The world’s largest music and podcast streaming platform, Spotify, has implemented its African expansion strategy announced last February. The only problem: online payments.
With nearly 345 million active users, Spotify’s rise around the world is meteoric. The platform hosts tens of thousands of African artists known or seeking to make themselves known. Being present on Spotify, for an artist, is often synonymous with success. And in recent months, the application has hosted podcasts, which are today the most followed in the world.
In Africa, the platform has 47,000 paying users. Many users, however, prefer the illegal music download or the free version of YouTube Music. For users, these are alternative methods, and Spotify knows this well. The Swedish group seeks since February to settle in all African countries. With a major concern to face: the terms of payment. The circulation of foreign currency in African countries is very limited, and the majority of potential users have cell phones, which are used as a means of payment, rather than bank accounts.
For countries with high banking rates, it is almost impossible to shop online. The only states whose central banks allow online transactions are South Africa, Rwanda, Morocco, Egypt, Senegal and Nigeria. For other African countries, the process of having a foreign currency bank account is extremely complicated, if not impossible. A challenge for Spotify and its development plan. While YouTube faces the impossibility of negotiating global access to the African market for its premium service, Spotify is currently negotiating with each state.
Spotify’s ambitions
Spotify intends to settle in 40 African countries, and 18 before the end of the year. Impossible mission ? Not that much. Because the South African, head of the music department of Spotify, Phiona Okumu, assures that the company has found “alternative payment methods”. Okumu talks about Vodafone’s money transfer system, M-Pesa, which has given the green light in the countries where it is installed. M-Pesa will thus enable Spotify to sell its services in Kenya, Ghana, Tanzania, South Africa, Lesotho, Mozambique, Egypt, DRC and Ethiopia.
The informal financial system is therefore becoming a boon for Spotify. But above all, this agreement represents a gateway to the African market, where the largest companies rarely manage to find the political support to sell their services.
According to Okumu, Spotify is looking for other partners in the target countries. “We are having conversations with the right partners to make sure we are providing solutions to the payment issues facing many African consumers in different parts of the continent,” she said. The partnership with M-Pesa may well cause other payment systems to negotiate with Spotify. Indeed, M-Pesa will not take commission on Spotify purchases, unlike its other customers – Banks, commercial companies and international ICT players.
In Africa, generally, the costs associated with opening bank accounts, the distance to financial institutions and the difficulty of meeting the demands of individuals have added to the attractiveness of using the telephone to pay for online services. .
What about operators in French-speaking countries?
In 2020, sub-Saharan Africa had 548 million mobile money accounts, up 12% from 2019, more than any other region in the world, said mobile industry body GSMA. This enabled banking transactions on a continent where about 43% of sub-Saharan Africans over the age of 15 had a bank account in 2017, according to the World Bank, which did not provide more recent data.
Spotify’s local rivals, such as Kenyan-Danish Mdundo and Nigerian Boomplay, have also started forging ties with mobile operators. However, the range of services of African streaming platforms is very limited compared to Spotify. Indeed, Spotify represents almost all the record companies in the world and, with them, all the singers and a large number of podcasts. For telecommunications companies that have already signed with Spotify – Airtel Nigeria and Vodacom Tanzania – the partnership can help build customer loyalty by adding exclusive services that are highly sought after, especially by young people.
What to undermine the operators of French-speaking countries of sub-Saharan Africa, in particular Free and Orange, very present in West Africa. The latter will find it difficult to negotiate better terms than M-Pesa to collaborate with Spotify. And this partnership has become crucial, as the streaming giant targets one billion users by the end of 2022.
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