Selcom: Tanzania’s trailblazer in mobile financial inclusion and transformation

QUESTION: Let us first take off by knowing what inspired your digital vision for Tanzania and prompted the Selcom dream.
ANSWER: There was no dream per se, but the vision and ambition was always to do something in the payments space since my time at Celtel.
Towards the end of my time there was already talk about mobile financial services, with M-Pesa having launched in Kenya. The space was very nascent in Tanzania with challenges around the lack of adequate infrastructure, data connectivity, affordable and reliable USSD and SMS channel access, not to mention suitable handsets in the hands of the masses and the requisite mobile penetration to scale adoption to make mobile financial services mainstream.
For instance, during our engagement with the Tanzania Postal Bank (TPB) in 2007, you had to type an SMS to check your balance or send money to another TPB customer. It was painfully cryptic and inconvenient. You had to carry a cheat-sheet to remember the various keywords, short codes and message string formats. There were no billers, no electronic airtime platforms to plug into. Mobile banking was far from what we take for granted today.
With mobile financial services (MFS), there was an evident snowball effect, and while service adoption took time, there was a consolidated effort by the industry, backed by the Bank of Tanzania, to financially include as many Tanzanians as possible as quickly as possible. There was also a lot of donor engagement coordinated by the Financial Sector Deepening Trust (FSDT) that funded telcos to on-board mobile money agents across the country, which significantly accelerated adoption.
As Selcom, we launched a lot of firsts in the market. Since not everyone had a burning need to send money to a relative in the village, we found ways to do more with mobile money than just peer-to-peer (P2P). Selcom was the first to vend LUKU on mobile money, not just in Tanzania but also in Africa. We were also the first to facilitate bank-to-wallet and wallet-to-bank transfers, and even the first to enable the mobile money interoperability pilot between Airtel Money and Tigo Pesa because of our central role in the entire ecosystem as a conduit in the absence of a national switch.

To what extent has this novel idea been realised and what should be expected of the company going forward?
Quite frankly, we have become experts at pivoting and evolving as a business, from being an aggregator (a reference I personally detest) or back-office service provider, to one that is now speaking to consumers directly.
Our technology and rails have always been used to enable our clients, which, in hindsight, has worked against us or to our detriment because our clients over time start considering ways to cut us out of the value chain by internalising our role to either cut costs or maximize margins.
I think this is a fair thing to consider on their part but it inadvertently drives us to explore and exploit avenues to recoup lost business and revenue, often as competitors to the clients we serve.
This is not something we intended but it’s the general direction in which financial services are headed - first by unbundling traditional service providers and then rebundling the services as more attractive, more accessible and often cheaper propositions, which can only be good for competition and great for the consumer.

Why is Selcom widely credited for playing a pivotal role in Tanzania’s digital transformation journey and advancement of financial inclusion in the country?
Well, quite frankly, because we did, but I also think that we don’t get enough credit for the role we’ve played and continue to play in this space.
The digital transformation as such began when we ventured into the “assisted cash payments” market. Selcom touches digitization of payments from cash, all the way to mobile money and card payments.
We’ve seen the transition from queuing in line at branches and paying for airtime or electricity, all the way through to enabling agent touchpoints who could do it on the consumer’s behalf, thus saving time and effort. Our role has led to us working with every single stakeholder in the financial system’s value chain as well as the private sector at large.
Customer challenges today can be as simple as cash handling, automating collections, digitizing payment flows or as complex as deep integrations into enterprise resource planning (ERP) or finance management systems - and we cover the entire spectrum of these needs under a set of easily consumable application programming interface (APIs).
Our wakalas can be found in the most remote areas serving bank consumers with deposits and withdrawals, while our QR codes for Selcom Pay can be found at all high-end stores in Tanzania. The market is completely untapped in my estimation, and we still need to reach non-traditional audiences such as a mama ntilie or even a boda boda operator. Our vision is that any size of business or a solo entrepreneur is aware of how to spend, collect and store digitally, without any reliance on cash or a costly bank account.
For over a decade now, the local digital payments sector has been very hectic supporting the likes of merchant payments and recording phenomenal growth to make Tanzania one of the fastest growing mobile money markets in the world. In the context of Selcom’s services and operations, succinctly highlight the extent of cashless payments in the country and who should be doing what to catapult them to the next level.
The biggest hindrance right now is the cost of transactions for SMEs and corporations. There is an element of over-monetisation for various reasons that’s introducing unnecessary friction to the ecosystem.
While there is some degree of interoperability, there isn’t what I would call “seamless interoperability”. We still have gatekeepers and walled-gardens that need to be torn down for payments to become completely seamless and participation to become thoughtless.
Catapulting consumer participation to the next level needs regulatory intervention, and I applaud the Bank of Tanzania for working on Tanzania Instant Payments System (TIPS) so that the industry can work against a well-defined set of rules to mitigate predatory pricing, preferential bilateral negotiations and baseless tariff hikes.
On the other hand, still under the Ministry of Finance and Planning, taxation on transactions needs to be assessed downwards so that participation in the digital economy is not seen as a costly burden for consumers or as a barrier to sustainability of participants in this space. There’s an intolerable sense of wealth erosion for consumers when they are charged and taxed excessively for going digital.

