Pay-As-You-Go, from solar kits to smartphones

Can the mobile industry and ecosystem players learn from an industry that has proved its solid technology foundations, high demand and low-income customers’ ability to pay for credit?

Energy poverty is a development challenge that traditional, centralized approaches have been slow to overcome. Globally, 1.1 billion people remain without access to electricity, including 589 million in Sub-Saharan Africa. Alternative energy sources such as solar have existed for decades, but their upfront costs have been unaffordable for most low-income customers, with the vast majority unable to access the credit necessary to extend repayment over time.

The expansion of digital finance systems in the developing world has altered this financial context and enabled new business models that rely on small, regular payments. In the off-grid energy sector a group of solar companies, primarily in East Africa and South Asia, are leveraging digital finance and locking technologies to offer pay-as-you-go (PAYG) energy.

How PAYG solar works

PAYG businesses rely on distributed energy sources where energy is generated at the point of consumption, in the case of PAYG solar, from a photovoltaic panel on the customer’s roof. Products range in size from $150 to $300 small home systems. Customers pay a fixed amount ($25) upfront to receive the product, and then make small, routine payments ($0.40 per day) over time (12 months). PAYG solar units contain hardware that allows the seller to remotely lock or unlock the unit, based on receipt of payment. Once the customer’s prepaid use is completed, the solar device automatically shuts off until the next payment is made. Payment schedules are relatively flexible, allowing households to pace the use of energy according to their cash flow and ability to pay.

From the provider perspective, the ability to remotely activate/deactivate the solar device based on payment significantly reduces the risk of default and theft. This added security allows PAYG providers to offer consumer financing in one of two forms: energy as an asset, where the customer pays off the solar unit over 3–36 months and takes ownership when repayments are complete, or energy as a service, in which the customer signs a long-term lease with lower monthly payments and no intent to own. In this case, assets are upgraded or replaced over time.

PAYG solar success

The model has proved its solid technology foundations, high demand and low-income customers’ ability to pay for clean energy and this can be seen in the strong performance of the PAYG solar market. According to the latest figures announced by GOGLA and The World Bank Group’s Lighting Global program in their first half of 2018 Global Off-Grid Solar Market Report, 3.66 million off-grid solar products were sold globally in the first half of 2018 of which 2.93 million have been sold on a cash basis ($107.50 million value) and 730 000 via PAYG business models ($110.89 million value). The GSMA M4D Utilities estimate that global PAYG solar sales have increased six-fold in the last three years.

Pay-as-you-go for smartphones

The PAYG solar model is also a perfect example of the second wave of inclusive digital innovation impacting lives around the globe. Emerging from the convergence of innovations around the Internet of Things, cloud computing and mobile financial services, these new service delivery models provide flexible payment terms while collecting intelligence on users and the systems they are using, creating a credit history through mobile payments for customers with no formal financial history.

PayJoy gives mobile network operators and finance companies a tool to collateralize smartphones that aren’t just the lowest cost phones. With our patented Lock technology, which resists any efforts to be deleted from the mobile device until the loan is recovered, we can increase payments and minimize the risk of late or defaults. We have developed a user experience on our lock that helps customers to track and make their payments seamlessly via the app. When users are late on a payment, they don’t get charged any late fees. Instead the PayJoy Lock limits their app and call functionalities until they make their payment, and instantly restores normal phone functionalities. Through this new “pay as you go” form of device finance that mirrors the “pay as you go” solar distribution model, we enable users to afford getting a smartphone by using it as collateral, and we enable finance companies and operators to onboard the next billion users to smartphones and full connectivity.

African countries will continue to experience a degree of volatility due to factors such as currency and economic and political instabilities, lack of locally relevant content and technical literacy and affordability. However, innovative technologies and solutions like that of PayJoy can lead to the next African smartphone boom in the longer term. Indeed, market researchers project an increase in the availability of low-cost devices in the region could add a further half a billion smartphone connections by 2020.

However, the time has certainly come to redefine low-cost devices to that of making the purchase price more manageable through financing, an area in which PayJoy is leading the market in Africa and globally.

For more information, visit Join the smartphone financing conversation by visiting the PayJoy blog, Twitter, LinkedIn and Facebook pages.

Written by Dominique Friedl, GM Africa and Jenny Jin, Senior Product Manager

Pay-As-You-Go, from solar kits to smartphones

Breakthroughs in affordability unleash smartphone growth in Africa

Innovative technologies like the PayJoy Lock are likely to lead to the next smartphone boom on the continent.

The last few years have been tough for smartphone shipments in Africa. However, according to the most recent figures announced by International Data Corporation (IDC) in 2018, Africa experienced year-on-year growth in smartphone shipments for the first time since 2015. The global technology research and consulting firm’s Quarterly Mobile Phone Tracker report shows the African smartphone market grew a modest 2.3% in 2018 to a total 88.2 million units, spurred by the strong performance of the continent’s three biggest markets – Nigeria, South Africa and Egypt.

