Today there are 3.5 billion people unconnected (including 1.7 billion unbanked) and not part of the digital revolution. Kai has created an innovative solution to accelerate the digitalization of unconnected population and informal businesses in developing countries, by removing the affordability barrier that is keeping billions offline.
To achieve that at scale, Kai platform is structured around a set of products:
- Our first essential product is the Kai operating system (KaiOS) and the application ecosystem. It has enabled the creation of a new category of products called smart feature phones, which give access to all major apps (such as Google, YouTube, WhatsApp, and Facebook) at a fraction of the cost of a smartphone. Today more than 175 million devices worldwide are powered by KaiOS. For instance, the KaiOS is at the origin of the JioPhone that enabled the Jio revolution in India.
- On top of the KaiOS, Kai has developed multiple tools to enable the monetization of our users: a full advertising (exchange and DSP) and usage analytics platform optimized explicitly for smart feature phones.
- Digital and financial divides are part of the same affordability problem. For this reason, Kai has been developing financial products intending to reduce the cost gap with basic feature phones via consumer device financing. With MNOs, Fintechs, and critical apps, we can bring KaiOS devices to the market at the price of a 2G product.
- In 2023, Kai is also launching a range of products to digitalize informal businesses. The primary offering of this business is to develop, in partnership with Mastercard, a QR-code-based merchant terminal for micro and small merchants in Africa and India, an NFC ticketing terminal for the transportation and delivery businesses, and a Tap-on-Phone terminal for merchants.
- In the long run, Kai will build upon that financial knowledge and combine it with phone and app usage data to learn invaluable information about the emerging middle class. Such knowledge will help Kai build credit scoring mechanisms and sell financial and insurance products to these new customers directly or indirectly.
Kai aims to attract an additional 70 million internet users and digitalize more than one million merchants by the end of 2025.
By leveraging different pillars, operating system, advertising platform, analytics, and building new financial products, KaiOS is a powerful platform to grow and monetize at scale while creating a lasting impact on tens of millions of underserved users over the next few years.
Kai shareholders include notable investors like Google, Orange, Reliance Jio, TCL, Investment Corporation of Dubai, AfricInvest, Cathay Innovation, and FinnFund.
Problem Statement
Digital Divide
With 3.5 billion people remaining offline globally, accelerating digital and financial inclusion in a post-COVID world is more than ever a priority.
While a lot of progress has been made on the telecommunication infrastructure side to increase coverage and quality of services globally (more than 95% of the world population lives now within reach of a 3G or 4G network), affordability of internet services and products is becoming the main challenge to close the digital divide.
According to the GSMA, billions of people live within reach of a mobile broadband network but do not use mobile internet. This is known as the “usage gap”.
The reasons for not using the internet are complex and vary, including being unable to afford internet-enabled handsets or data costs; being unaware of mobile broadband and its potential benefits; lacking the skills and confidence to use mobile internet; or being prevented from accessing the internet due to social norms.
The vast majority of the next billion people who eventually come online will do it through a mobile phone. Of the causes highlighted above, the affordability of internet-enabled handsets will be the critical entry barrier.
Disposable Income v/s Cost of Smartphone
The price threshold at which an internet-capable device can be considered affordable, as defined by A4AI and GSMA, is 23% of monthly income, translating into a minimum daily income of US$7.15 for the cheapest smartphones retailing at US$50.
This means that even the cheapest smartphone is not affordable to a large portion of the population in LMICs (75% in Ethiopia, 60% in Egypt, 95% in DRC, 75% in Pakistan…). As a result, without any other option, many people must continue to use and buy basic 2G phones and remain excluded from the internet revolution. And this will lead to an increasing divide between people with access to this wealth and growth source and people without access.
To build up scale while considering the monthly income per population quintile, the entry price point for internet-capable devices should be comparable to the retail price of 2G devices ($15) to be affordable in LMICs.
Reaching such a price point will require some financial engineering to artificially lower the initial retail price or a technology/business breakthrough to disrupt the market. There are two possible market configurations to work through:
- Operator market, and
- Open market
In an operator market, the traditional financing approach is the subsidy model (subsidy provided by the MNO, with a monthly subscription payment over a minimum period, with the phone used as collateral through SIM-lock). This model works and has been demonstrated in India by Reliance Jio (JioPhone is a KaiOS device), giving access to meaningful internet to more than 100 million Indians.
The challenge in other LMICs is that the mobile operators only control ~10% of the mobile phone distribution. For this reason, the second market configuration, called “open market”, is the critical channel to reach billions of unconnected.
Kai’s strategy to address the “open market” is to engage at the country level. Working with the local government, MNOs, banks, and retailers/distributors, we can bring the KaiOS devices at the price of a 2G phone with a much stronger value proposition. The first instance of this approach is our deployment with the Post office in Ivory Coast. And we already have several additional countries planned (Liberia, but also a more comprehensive partnership with SmartAfrica and the Universal Postal Union).
Digitalizing the informal commerce
Leveraging our affordable and accessible technology, we are partnering with Mastercard, local institutions, FMCG, and banks to deploy our merchant digitalization solutions to Africa in the first phase and then to the rest of the world.
The initial step involves creating enough value for informal merchants to engage in the digitalization path. This is done by making some efficiency gain for them by connecting them to their supply chain, enabling them to access inventory financing and, at the same time, boosting their revenues by allowing them to extend the range of products and services they provide, offering merchants the possibility to accept all sorts of payment means seamlessly while building a credit history. This initial implementation is a merchant application that can be installed and runs on any KaiOS product available.
The second step is a dedicated hardware with NFC capability that we are developing with one of our hardware partners. It will be deployed in several verticals to validate tickets or accept closed-loop payment, for instance, in buses in Nigeria, in taxis, or with delivery men.
The third step is an exclusive partnership with Mastercard to combine steps 1 and 2 above (the merchant app and the NFC-enabled hardware) and add Tap-on-Phone capability to transform the device into a contactless and QR acceptance terminal. The product, which will be launched to the market at the end of 2023, will be cobranded with Mastercard and distributed through Mastercard sales channels (banks, payfac…), to foster the merchants’ digitalization in Africa and in developing countries around the world.
Source: kaiostech.com