Next up in Glenbrook’s travelogue series, Nikhat Choudhury joins Yvette Bohanan to share her experience making payments on a recent trip to Turkey.
In this double feature episode, Elizabeth McQuerry and Bethany May also provide observations on the local payments scene in Ethiopia, including their use of the e-money wallet Telebirr.
Yvette Bohanan:
Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. I’m Yvette Bohanan, a partner at Glenbrook, and co-host of Payments on Fire. We are ringing in 2023 with a Fanning the Flames travel log series to talk with our team members who racked up lots of miles going around the world in 2022, which was pretty exciting for everyone. We are going to hear firsthand about their experiences and observations with local payment networks across the globe. And for this episode of our podcast series, we have three guests joining us today; Bethany May, Elizabeth McQuerry, and Nikhat Choudhury. Welcome, everyone, to Payments on Fire.
Elizabeth McQuerry:
Thanks for having us back. Thanks for putting this together. It’ll be fun.
Bethany May:
Good to be here.
Nikhat Choudhury:
Yes. Excited.
Yvette Bohanan:
Okay. Nikhat, Bethany, this is your first inaugural Payments on Fire guest spot, right?
Bethany May:
Right.
Nikhat Choudhury:
Yeah.
Yvette Bohanan:
Excellent. In 2023, I expect you to be pros and get into the co-host mode too, with me. All right. What countries are on the docket? Where were you all?
Nikhat Choudhury:
I visited Turkey around two months ago.
Yvette Bohanan:
Okay. Turkey, in what we would consider here in the US the fall, effectively.
Nikhat Choudhury:
Mm-hmm.
Yvette Bohanan:
And were you in a particular city, a set of cities?
Nikhat Choudhury:
I was in Istanbul for a few days, and then I spent another few days in Cappadocia.
Yvette Bohanan:
Okay, Cappadocia. Elizabeth, Bethany, tell everyone where you’ve been. Where are we talking about here?
Bethany May:
Well, Elizabeth and I actually traveled to Ethiopia for a client engagement, so we were there for about one week in November.
Yvette Bohanan:
And what city in Ethiopia?
Bethany May:
The city called Addis Ababa.
Yvette Bohanan:
Addis Ababa. All right. Excellent. So, not places that I’ve been to, so I’m very, very curious about all of this. Let’s start with Turkey. Nikhat, you show up, you land at the airport, I’m assuming you flew, and you get off the plane and you need to pay for stuff. Everyone has to start buying. What did you see? What did you experience traveling?
Nikhat Choudhury:
I noticed while I was there, they do accept both cash and credit cards, but if you wanted to pay for items at a shop, they would always prefer cash and some would even reference the processing costs of cards. You could pay with cash, but they mostly preferred cash.
Yvette Bohanan:
A lot of times, people say, “Where in the world is there a cash preference for payment systems? Isn’t cash really old-school?” But here you were, so you had to go to an ATM?
Nikhat Choudhury:
Yeah.
Yvette Bohanan:
And withdraw some local currency. Was that hard, difficult?
Nikhat Choudhury:
It was difficult in the sense that the ATMs had high fees, but it wasn’t difficult to find ATMs. In both Istanbul and Cappadocia, there were a line of ATMs from different banks, so you had different options. But in my experience, I had to go to each one to see what the fees were, because sometimes the fees went up to 15% and it was really high.
Yvette Bohanan:
Wow. So it was convenient but expensive, essentially?
Nikhat Choudhury:
Yes.
Yvette Bohanan:
Yeah. And did you find yourself worried about running out of money? That was always my fear. When I would travel overseas and there was a lot of need for cash, local currency, and I would be there on a Friday, I would be paranoid that I’d hit some sort of bank off banking hours or something and be out of cash and not be able to get dinner or something. Did you have any concerns with that or did you find yourself timing things differently?
Nikhat Choudhury:
I think there were a lot of available methods to receive cash. There were the ATMs. There were also banks. The banks would close by a certain time, but the ATMs were always available. The only concern that I had was that I could only take out a limited amount of cash for the ATMs, so I found myself having to take out cash more than once and having to pay the fees more than once.
Yvette Bohanan:
Oh, okay. Interesting, interesting. All right, so cash is king in Turkey. That’s what we’re hearing here right now.
Nikhat Choudhury:
Yes.
Yvette Bohanan:
Elizabeth, Ethiopia. How would you compare and contrast your experiences to what Nikhat’s talking about here?
Elizabeth McQuerry:
Yeah. Of course, we were busy working most of the day. We weren’t out doing a ton of things, but we also went to the ATM and of course, got some cash, and we did see several ATMs. Bank buildings were all along the streets, so it seemed like there was certainly enough of them. And the one that we had, we had no problem with, or one we used. And then we used that cash to put some money into a Telebirr digital wallet once we were able to open it. And we did pay for a number of things with Telebirr, but we also paid with our card for the hotel and maybe a restaurant.
