrace Airtel Nigeria and Vodacom Tanzania, the partnership might help to realize buyer “loyalty and stickiness” by including worth, Stuart stated.

MTN, Africa’s largest cellular operator with 48.9 million lively cellular cash customers, is integrating its cellular cash service onto its MusicTime app to permit funds, Serigne Dioum, group chief digital and fintech officer of MTN, informed Reuters.

“We’re talking to players who are music-only players and also we’re talking to players who have broader reach in music, video and gaming and who can position our digital services much better,” MTN’s Dioum stated.

Boomplay, which has 60 million month-to-month lively customers, has allowed customers to pay by way of cellular platforms akin to M-Pesa and Tigo-Pesa in Kenya and Tanzania.

It goals to roll out that possibility in Francophone nations, Tosin Sorinola, Boomplay’s director of artiste and media relations, informed Reuters.

Mdundo, which had 8.7 million month-to-month lively customers as of June, has three telecom partnerships in Nigeria and Tanzania, and expects one or two extra related offers earlier than the top of this yr, Chief Executive Officer Martin Nielsen informed Reuters. “When it comes to payments across Africa our key focus is bundling with telcos… because telcos are the ones who have this reach and access to people’s pockets,” he stated.

© Thomson Reuters 2021