Habtamu is also a founder of ZayRide, an app-based taxi-hailing service. ArifPay is a mobile point of sale system which will allow ATM cardholders to make electronic transactions via their smartphones. The company intends to launch M-POS and gateway-related digital financial products. It aims to allow people to use their mobile phones for conducting financial services including payments. Kaleyesus Bekele of Origins Media sat down to discuss more.
ArifPay, an online digital payment system was established five years ago by the initiative taken by the young entrepreneur Habtamu Tadesse. He lived in the United States of America (USA) for long time. When he first established ZayRide, a taxi-hailing company, he was getting difficulty due to the absence of online/digital payment system in Ethiopia.
“We (along with his team) asked ourselves why we don’t create such a platform not only for the purpose of ZayRide but to solve problems in each walk of life,” he said.
There was this institution called Square App, a digital-payments company own and run by Jack Dorsey, Twitter’s founder. The Square app idea was first conceived in 2004.
“I used to get to know the Square App when I was in the US and insisted why we don’t develop the same system,” said Habtamu. Until then, there was no law to support the fintech despite some companies received a license to work in Ethiopia.
It was last year that the National Bank of Ethiopia (NBE) came up with a fresh directive, which permits fintech companies like ArifPay to involve in the market. “We are ready for that by developing the system. So, ArifPay has become the first new company under the new system,” he says.
ArifPay Financial Technologies Share Company also raised $3.5 million from 31 investors in a private placement round.
According to the new directive by NBE, there must be at least 10 shareholders to establish a financial technology firm and the minimum requirement is 13 million Birr capital.
What we have feared is that most of the investors here focus on investing on hotels and factories, he says. But, the directive does not so far allow participation of foreign firms and investors. There are however some hopes given by Yinager Dessie (PhD), Governor of the NBE, in different occasion regarding opening-up the financial sector to foreign firms and investors.
“We have been in a doubt whether we can convince local investors to join our company to fulfill the required capital,” he said. “Then, we established a committee to approach investors to present them on how ArifPay works, how the society can use it and the problem-solving capacity of the new technology.”
“We were nine shareholders then. Another 32 investors attended the investment call and fortunately all the investors buy a share of 140 million Birr within an hour,” he said. “We approached Ethiopian diaspora’s, who have with a great deal of knowledge regarding the fintech field through a vetting process,” he added.
It was just two weeks ago that the NBE issued a license for ArifPay. NBE request different requirements such as the security of the system, who the shareholders are, whether they involved in criminal activities before, electing the CEO, evaluation of the Board of Directors from their experience, education, and their fintech knowledge. This licensing makes ArifPay the first fintech company in Ethiopia.
ArifPay consists of two different features. The first is to facilitate payments in restaurants, purchase basic goods, purchasing and getting gas for vehicles, and shopping at the closest store.
The second is anyone can use it as paying system to pay electric, water bills and making other payments while we are at home through the ArifPay app, he utters.
Also, a Point of Sale (POS) service is being implemented through smartphones or tablets that can perform the tasks of a cash register or a traditional POS machine, wirelessly enabling bank account holders to make payments from ATM cards issued by any bank.
“We also created a digital platform for small shops to manage their sales and modernize their manual inventory system,” he explained. “We also seek to facilitate condition for small shops to get a financial loan from banks by showing them they are using our ArifPay system—which shows their sales amount.”
Agreement with Banks, revenue authorities
“We signed an agreement with Abay Bank Share Company to make a POS payment, which enables bank account holders to make payments from ATM cards issued through mobile POS, which is the first in Ethiopia,” he says.
“Abay Bank can reach many customers through our new mobile POS (M-POS) system,” he envisions.
The company intends to launch MPOS, gateway and related digital financial services in Ethiopia by leveraging the latest M-POS and online payment technology platform in the industry and developing user-oriented products and services that will allow people to use their mobile phone and their payment instruments for conducting financial services including payments.
The POS services, which are currently being provided by all the banks in Ethiopia, are not more than ten thousand in number. “Even in Bole area Addis Abeba, there are more than 10,000 businesses. So we can unlock the potential by making it more accessible,” he aspires.
“Services such as paying electricity and water bills through the digital system will be launched in Amhara, Oromia and South regions in a few weeks following the agreement we signed with the Information Network Security Agency (INSA),” he said, adding, “A customer who don’t have smart phone can utilize our service in a nearby shops”.
Kenya and other countries have started these fintech processes earlier than Ethiopia. M-Pesa, for instance is the longest-serving financial service providing a mobile banking service that allows users to store and transfer money through their mobile phones.
M-Pesa was introduced in Kenya as an alternative way for the population of the country to have access to financial services. Safaricom, the largest mobile phone operator in Kenya, launched M-Pesa in 2007.
Banks in Ethiopia request financial transaction accounts/banks statements while debtors approach them. Though there are more than 110 million people in Ethiopia, those who are debtors are only 250 thousand. That indicates the money is circulating out of the formal banking system—that hurts our economy, says Habtamu.
He hopes that Ethiopia can catch up with its neighbors in terms of fintech development despite it started late. “What I fear is that though some banks are striving to boost financial inclusion, others seem reckless,” he asserted.
There are words which have to be eliminated from our dictionary, especially in Ethiopia’s financial sector. For instance, some banks dubbed themselves as “International” even without opening branches in neighboring Djibouti and Somalia.
The second word that has to be eliminated for Habtamu is “Security”. “Everything is considered as a threatening one in Ethiopia due to some raise security concerns,” he opines. Mentioning of such cases, don’t we have to drive a vehicle for fear of accidents? He asks. “If we sit idle fearing security concerns, there will be no growth at all”.
For instance, in the US, before the invention of Chip system in Automatic Teller Machine (ATM), the previous system, which was called magnetic-stripe (mag-stripe) on payment cards, was not a secured one.
The US invested billions of dollars to change the payment system to chip technology, by making cost-benefit analysis of the risks of the previous and the new technology, he argues.
Before the establishment of ArifPay the biggest challenge was convincing stakeholders to come to Ethiopia from abroad and the process at Document Authentication and Registration Agency (DARA), according to Habtamu.
Another challenge was that it took us long time to develop the ArifPay system by our Ethiopian professionals—it consumed so much time to read, check the system for which part is missed, he says.
“We can’t copycat the European or US app systems rather we contextualized the app to suit Ethiopian users—we have to assimilate the app with the local culture and confirm working actively in internet connection we have”
The thriving ZayRide Business
“Our business at ZayRide is thriving,” he says. ZayRide is an app-based taxi-hailing service founded by Habtamu himself. “We have more than 12 thousand drivers,” as he puts it, adding, “We are about to expand our services across five regional cities.” Hawassa and Gonder are among the cities planned to expand our services. He aspires to reach the vast Ethiopian app-based taxi market in a short time.
“In the future, our objective is to connect those businesses that are unable to get finances with the microfinance institutions,” he aspires.
“We are also planning to create 50 thousand jobs in short period of time and 100 thousand jobs in five years,” he told Ethio Forum and Investment Forum radio show.