World Dialogue on Regulation

With the introduction of Internet and the development of e-commerce in the 1990 there were high expectations of global trading among businesses (B2B) and between businesses - consumers (B2C). Although Western countries have seen an e-commerce revolution and an explosive growth of internet transactions, e-commerce is virtually non-existent in most Sub Saharan African countries.

As a result of a low penetration of the ICT in society, old-fashioned banking systems and a little supportive legal infrastructure the African countries have missed the first tidal wave of global e-trade, but new developments may give them another chance. The Working Party on the Information Economy of the Committee for Information, Computer and Information Policy of the Organization for Economic Co-operation and Development has published an overview of the different e-payment systems that can be used in e-commerce.

Where the traditional payment systems for e-commerce required access to PC's and credit-cards (account-based payment systems), some newer systems build on personal communication tools like mobile phones. This category, so-called Mobile payment and telephony account systems, concentrates on payments conducted through wireless devices either using a bank account or telephone bills.

With the explosive penetration of mobile phones the African continent has seen over the past years, telephony payment may offer possibilities to join the global e-trade. There are two different ways in which telephony accounts are used for payment:

1. 'premium rate' models, and
2. 'direct transfer' models.

In the 'premium rate' model the customer pays a higher rate for the service, which is then passed on to the merchant by the telephony operator. Payment occurs by phoning a special number the merchant has installed with an operator, by sending a particular code by SMS, by voice contact, or by dialup to access content on a site and the user is charged by the minute for using the site.

The direct transfer models consist in charging the telephony account directly for payment. This is often done by installation of specific software by the operator that offers the payment option. It can be used to debit the consumer's account to pay another account. In a economic situation with hyper-inflation, the need for speedy banking transactions becomes even more important since long clearing procedure devaluate the value of the money substantially. It is in this context that Alex Weir proposes a cashless sms-based payment system.

In his concept paper Low-cost secure electronic banking for the 3rd world - SPS - SMS Payment System, Weir explains the workings of such a system. However, the main challenge is not a technical one, but a regulatory one, both Weir and the report of the Working Party on the Information Economy emphasize. In order to let African buyers enter the global e-commerce market, governments need to clear the way for cross-border payments and financial institutions need to be 'motivated' to update their often old-fashioned banking procedures.

Regulatory questions arise regarding whether and to what extent non-financial institutions (e.g. telecommunication service providers) can become involved in providing payment systems, and to what extent these institutions have to then comply with financial institutions regulations. In order to move ahead, Weir proposes a new virtual bank to enter the financial playground. The Working Party on the Information Economy develops a similar line and refers to the successful financial service provider PayPal. With 45 million subscribers PayPal has been able to successfully challenge the traditional financial establishment.

It is high time that African stakeholders start thinking about a mobile telephony based equivalent of PayPal, if they do not want to miss the second wave of e-commerce for the consumers and the small businesses at the continent.