iKaaz's Expansion Underscores Regional Growth Potential


BMI View: With many governments across Africa implementing policies to reduce the volume of cash-based transactions, iKaaz's mobile point of sale (mPOS) solution will resonate among businesses and consumers in the region. The firm's expansion into Kenya underscores the growth potential of its solution, which will attract significant interest owing to number of competitive advantages in the mobile payment solutions market.

Mobile Access A Key MFS Driver
Kenya And Nigeria Mobile Penetration (%)

iKaaz's NFC-and Bluetooth-powered cloud-based solution enables consumers to make payments at select merchant outlets with their mobile phones. The solution works by attaching a tag, which costs less than USD2, to any phone, converting it into a near field communication (NFC)-enabled device for consumers while merchants plug a reader into their own mobile phones to turn them into mPOS terminals. Customers can also link the iKaaz NFC tag to their bank account, pre-paid account, debit or credit card to turn their device into an extension of that particular account. In addition to the NFC-based solution, iKaaz also supports SMS-based payment transactions.

iKaaz launched its mPOS solution in Kenya in June 2014 following its entry into the Nigerian market in February. The India-based firm is partnering with Family Bank in Kenya and First City Monument Bank (FCMB) in Nigeria for its solution. iKaaz secured an undisclosed amount of seed funding in January to support its expansion in India and Africa. It is also planning to raise fresh funds to the tune of USD5mn, which we believe will be used for further expansion across Africa. We believe the firm's interest in the region is partly driven by the move by governments across Africa to reduce the volume of cash-based transactions over rising cash handling costs and security risks, as well as increasing mobile phone penetration, especially among consumers without access to traditional non-cash payment solutions such as credit and debit cards.

Although iKaaz will compete with other MFS solutions in Africa, such as the hugely successful M-PESA in Kenya, we have a positive view of its overall performance in the region owing to a number of key competitive advantages over other solutions. Firstly, iKaaz's network- and device-agnostic attributes will give it a greater acceptance among merchants and consumers alike, compared to device-dependent solutions or closed MFS platforms. Secondly, at less than USD2, the solutions NFC-based tag is significantly cheaper than most NFC-enabled devices. We also note that the mPOS provides added flexibility, which will appeal to businesses with field operations.

One notable risk to iKaaz's solution is that connectivity to financial institutions is limited at present. So far, the firm has partnered with only one bank in each of Kenya and Nigeria. However, we argue that it should have the capacity to connect to multiple financial institutions and that it must move quickly to establish those relationships in order to maximise its market potential.

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Geography: Kenya, Nigeria