Watu’s Erick Massawe on the ABC of Pay-As-You-Go

Watu Credit’s Country manager, Erick Massawe /HANDOUT

Innovative digital asset financing, pay-as-you-go has established roots in Kenya, fueling smartphone uptake, fueling social economic growth in the country as the population grabs opportunities that come with the digital revolution.

This fast-growing payment mode across the globe, which locals refer to as Lipa Pole Pole, Lipa Mdogo Mdogo, has revolutionized retail and e-commerce. Research and Markets estimate it to grow by 11 per cent to hit $2.1 billion (Sh273 billion) by 2029.

It grew 17 per cent to close 2024 at $1.26 billion (Sh164 billion). At the centre of this transformative innovation is Watu Credit, a Kenyan entity that has spread its wings to other eight countries in Africa and is expected to launch in Central America’s market later this year.

The Star sat with Watu Credit’s Country manager, Erick Massawe, to understand the future, emerging trends and challenges of this asset-financing model that marries traditional hire purchase and technology to bring efficiency.

How can you sum up the Pay–as– you–go model?

Simply efficient and transformative. Our smartphone financing has for instance ushered millions of people into the ongoing digital revolution, exploiting opportunities that have transformed their social and economic lives.

As of September 2024, the smartphone penetration rate in Kenya was 72.6 per cent, with 37.4 million active smartphones in use. The social and economic impact of this growth cannot be comprehended. Data shows that most of those buying these phones are aged 20-26 years.

The majority could not have afforded those gadgets were it not for this mode of financing, as they are largely unemployed.

What are factors that will drive the growth of this financing model?

We have barely scratched the surface of this business. As I indicated, we are progressing with our customers. As they advance, they come back to us for more superior gadgets with those in the mobility sector progressing in terms of quantities, preferences, or means.

A Mombasa-based entrepreneur, Linah Momanyi has for instance made her foray into the transportation sector. She bought her first motorbike through Watu Credit’s PayGo model. Her excellent repayment records have seen her advance into Tuk Tuk business and as we speak, she now has 81 pieces.

The high cost of borrowing and limited disposable income are also a driving factor. As the amount of money in people’s pockets continues to shrink, PayGo, which allows flexible payments, becomes the most viable option. Sound government policies like the Business Laws (Amendment) Act, of 2024 are expected to bring controls that will bring sanity into the sector.

The regulatory regime is expected to protect customers from exploitative rates while guarding players from unscrupulous entities.

Talk more about the likely impact of CBK’s regulation of the sector Credible players like Watu Credit have shouldered the burden of the unregulated market. Unscrupulous entities have for a long time taken advantage of the regulatory loophole to overcharge and even frustrate defaulting customers.

The new law is therefore expected to create a level playing field.

What are the emerging challenges in the market?

As millions of Kenyans benefit from the innovative below-the-line asset financing, Buy Now, Pay Later, the model is under fraud threats, mostly targeting smartphones.

Various sector players have reported losses running into tens of millions to phone flashing, and illegal modifications to the software of financed devices, allowing users to bypass security systems designed to lock phones in case of a payment default.

While firms are immediate losers, beneficiaries of this business- customers, are the ultimate loser. It is therefore important for them to understand that and avoid shortcuts for posterity.

Even so, Watu Simu has partnered with manufacturers such as Samsung to integrate advanced security technologies like Knox Guard PAYG as remedial measures.

This software has been pivotal in thwarting many hacking attempts. Additionally, companies are tightening their Know Your Customer (KYC) processes and reducing authorized dealerships to minimise exposure to bad actors.

While effective, these measures have come at a cost, with legitimate dealers experiencing reduced business opportunities.