Looking ahead, IDC expects Africa’s overall smartphone market to grow 5.4% year on year in 2019, to a total 92.9 million units, stimulated by the introduction of more affordable devices in the African market, which will help drive progress in this space over the coming years.

We often hear about high-growth markets like India, Indonesia and Vietnam, which are forecast to show growth in smartphone shipments in 2019. Growth in Africa should theoretically be significantly higher due to the relatively low base for smartphone and mobile internet penetration, which, as of the end of 2018, was just 33% and 38% respectively.

What are the main factors constraining the acceleration of smartphone adoption in Africa?

In many countries, macroeconomic factors are to blame for some of the smartphone industry stagnation. Nigeria, for example, experienced an economic downturn and a shortage of foreign exchange, which impacted sales of imported products, including smartphones. South Africa also slipped into a technical recession in 2018, as the economy shrunk for two consecutive periods.

According to the GSM Association (GSMA), a trade body that represents the interests of mobile network operators worldwide, affordability still represents a significant barrier to the uptake of mobile services in the region, with the total cost of mobile ownership (TCMO) determined by the cost of service usage (voice, data, SMS), activation and mobile handset. Countries in Sub-Saharan Africa have among the highest level of TCMO as a proportion of income worldwide; this is particularly pronounced for those at the bottom of the income pyramid. For the 27 countries in the region where data is available, the TCMO for purchasing a handset and 500MB of data per month represents on average 10% of monthly income, well above the 5% threshold recommended by the UN Broadband Commission.

According to PayJoy’s own market analysis and affordability ratio, on average, the price of the cheapest smartphone represents 63% of monthly income. In 33 of 41 African countries, the price over income ratio is higher than 20%. In Nigeria, for example, the average selling price of an entry level smartphone is $65 while the GNI per capita is $173 per month, which represents an affordability ratio of 38%.

With some sense of normality returning to economics across Africa and affordability somewhat improving, what will help the smartphone industry prosper in the next few years?

For one, industry leaders are expected to increase their focus on putting affordable smartphones in more people’s hands as mobile subscriber penetration approaches saturation levels across Africa. This focus on smartphones, in turn, will help boost data revenues for network operators in a market where voice revenue growth has flatlined.

According to Jumia, Nigeria and Kenya’s leading ecommerce platform, the average selling price (ASP) of smartphones continues to fall year on year in most markets across Africa: smartphone average prices across Africa were $95 in 2018, down from $99 in 2016 and down from $165 in 2014.

Source: Kenya Mobile Report 2019

The smartphone industry in Africa has remained a truly competitive landscape over the years, with Chinese brands dominating the African markets with their strategy of introducing lower price points specifically for the profiles of African users. However, that said, it’s evident that the year on year reduction in average selling price (ASP) of smartphones is slowing significantly and with the enhancement of technologies like displays, cameras and 4G/5G technologies, one could expect the ASP’s to start increasing again, as they have globally.

Other factors that could help bring the cost of devices down for consumers:

  1. The availability of Android Go, a streamlined version of the Google mobile operating system.
  2. The rise of the “Smart Feature Phone” powered by KaiOS, a new class of mobile device.

Android Go was designed for low-power devices (Chipset & Memory), and the operating system will enable handset manufacturers to ship smartphones that while not as full-featured as a flagship device, still offer a reliable and responsive end-user experience well suited to the African markets. Android Go is Google’s new product for the next billion users.

MTNSPThe Smart Feature Phone was originally introduced in July 2017 by the Indian mobile network operator Reliance Jio. The JioPhone, as it was named, was an affordable 4G smart feature phone, powered by KaiOS. The price announced for it is $0 with a security deposit of $21 which can be drawn back by the user by returning the JioPhone at Jio stores only after three years. More recently, South African mobile network operator MTN announced the introduction of their own Smart Feature Phone. The MTN Smart Feature Phone is a 3G non-touch screen device that runs on KaiOS and has the following apps: WhatsApp, Facebook, Twitter, YouTube, Google Maps, MyMTNApp, FM Radio and Google Assistant. The MTN Smart Feature Phone sells for about $22 with 500MB of data included for six months. MTN CEO Rob Shuter said it’s a “wonderful bridge device” for the vast number of Africans who still use feature phones because they cannot afford smartphones. While this may be a “wonderful bridge device” or a device to bring people online for the first time, one can’t help but wonder if too much has been sacrificed in user experience to achieve affordability. Time will tell!

There is certainly ample opportunity for the mobile industry and ecosystem players to improve smartphone affordability in emerging markets like Africa and to borrow from a prominent financial institutions tagline, the time is now right for some “Solutionist Thinking”!

Keep an eye out for our next blog post where we will look for “Lessons from other industries, leading to new innovative solutions for making smartphone for affordable and accessible”

For more information, visit Join the smartphone financing conversation by visiting the PayJoy blog, Twitter, LinkedIn and Facebook pages.


Written by: Dominique Friedl, GM PayJoy Africa

April 3, 2019

Breakthroughs in affordability unleash smartphone growth in Africa