Yvette Bohanan:
What exactly, for people that they haven’t been to Ethiopia, what is Telebirr? Whose network is that? Is that a Telco? Who are we talking about here?
Elizabeth McQuerry:
Yeah, absolutely. That is one of the e-money wallets that’s offered by a Telco. Ethiopia is under a tremendous period of transformation, opening up its economy to foreign participation. So Telebirr, which is a national company, is now going to have some competition from other providers in financial services overall, including in this Telco space, their phone data lines, Safaricom from neighboring… Well, I’m not sure where their headquarters is anymore. They’re also bringing M-Pesa. It is opening into the Telco space as well as the e-money space.
Yvette Bohanan:
All right. All right. And you used a cash-in, cash-out agent to do that, just someone at a kiosk?
Elizabeth McQuerry:
First, we had to get a SIM card, so we took our cell phone. It was a smartphone, so that was nice and easy for us. We just got a SIM card, we registered that and then it was under my name, and then we got the Telebirr account, which is separate.
Yvette Bohanan:
Okay. And then you had to go to an ATM, get cash, and then load, go to an agent and load value on the phone, and then you were off to the races, basically. You could transact. Did you have to pay a fee to do… I’m thinking back here to Turkey and Nikhat’s saying 15% ad valorem fee to get your money out of the bank. What kind of fees were you experiencing in Ethiopia?
Elizabeth McQuerry:
Well, I’m a little embarrassed to say I’m not terribly sure.
Yvette Bohanan:
So they weren’t quite as transparent as Turkey here?
Elizabeth McQuerry:
Yeah.
Yvette Bohanan:
Okay.
Elizabeth McQuerry:
But we did pay a fee, and I don’t remember what it was, when we got money out of the ATM. We got cash out of the ATM, but it wasn’t a large number, I don’t think, though we weren’t able to get out that much. There was clearly a limit, but that was sufficient for our needs during the week because we were working. We weren’t out making lots of transactions. And then also, we did not pay any fees to put money into the digital wallet. And they do give you a little, I think it’s a bonus for opening up the digital wallet. $1 or $2 we got of added value to our account, but they did not tell you what the fees were when you actually used the wallet itself. So to say how much we paid or the merchant paid, well, frankly, I don’t know. We could do more investigation, but they didn’t tell you at the transaction level.
Yvette Bohanan:
But it’s interesting that it’s not obvious. There’s a lot of regulatory posture around the world these days about you have to be very clear about fees and transparent and display things on screens and all kinds of stuff. So that’s interesting that it wasn’t super clear when you were there.
Elizabeth McQuerry:
Yeah, it certainly wasn’t clear at the transaction level. I’m very grateful that the app for the wallet was in English, and it’s also interesting the number of things you could pay for in terms of utilities. It seemed like you could also use it to pay for airfares, so they’re doing a fair amount of integrations with merchants. But at least at the transaction level, I probably scrolled all the way to the bottom and said, “Check that box.” I accepted the terms and conditions, right?
Yvette Bohanan:
Right.
Elizabeth McQuerry:
I didn’t look at all of the details. I’m sure it’s there somewhere, but it wasn’t at the transaction level.
Yvette Bohanan:
Yeah. Interesting, interesting. I’m just curious, when you went to your hotels in these countries and you checked out, were they offering you dynamic currency conversion? Were they offering you the option to pay in local currency or your home currency? Did you see that experience at all in your travels? What about Turkey? When you were checking out of the hotels, did you get all that rigamarole that goes with DCC?
Nikhat Choudhury:
I definitely noticed that in Turkey, they preferred euros or dollars over liras, and that has to do with their inflation rate, which currently is 84.4%.
Yvette Bohanan:
Oh my goodness. Let’s just pause and take that in for a second. That’s really hard.
Nikhat Choudhury:
Yeah.
Yvette Bohanan:
Wow. So they’re actually preferring quote, unquote “cash” but not their fiat. They’re actually preferring euros and dollars.
Nikhat Choudhury:
Yes. We did the hot air balloon, and that one, they only took dollars or euros. They would not accept payment through liras.
Yvette Bohanan:
Interesting. So there’s sort of a correlation here, then. Did you see people using, locals around you or whatever, did you see folks using any types of digital wallets either through Telcos or banks and paying with their mobile phones, smartphones at all, or was it cash pretty much for everyone in euros and dollars?
Nikhat Choudhury:
I didn’t see people paying with digital wallets, I think. I also didn’t pay with digital wallets while I was out there. Merchants would accept liras, but they would try to ask us. Not only would they ask, “Oh, we would prefer cash over cards,” but they would also say, “If you could pay with euros or dollars, we would prefer that over liras.”
