Africa fintech: How do pirates take payments?

In 2009, the MV Maersk Alabama, a cargo ship travelling from Salalah in Oman to Mombasa in Kenya, was hijacked by Somali pirates a couple of hundred miles south east of the ancient port town of Eyl in Somalia.

Four pirates stormed the ship, eventually capturing the captain, taking him away in a life boat and demanding a ransom in exchange for his safe return. Inside the ship, there was $30,000 kept in a safe, which the pirates managed to seize. 

A few days later, the US Navy came to the rescue, saved the captain, killed three of the pirates and took the fourth into custody. The cash, however, was never found. In 2013, the story was made into a film starring Tom Hanks that grossed $218.8 million.

Today, however, pirates are more likely to demand a secure transfer to an offshore account than bother with looting a safe.

Africa in particular has leapfrogged the developed world’s reliance on cash in favour of mobile money. M-Pesa is the obvious example here, but many others exist: MTN Mobile Money, Orange Money and Tigo Cash, to name a few.

New apps

Meanwhile, a whole host of new apps have been developed on the continent aimed at providing short-term loans almost immediately for people that don’t necessarily have a bank account or collateral. Apps such as Branch, Paylater and Kiakia bypass banks to transfer money direct to the individual via mobile phone. Some use smart-phone data to assess the suitability of the applicant. 

In 2017, investors pumped $195 million into African fintechs – nearly a third of all venture capital funding for African start-ups in that year.

And yet, amid Africa’s digital transformation, a big portion of the continent still runs on cash. More than 90% of all retail transactions in Africa are still conducted in person and in cash. Where cab hailing apps have launched, cash payment options have been made available. In Nigeria, where dollars are hard to come by, consumers still rely on access to the black market for hard currency needs.

Patterns vary from country to country, of course, but the point is that in a continent ripe for cashless payments, there is still pushback. The tangible feel of cash and the face-to- face interaction with vendors is still wanted by many throughout the continent.  Despite the focus on Africa as a frontrunner in cashless payments, a cashless society is still a long way off.

In the first six months of 2018, there have been 107 attempted and actual attacks by pirates. By and large, the attacks were located in the Gulf of Guinea on sub-Saharan Africa’s west coast, but data on whether they are accepting cash or electronic transfers hasn’t been gathered as yet.