Spotify and more music streamers are turning to telecommunications companies to make payments easier in Africa

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Africa, with its internationally recognized musical talent – and the increasing use of mobile phones – is at the center of plans for Swedish music streamer Spotify to expand its reach to one billion customers.

With African artists like Nigeria’s Burna Boy and South Africa’s Black Coffee streamed around the world, the continent was seen as an obvious choice and is home to more than a third of the company’s 85 new markets.

The problem is paying in a continent where many people have a cell phone rather than a bank account.

That means Spotify’s first task in executing a plan announced in February to nearly double its footprint is to win over the telecommunications companies that are often equated with banks.

Phiona Okumu, Spotify’s music director for sub-Saharan Africa, told Reuters that the company had secured “alternative payment methods”, namely M-Pesa, when moving to Kenya in February.

M-Pesa is owned by Kenya’s largest telecommunications provider Safaricom and is used to send money, save, borrow, and make payments for goods and services.

“A lot of African countries don’t have a bank account which means they don’t use credit cards, and so do a lot of East African (countries) and Kenya for the most part uses M-pesa,” Okumu said. In other parts of Africa, Spotify is looking for more employees.

“We are holding discussions with the right partners to ensure we are providing solutions to payment problems faced by several African consumers in different parts of the continent,” said Okumu.

On the hunt for mobile money

Irene Kophen, a Spotify Premium user based in Kenya, said she preferred M-Pesa to bank cards because she believes mobile money has made music more accessible.

“Most of us have access to our phones, but not many of us have cards or bank accounts,” the 31-year-old told Reuters.

Costs associated with opening bank accounts, the distance to financial institutions, and the difficulty of meeting “Know Your Customers” requirements due to insufficient proof of address have made paying by phone even more attractive.

“In recent years, the focus has been on expanding innovative banking services through mobile technology to capture lower-income, unbanked segments,” a spokesman for South African bank Absa said in an emailed statement.

By 2020, Sub-Saharan Africa had 548 million mobile money accounts, 12 percent more than in 2019 – more than any other region in the world, the mobile communications industry announced to GSMA.

This has enabled bank access on a continent where around 43 percent of sub-Saharan Africans over 15 had a bank account in 2017, according to the World Bank, which has not provided recent data.

Win, win

Spotify’s local rivals, such as Kenya-based and Denmark-listed Mdundo and Boomplay, headquartered in Nigeria, have also begun to connect with cellular operators.

Such partnerships are based on telecommunications providers selling music packages that give customers access to a streaming company’s premium service and exclusively curated music mixes.

Collaboration can be mutually beneficial in terms of increasing sales and helping to grow subscribers, but it’s all but essential for the streaming companies.

“It’s critical that streaming companies get this right or they’ll lose revenue from consumers who were willing but unable to pay it,” said Charles Stuart, PwC partner and director of technology, media and technology Telecommunications.

For the telecommunications companies, which include Airtel Nigeria and Vodacom Tanzania, the partnership can help deliver “loyalty and persistence” to customers through value, said Stuart.

MTN, Africa’s largest wireless operator with 48.9 million active mobile money users, is integrating its mobile money service with its MusicTime app to enable payments, Serigne Dioum, MTN’s group chief digital and fintech officer, told Reuters.

“We’re talking to players who are pure music players, and we’re also talking to players who have greater reach in music, video and games and who can position our digital services much better,” said Dioum of MTN.

Boomplay, with 60 million active users per month, has enabled users to pay via mobile platforms such as M-Pesa and Tigo-Pesa in Kenya and Tanzania.

It aims to roll out this option in Francophone countries, Tosin Sorinola, Boomplay’s director of artist and media relations, told Reuters.

Mdundo, which had 8.7 million monthly active users as of June, has three telecommunications partnerships in Nigeria and Tanzania and expects one or two more similar deals later this year, Chief Executive Officer Martin Nielsen told Reuters. “When it comes to payments across Africa, our main focus is on bundling with telecommunications companies … because telecommunications companies are the ones who have that reach and access to people’s pockets,” he said.

© Thomson Reuters 2021

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