Yvette Bohanan:
So you have one level of the system that’s preferred and the second level of the currency within that system, and that’s pretty interesting. It actually ties to if they were using digital wallets. If folks were trying to use digital wallets, it probably would be wallets being loaded and using Turkish lira. So if there’s a propensity not to want to use Turkish lira, you’re not going to be using digital wallets necessarily. There’s a bit of an interesting tie in there. That’s an interesting observation.
Elizabeth McQuerry:
Can I just comment on that, at least in terms of other markets, that it’s my understanding that the original instant payment system in Brazil, which dates back a number of years, it goes by the acronym TED or Ted. Part of the reason it was designed was quite literally to move money faster, and put that in the Brazilian context, and it’s really about… It wasn’t just because we’re in the speed of now. However many years ago when this was developed, this was also a response to inflation. And in fact, in Brazil’s case, hyperinflation, which was much higher than what Turkey is currently experiencing.
And so you need to move your money fast in inflationary times, otherwise it loses value. And Brazil is a more controlled economy, it sounds like, than Turkey, so it’s not easy to pay with foreign currency on the street. People don’t have it. It’s not easy to pay. Therefore, you want to move your domestic currency as fast as possible during inflationary times, and that’s a little odd advantage for countries that have instant payments since we’re all experiencing inflation today. Hopefully not hyperinflation, but we’re all feeling that pinch.
Yvette Bohanan:
Yeah. Yeah, no, and it’s a big pinch when it’s 84 higher, double-digits. It’s not the triple digits for us. It’s a good observation as well. All right. So, very different experiences. I think this is also highlighting, a lot of times people talk about emerging economies, emerging markets, developing countries, and we think they all work the same way. This is an actual great illustration of two countries tackling a lot of different issues and different economic headwinds, and how they’re going about dealing with it from a payments perspective.
So Bethany, we have not heard from you yet, and I am dying to find out, since you all were working in Ethiopia. Sadly not in a nice hot air balloon ride, but doing other fun things. But when you were engaged at that professional level there, you probably had some observations about what you’re going to be watching in terms of things developing in Ethiopia as we head into 2023. What were your key takeaways at a professional?
Bethany May:
Absolutely. That’s a great question. I know we were there for work, but I think Elizabeth and I both tremendously enjoyed our time in Ethiopia and getting to better understand the market and what’s going on there. Like Elizabeth mentioned, there are just an incredible amount of changes happening in Ethiopia right now in terms of digital payments. The banking sector is opening up to foreign investments, as Elizabeth mentioned. Another Telco operator is coming in to provide competition for Telco services, and they’ve received approval to offer mobile money wallets. All of these factors are really going to provide some much-needed competition in the Ethiopian market for consumer accounts.
On top of that, Ethiopia is introducing an instant payment system into the market for interoperable real-time payments. So there’s going to be just a tremendous confluence of changes, and I think it’s exciting to see how this advances the atmosphere or the environment for digital payments in Ethiopia. I’m excited to see those changes and how it impacts financial inclusion in the country.
Yvette Bohanan:
Wow.
Elizabeth McQuerry:
I’m remembering another interesting thing we learned, and I personally, unfortunately haven’t done more research on it. Remember when we learned that right now, there are no credit cards in Ethiopia that are being issued? It’s only debit, and that’s a relatively new phenomenon, and so they’re moving very quickly into having revolving credit options.
Bethany May:
That’s right. Quite a few big changes happening, and I think that we’re going to see some really rapid advancements in Ethiopia in terms of a variety of digital payments. It’s certainly an exciting time, and I’m looking forward to see how the industry adapts to these regulatory changes and this new competition in the market and how the digital financial services evolve to provide better services into the market.
Yvette Bohanan:
Wow. That’s pretty exciting, actually. That’s a lot of key development. Strong central bank here, very centralized measures, and regulatory direction being given? Are you seeing a lot of guidance coming out?
Elizabeth McQuerry:
I think we’re not following all of it, obviously, but it seems like they’re clearly pushing the market forward and on a number of levels. Some of these changes, obviously are beyond, if you will, payment in central bank purview, just foreign investment. You can imagine the coordination that all of these governmental bodies need to be doing in a rapidly transforming society like Ethiopia. It must be A, really demanding and B, very exciting, maybe C, rewarding.
Yvette Bohanan:
Yeah, we could only hope. We could only hope. All right. Well, on that note, thank you all for participating in this session on Fanning the Flames, and I am looking forward to hearing more about your travels as we go into next year. I know you’re all very intrepid travelers out there around the globe, so thanks for sharing. This is Yvette Bohanan and you’ve been listening to Bethany May, Elizabeth McQuerry, and Nikhat Choudhury, who have been running around the world and making some very interesting observations that we can compare and contrast on payments around the world. Whether you’re traveling for fun or work or some combination thereof, it’s always interesting, so thank you all very much. We appreciate your insights and sharing with us. And until next time, to our listeners, please stay safe, enjoy your travels, and do good work. Take care.
