Like everywhere else on the planet, African retailers are struggling with the mobile payment chicken-and-egg dilemma — how can they accept mobile payments if consumers aren't using the technology?

The CEO of one South African-based fintech firm thinks he has the answer. It involves a combination of the embedded mobile wallets within mandatory national ID cards—which will be capable of making payments—and over-the-air point of sale updates. What will bring it all together is cash payments for phone talktime.

Although Africa's experience with Vodafone and Safaricom's M-Pesa system is impressive, its success has been primarily in the context of P2P payments, where M-Pesa delivers about 60 percent of all P2P transactions throughout Africa, said Vahid Monadjem, CEO of South African-based POS vendor Nomanini. But with mobile retail transactions that do not involve P2P, Monadjem said, cash is still king.

"In Kenya, 98 percent of retail transactions are still cash," he said.

The chicken-and-egg problem is hardly unique to African retailers. Merchants don't want to go through the costs and effort to support payments that almost no shoppers are using—and shoppers have no reason to change their behavior to engage in mobile payments if almost none of their favorite retailers support it.

According to Monadjem, the merchants who will overcome this problem will be the so-called informal retailer, which is a merchant with no fixed location. These are street vendors and other sellers who change location daily.

For these retailers, prepaid is huge. "Prepaid electricity, prepaid water. To attract customers, to get business, they need prepaid," Monadjem said. "Shoppers walk in and they buy 10 cents worth of mobile talk time and a boiled egg and some bread."

Instead of making a tech-fueled move to mobile payments—via M-Pesa, Near Field Communication or perhaps QR codes—Monadjem proposed a slower paper-based transition.

"The consumer is used to walking to the local merchant," he said. "'Can you load this money into the phone?' The POS prints out a code. It's a piece of paper in someone's fingers."

The consumer then "punches that card number into the phone and they give that dollar of cash. Sounds totally antiquated, right? But we're leveraging the assets that exist," Monadjem said. "The plumbing is there. We're just laying the tracks."

The next phase is to leverage integrated mobile wallets within the National ID cards, which is putting the capability to do mobile payments into the hands of almost every African. Add some wireless point of sale upgrades and, little by little, African retail mobile payments can spread, Monadjem said.

The retail mobile payments and M-Pesa P2P numbers that Monadjem cited agree with figures crunched by Crone Consulting, according to company founder Richard Crone.

"His numbers are right in line with ours. Only about 2 percent of (Africa's) GDP is transferred through M-Pesa," Crone said, adding that that figure "is up from one percent two to three years ago."

But Crone was less enthusiastic about Monadjem's go-slow approach.

"This is the minimum viable product. It's a step in the right direction, but the (paper) code is hard to digest in my mind," he said, adding that M-Pesa's success in the P2P arena in Africa signals that African consumers are willing to move beyond paper. "Where's the paper in an M-Pesa transaction? There is none. There is no paper."

A wide range of other technologies can also enable entry-level mobile retail transactions. Beyond NFC and QR codes, merchants could use the Bluetooth or geolocation technologies built into many handsets.

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