Different technologies catch on in different countries, for reasons that are not always obvious. In Central Asia, bill-payment kiosks are transforming consumers' economic lives.
On our first morning in Dushanbe, the Tajik police stop our car. We had been driving less than three minutes before hearing the siren squawk. Behind us, a police officer emerges from his compact Soviet-era Lada wearing a peaked military cap that seems almost as large as his vehicle. Our host, Shuhrat Soliev, motions us to stay seated. He walks behind his car to greet the officer. Fast-paced negotiations in Persian ensue.
Finally, Soliev climbs back into the driver’s seat and we proceed to our first meeting, navigating along wide boulevards that are conspicuously smooth, quiet, and clean. On-the-spot fines from the police are common here in Tajikistan. The hundreds of dollars of fines Soliev incurs each year are part of the price he pays for his matte black BMW X5.
Soliev is one of Tajikistan’s most successful technology entrepreneurs. We are partners at an investment advisory firm, here to learn about his company and its implications for Afghanistan. The night before this traffic stop we had flown to Dushanbe from Kabul. The contrast between the two nations is striking.
Tajikistan shares ethnicities, religion, language, and a border with Afghanistan. Their common legacy stretches through the empires of the Persians, Bactrians, and the Seleucids, and the Arabian Caliphate. Yet a century-long interlude of Russian control has left a concrete- and vodka-infused stamp of Soviet influence on Tajikistan.
Part of this Russian legacy are the 1.5 million Tajiks--a fifth of the population--who work abroad, primarily in the remnants of the old Soviet Empire. Soliev lived this statistic. He began his career in Russia early last decade. While there he had an insight that has changed the lives of most Tajiks.
However, to tell Soliev’s story we must briefly return south, back across the Hindu Kush, into Afghanistan. Ubiquitous along the dusty roads of Kabul are Afghanistan’s ambassadors of telecommunications: the mobile scratch-card phone dealers. As cars creep through Massoud Circle, these men hold up plastic cases of cards to vehicle windows. Buyers scratch the foil strips on the backs of the cards to reveal codes that can recharge their prepaid accounts. For the half of the Afghan population who own a mobile phone, these card dealers are the primary means of paying for mobile credit.
Yet the scratch card salesman may be slipping into the past. Visit the Khair Khana neighborhood of northwestern Kabul and you’ll likely see people gathered on the street corner, purchasing airtime from a modest metal box with orange paint and a glowing touchscreen. This is Soliev’s innovation.
From Russia, with kiosks
Working as an expatriate programmer in Moscow, Soliev observed that few Russians purchased scratch cards for mobile phone credit. Instead they paid for mobile credit by inserting cash into electronic terminals--kiosks just like the ones Americans use to buy a metro card or to check in for a flight. Average per-capita spend in Russia through such kiosks is $154 a year.
Inspired by what he saw, Soliev took what savings he had and moved home to Khujund, Tajikistan. He built his first electronic payment terminal by hand and carted the prototype around to the major mobile operators. He convinced them to take a chance on him as an alternative to the costly scratch cards system. It was not a tough sell; manufacturing, distributing, and securing scratch cards consumes 20 percent to 30 percent of a telecom’s profit margin.
Six years later, few scratch-card sellers remain in urban Tajikistan. Instead, electronic payment terminals stand on almost every corner. Soliev’s company, ExpressPay Tajikistan, has more than 900 kiosks, and his success has attracted fierce competition from more than ten new rivals. On some street corners, three or more terminals from different vendors cluster in silent competition. Buyers put cash into their chosen machine and enter their mobile phone numbers. Their prepaid accounts are instantly credited.
The terminals provide much more than mobile credit. Tajiks can pay for more than 90 different products, including electricity and water bills, Internet accounts, Facebook credits, and airline tickets. The terminals fill a gap in the payment ecosystem of developing economies, allowing consumers a convenient payment mechanism where Internet penetration remains low.
Innovation across the Hindu Kush
In an echo of Soliev’s inspiration, Afghan entrepreneur Abdul Shakoor became fascinated by the payment terminals while visiting Tajikstan. Shakoor sought Soliev out. He emailed and called. Often. His initialinvitations for a visit to Kabul fell on understandably deaf ears. But eventually Shakoor convinced Soliev that the potential market of 30 million people just across the Tajik border was worth exploring. Soliev traded his BMW for his wife’s more modest sedan and drove through the mountain passes of the Hindu Kush to Kabul.
Less than 12 months later their partnership, Marikh Tech, is already bearing fruit. Most of the major telecom providers have signed up to sell through the kiosks, and over 200 machines dot the streetscape of Kabul. In his Kabul office, Shakoor gleefully displays transactions pouring into the Marikh Tech system in real time. Each kiosk will pay for itself in less than two years. The company’s only concern is how to expand faster. In Marikh Tech’s basement, kiosks stand in long rows, fresh from manufacture in China and awaiting installation. Shakoor has poured his personal savings into purchasing and outfitting more kiosks. Now he’s seeking investment to expand into Herat in western Afghanistan.
The least-developed countries adopt new technologies in a variety of ways. Occasionally they leapfrog, as when skipping landlines and going straight to mobile phones. More often the change is incremental; a country takes cues from neighboring nations rather than jumping to the most advanced solution.
In our work, we must focus on what consumers demand rather than the ideal answer. We have explored other intermediate technologies that aid the transition from a cash economy to digital bill payment. An example is mobile money, which allows customers to send and receive payments through their phones. This has been a massive success in East Africa. In Afghanistan, western development agencies have attempted to transplant that success, giving grants for mobile-money marketing and technology development. Yet it has been slow to gain traction with Afghan consumers. Marikh Tech, by contrast, has caught on without donor support.
To outsiders, e-payment kiosks may seem unwieldy or even backward, an unnecessary step on the road to credit cards or mobile money. But outsiders do not decide what consumers want. Afghans have already voiced support for Marikh Tech’s terminals with the cash in their pockets. Thanks to their support, Shakoor, Soliev, and their modest orange terminals are becoming a powerful local force in Afghanistan’s transition to a modern transaction economy.
Last updated: Apr 18, 2013
Jake Cusack and Matthew Tilleard: Jake Cusack is a former Marine Corps officer and graduate of Harvard Business School and Harvard Kennedy School. Matt Tilleard is a former BCG strategy consultant and graduate of Stanford Graduate School of Business and Harvard Kennedy School where he studied as a Fulbright Scholar. They are partners at the investment advisory firm CrossBoundary.