A combination of sophisticated server-based transaction switches and cheap, reliable wireless communication is creating lucrative new opportunities for South African retailers to sell prepaid airtime and electricity through vouchers generated at till points rather than traditional scratch cards.
"The benefits of offering online prepaid products are huge," says Charles Smithers of Kwikpay, South Africa`s leading provider of prepaid and value-added services to national chains and convenience stores.
"Eliminating physical cards means retailers don`t carry stock - which means more floor space, no ordering, no stocktaking, no shrinkage and most importantly no security problems. We know of at least one case where someone has been killed for the value of their physical phone cards."
Kwikpay serves around 5 500 retail outlets across South Africa, from mom and pop convenience stores to the largest branches of national chains like Clicks and Spar. As well as prepaid airtime and electricity, Kwikpay also enables retailers to offer services like online payments of utility bills, traffic fines and TV licence fees.
"The whole system relies on fast, reliable communication," says Smithers. "The transactions have to be completed in a few seconds, and because the margins on prepaid sales are low, retailers have to be very careful to use the most cost-effective communications. We use the GPRS-based CellPAD communications device from Datalinx Technologies, which is the most cost-effective solution - and because they use two SIM cards there`s always an alternative if one of the networks is congested."
Wayne Berkinshaw of Datalinx, which is a major supplier of such GPRS devices to Kwikpay, confirms the advantages of GPRS: "In a traditional fixed-line environment, people are paying for the time they spend online. That can very quickly add up to a lot of money. With GPRS, you`re only paying for the data you send, and a typical debit or credit card transaction involves very tiny amounts of data. Retailers doing up to 3 000 transactions a month will pay less than R150, or about 5c per transaction, and the cost per transaction decreases from there."
Kwikpay supports 2 000 outlets with standalone devices or kiosks, as well as around 3 500 outlets with an integrated system, where prepaid products are available at every till point. "Retail customers love it because they can do all their transactions at a single till," says Smithers.
Smithers adds that prepaid sales can be a significant revenue source for retailers. "A small convenience store can very quickly average R15 000 a month and we have some large stores turning over R250 000 a month on prepaid airtime alone. A moderate store can easily pay its rent with the revenue."
Because prepaid voucher sales don`t need any additional infrastructure or stock, Smithers says they are not limited to traditional retailers. "We have pharmacies, video shops, coffee shops and restaurants," he says. "It`s now possible to offer prepaid vouchers anywhere where there is a point of sale."
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