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There’s not much of a limit on what you can buy online these days. Thing is, in South Africa at least, almost all of those ways involve having a bank account and, if you want things to be really simple, a credit card.
But what if you could finance your online purchases with a single credit product where everything from application to first payment happens online?
That’s pretty much the premise behind mobicred, a revolving credit product looking to take advantage of the boom that’s hit the South African ecommerce space over the past couple of years by offering a centralised account that you can access across a number of merchants.
According to mobicred founder Jason Sive, who is also the director of First Health Finance — the first company in South Africa to finance medical procedures not covered by medical aid (all its applications also take place online) — the product will appeal to people reluctant to use actual credit cards online, because of the dangers inherent in them both when it comes to their own spending and fraud.
The other bonus, Sive says, is that mobicred’s offering costs about as much as your average middle of the road credit card offered by a traditional bank. This is apparently true both for the merchants using mobicred and for customers, who have to pay a small initiation and activity fee. “You’re no worse off using our product,” says Sive.
Given the millions of South Africans currently drowning in debt thanks to existing products though, you’d think it might not be the best place to launch an online credit facility.
Sive says however, that the Redwood Third Party Processing credit scoring system used by mobicred should help mitigate that problem to a large degree.Once you’ve applied to get on the system, approval time is meant to take less than five seconds.
It’s also helped out, to some degree at least, by the fact that maximum credit facilities it will be issuing at any one time are between R3 000 and R15 000. While anyone looking to counter low amounts as a protection against serious failure will most likely point to the mess that South Africa’s unsecured loan space currently finds itself in, Sive doesn’t think mobicred will have the same issues.
His company, he says, isn’t about to venture into the territory of excessive lending at excessive rates. “That’s not our segment,” Sive tells us, “we’re going after much lower risk individuals and we’re not trying get consumers through to the end of the month.”
At any rate, mobicred’s funding reserves are much more suited to a clientele likely to make good on their credit. It’s started out with private capital raised between five or six individuals with a hedge fund committed to a second tranche of funds.
Of course, all the funding in the world means nothing if the ecommerce players aren’t willing to use your product. On that front, mobicred seems to be making decent progress. The company’s system is already being used by South African Apple retailer Digicape as well as the MIH-owned furniture outlet 5Rooms and online clothing store Style36 and baby goods retailer Kinderelo. According to Sive, there are also other partnerships in the works.
On thing in its favour when it comes to attracting merchants is that, unlike any of the payment services that make use of people’s existing bank accounts, it doesn’t require 3D Secure authentication. The anti-fraud technology has been a particular bug-bear for the industry over the last little while, with many saying that it’s not particularly effective and that it turns people off buying from their sites.
Sive also believes that merchants that allow their users to use mobicred could find doing so mutually beneficial, especially given the single account facility. Think about how much good will a company could earn if it doesn’t stock something and recommend a site that does, knowing that you won’t have to go through a tedious registration process when you get there. The other bonus, he adds, is that there’s no paperwork for the merchants.
While Sive admits that integration with the first few sites using mobicred, via the API was a little slow, he says the company’s working on it and hopes to get the timeframes involved down from a day or two to a few hours.
And until mobicred has achieved the right level of tightness in the South African market, where it doesn’t really have any direct competition, it won’t look to expand abroad. Sive does however believe that the mobicred model could easily be white-labeled in other markets. If that happens though, it will face competition from similar products in Europe, from companies like Klarna, and in the US, where Bill Me Later, is something of a market force.
Sive reckons that the South African ecommerce space is ripe for a product like mobicred and claims that he’s “very keen to push boundaries” with it. “In fact,” he says, “I don’t see that the space can progress quickly without a credit product”.