What is your take on Tanzania’s cashless economy ambitions and the progress the country is making towards full digitization of its money?
This is a global phenomenon, and we are also riding the wave in Tanzania. We have mobile money, and that is where the majority of transactions are happening today, and has been a great tool to achieve and promote financial inclusion, but we have to think beyond this.
We need to think about what it means to become a cash-lite digital economy. We have to have touchpoints at every level of the economy, because while there is financial inclusion, there might not be digital inclusion yet. We need digital inclusion such that even when I buy vegetables, I should be assured that the vendor will accept payment electronically, and this can only be achieved if all stakeholders in the value chain have bought into the vision.
The movement of funds from consumer to merchant to supplier to farmer to inputs provider to importer should be completely cashless - that’s the Holy Grail we’re all seeking.

Are the prevailing policy and regulatory conditions supportive enough to accord digital finance stakeholders the opportunity to serve the country better and help to include the excluded into the formal regulated financial system?
We work with two amazing regulators. The Bank of Tanzania is extremely pragmatic, forward thinking and probably the most proactive regulator in the country in terms of adoption and enabling of new ideas, innovation, promotion of financial inclusion and staying relevant in accordance with the fast-changing times and circumstances in which we live.
The central bank is constantly enhancing regulations, borrowing and sharing best practices globally for the betterment of our national financial inclusion strategy.
The other regulator that we work with, the TCRA, has been immensely supportive of our growth plans and roadmap since our early days. TCRA is well versed in the challenges facing our industry as we push for infrastructure growth, better addressing and mapping, better postal and courier services, faster and uncongested data networks and affordable access to data backbones.
How have ordinary Tanzanians benefitted from the investments Selcom has been making to help drive the national financial inclusion agenda?
I think as Selcom, we can do a lot more than we are doing today. Though we have put in a lot of work and investment in systems and infrastructure, we have always been an enabler for our clients.
The full realization of our potential requires us to go direct to the consumer, and that’s what we’re building going forward. We see great value in going after this latent and untapped market. There is a lot of value creation when you can design your own roadmap. At present, we can only grow as fast as our clients allow us to, thereby never quite fully articulating our ambitions to fruition.

And what should they expect from the company in the near future in terms of improving efficiency and minimizing costs associated with financial transactions, which a cashless society is all about?
Selcom is already quite a lean organization with a very flat structure that keeps our costs down. We promote growth and look at our business through the lens of volumes, hence because of that any savings that we make because of our efficiencies are directly passed on to the client. This is one of the reasons our services are more affordable, and we have been reasonable in the way we price our services.
The general industry thinking around pricing needs to change, especially in the way we monetize our services. There are better, more intelligent ways to make money without necessarily passing on the burden to the customer.

Who have been Selcom’s partners in its digital transformation journey and what benefits have these collaborations managed to put on the table at the individual, corporate and sectoral levels?
Our biggest allies have been the regulators. Our technology stack is proprietary and therefore we have very few, if any, external dependencies on third parties or vendors. Hence, I give a lot of credit to the Selcom team for working tirelessly every day to fulfil our vision and for helping us get to where we are today.

Finally, could you briefly outline your digital plans and operations outside Tanzania? We gather the company will soon be debuting services in several markets in the region.
We have a strategic partnership with Mastercard, which has propelled us into a number of markets. We’re already working with them to build the framework and infrastructure closely in order to put the necessary rails in place locally to scale up merchant payments, card issuing, acquiring and other ancillary services along with other assets from Mastercard.
This gives us an anchor client to work with in those markets and, as a result, it allows us to have our foot through the door from where we can build our own continental footprint. There are 11 markets on the table, and we are looking forward to being in each and every one of them by the end of next year.