Understanding The Prepaid Ecosysem

The sustainability of the producers, distributors and vendors, of prepaid goods and services, will become increasingly more difficult as long as the focus is on the individual parts and not the system as a whole.

The Systems Theory, as a broad concept, is ancient – understanding systems and their inter-related parts. In 1926 Jan Smuts, a prime minister of South Africa and an academic coined the term “holism” in his book Holism and Evolution. Smuts (1926) was the first to acknowledge that the “whole is greater than the sum of the parts”.

However corporate tendency still remains that organisations develop a strategy focusing only on its relationship with its primary stakeholders – those they need to make money or those they need to save money, i.e. a total profit driven strategy. This approach ignores the need to keep its ecosystem sustainable.

The Competition Commission of South Africa was formed in 2000, in accordance of the Competition Act, No 89 of 1998 by the Government of South Africa. Its mission is to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers in order to achieve equity and efficiency in the South African economy. The focus of this regulatory body is on the protection of competition within an ecosystem but not on the long-term sustainability of that ecosystem.

WHAT IS THE PREPAID ECOSYSTEM?

Thanks to Wikipedia we know “an ecosystem is a community of living organisms in conjunction with non-living components of their environment interacting as a system”. The Prepaid Ecosystem is just a very special case of this definition.

The “community of living organisms” consist of the companies and individuals that produce, distribute, vend and consume the “non-living components”, i.e. virtual products (e.g. prepaid airtime, prepaid electricity, etc.).

In the global Prepaid Ecosystem there is an ever-growing population of consumers that consumes a growing supply of prepaid goods and services. In a study, MasterCard found that the prepaid market would grow more that 22% per annum over the next 5 years. This study also projects a global prepaid opportunity of over $822 billion by 2017.

The producers, supplies goods and services at a relative small direct cost to themselves. The consumer buys these goods and services at a fixed price, but the narrow margin for profit puts pressure on distributors and vendors to run a sustainable business. With commissions ranging from 12% to less than 4% (with an average at about 5.5%), which can be spread over the entire distribution network, there is not much in it for the independent vendors of prepaid products.

WHAT MAKES THE PREPAID ECOSYSTEM SUSTAINABLE?

As with natural ecosystems, diversity and balance is the key to a sustainable ecosystem. If the Prepaid Ecosystem is rich in the variety of prepaid goods and services, there will be a higher rate of interaction between the different players in the ecosystem. This inevitably leads to a higher flow of goods and services to the consumer and a higher flow of money to the producer. An ecosystem with a single producer of a limited range of goods and services is very seldom sustainable. Therefor the assumption can be made that there is a critical mass of producers, distributors, vendors and consumers required to create a sustainable ecosystem.

The Ubuntu philosophy of “a person is a person through other people” can be extended to apply to organisations: An organisation’s value can only be affirmed through the recognition of other organisations, the unique needs they address and the symbiotic interaction between these organisations. This is a paradigm shift that needs to happen: rather than viewing other organisations as a threat, they exist to bring variety and balance in the ecosystem – enhancing and stimulating it. I.e. it requires that all the players seek a win-win solution. Plato philosophised that all things will be produced in superior quantity and quality and with greater ease, when each man works at a single occupation, in accordance with his natural gifts, and at the right moment, without meddling with anything else – the same could be said of players in a Prepaid Ecosystem.

Within a Prepaid Ecosystem best practices should be established to protect the relationships and interaction between the different players. Levels within the ecosystem should be managed, with the focus on long-term sustainability, rather than managing the individual players separately.

HOW WILL THE PREPAID ECOSYSTEM LOOK IN THE FUTURE?

Mobile networks (producers) are currently experiencing a very high churn rate, which is combined with lowering Average Revenue Per User (ARPU). Mobile networks are engaged in a tariff war, trying to retain their subscribers. This means that consumers are leaving their Prepaid Ecosystem and those who stays, are consuming less or rather, they are paying less for what they consume. This approach does not seem to be working, networks are only cutting their own profits and the livelihood of their distributors and vendors. This puts even more strain on the long-term sustainability of their ecosystem.

Rather than to drive themselves, their distributors and vendors into the ground, all the players should rather focus on creating a sustainable ecosystem, an ecosystem that could potentially include prepaid electricity products, mobile banking solutions, etc. This ecosystem can be extended to include an extensive distribution network involving distributors, large retailers, independent merchants and traders to serve the ever-growing consumer base. Consumers will stay in a Prepaid Ecosystem as long as it is convenient, not necessarily because it is cheap.

Strategies must be defined and implemented to:

1. Create a place for every player in the Prepaid Ecosystem, even if it means that a specific level should be conserved (e.g. the vendor level) for social reasons such as job creation or rural upliftment;
2. Stimulate interaction and encourage diversity within the ecosystem; and
3. Managing the ecosystem holistically and acknowledging the interdependencies.

Failing to recognise that prepaid ecosystems is the key to long-term survival of producers, distributors and vendors, will inevitably lead to their isolation and downfall.