It’s been so long since 30-year-old Cape Town entrepreneur Kobus Ehlers last used his wallet that he’s not even sure where it is. “My car maybe?” he says as he reflexively scans the cheerfully decorated offices of his startup, SnapScan. When it’s pointed out that leaving a wallet in a car in a city infamous for break-ins and carjackings may not be a good idea, he shrugs. He probably doesn’t even have the equivalent of five dollars in it, he says. “I never use cash. Credit cards are over. There are much better ways to pay for things.”
As the co-founder of one of South Africa’s most successful electronic payments apps, Ehlers is of course expected to use his own product. But the real reason he isn’t worried about his wallet is because Cape Town is a city seduced by the idea of cashless and cardless transactions, in no small part because of his company’s success. “You can literally wake up in the morning, buy a cup of coffee, go to your dentist, have lunch, pay your bills, take a taxi, go out for dinner, and donate to your favorite cause without using cash or a card,” says Ehlers. “And in none of that is there any risk of your card details getting stolen, or you getting mugged for your cash.”
For all the talk of a new cashless society ushered in by the likes of Apple Pay in the United States, it’s going to be a while before a swipe of a phone will buy a meal in most cities. But in Cape Town, it’s already happening. I’ve used my phone to pay for parking, cover a medical bill, order take out, buy groceries at my local farmers market and give money to the homeless woman selling the South African version of Street News at the traffic light. Churchgoers use their phones for donations. My facialist just informed me that I could pay for Botox treatments with SnapScan. I’ll take that as her endorsement of an increasingly popular payment service, and not a hint.
A free app available for any smartphone, SnapScan works almost like a pocket ATM linked to the user’s debit or credit card account. Instead of handing over a card, customers scan a unique SnapScan logo posted at the cash register with their camera-enabled phone. They enter the amount, type in a pin code (or use touch ID) and a few seconds later the vendor’s phone chimes with a confirmation sent by SMS. It’s quick, painless, and entirely safe, says Ehlers. SnapScan is backed by Standard Bank, one of South Africa’s biggest banks, and uses cutting-edge fraud protection technology. More to the point, he notes, it means that vendors never have access to actual credit card details. “That means no one is noting down your number so he can go shopping later,” says Ehlers.
SnapScan may make mobile payments easy for users, says Ehlers, but the reason why the company has been so successful in South Africa is that it makes processing the payments easy—and cheap—for sellers. With traditional credit card systems, and even Apple Pay, vendors have to buy expensive equipment to process the payments—something small businesses can rarely afford. But SnapScan only requires an upfront investment of the less than five cents it costs to print out their Quick Response [QR] Code, a square, camera-readable version of a traditional bar code that resembles a mosaic tile, and tape it to the cash register. “If someone wants to buy from you and you don’t have a credit card machine, and the person doesn’t have cash, our payment system is the difference between closing the sale and not closing the sale,” says Ehlers. Registration is free, and the company charges retailers an average fee of three percent, on par with most credit card companies.
As a result, SnapScan has been adopted by about 12,000 small and medium businesses in more than 17,000 outlets across South Africa. (Apple Pay, by contrast, so far only deals with less than 100 major retailers in the US, but can be used in their multiple branches across the country) SnapScan has 150,000 registered users, and processes hundreds of thousands of dollars in payments every day for everything from airline tickets to handcrafted wicker baskets at roadside curio stalls.
It was that question, of how to bring small businesses that couldn’t afford traditional credit processing facilities into an increasingly cashless environment that inspired Ehlers and his co-founders to develop SnapScan. Like many Cape Townians, Ehlers was a fan of the Big Issue, a South African spinoff of a British charity that prints high quality magazines for homeless men and women to sell at a profit in order to work their way off the streets. Most of the vendors ply traffic backed up at intersections for sales. But because of the risk of carjackings, which have nearly doubled in the greater Cape Town area over the past two years, to 1530 reported incidents, few motorists keep cash on hand. “People stopped buying the magazines,” says Ehlers. “A Big Issue vendor comes up and says ‘do you want to buy a magazine,’ and you say ‘I do, but I don’t have cash with me.’ That was a problem we realized we could solve very easily.”
Like regular Snap Scan vendors, each Big Issue seller is issued a QR code. Unlike traditional vendors, however, few have bank accounts. Instead SnapScan collates their daily sales and sends them an SMS voucher that can be used at an ATM machine. For the Big Issue sellers, SnapScan waives their processing fee.
Though the United States market may be a distant goal, for now Ehlers intends to focus on Africa, where leapfrogging limited infrastructure has become something of a niche. Unlike in the U.S., “it’s not strange for somebody in the smallest African village to use their cellphone for banking,” says Ehlers. That readiness to adopt new, useful technology is a boon for practical app developers in Africa, even if it means the U.S. market loses out. And in this case, it will: beyond just processing payments at the till, SnapScan provides a solution for some of the most vexing aspects of online payments: security and data entry.
SnapScan customers don’t have to worry about sending their credit card details to online vendors that may not have the latest fraud protection. They just scan the QR code at the virtual checkout like they would in the real world. It works even better on social media: when wildfires devastated national parks around Cape Town a few months ago, the SPCA Wildlife Unit posted a SnapScan QR Code on Twitter and Facebook to raise funds. Donating was as simple as snapping a photo. And that is the way Ehlers wants it. “We have succeeded if we are so slick and convenient and fast that you don’t even notice we are involved at all.”