Visa has partnered with four banks in Kenya to launch a mobile phone payments platform that will mount the first credible challenge to the country’s dominant Mpesa system.
The mVisa service allows people to send money to each other’s accounts without first loading a digital wallet, as well as pay for goods and services without a point of sale machine regardless of which mobile provider is being used.
Visa, the world’s largest payment company, said mVisa should reduce the cost of remittances from overseas and, for businesses, automatically build up a library of transactions that will help banks provide services such as loans.
Kenya is one of the most attractive markets for mobile money because of the success of Mpesa, launched by Safaricom, which is 40 per cent owned by Vodafone, nine years ago.
The total value of Mpesa transactions in Safaricom’s last financial year was $52bn and the company’s earnings from the service in 2015/16 was more than $400m.
Visa expects the system to be cheaper than Mpesa because people will not be charged when they make payments to merchants, which in turn will be charged less than they currently pay to receive Mpesa payments.
Unlike Mpesa, customers will not be charged to convert money received to cash since they can withdraw it from an ATM.
Francis Mugane, the director of merchant sales and services for Visa in sub-Saharan Africa, said the aim of the service was to offer an alternative that was convenient and cheap. Kenya is the second country in which mVisa has been rolled out after India last year.
“The primary goal is to enable businesses and individuals to make digital payments directly from your bank account and on a system that’s interoperable between banks and mobile networks.”
Visa’s partners include Kenya Commercial Bank, Kenya’s largest bank by assets, and two other prominent institutions, the Co-operative Bank and NIC.
Visa said it hopes to sign up another eight banks in the next year and expand into neighbouring Tanzania, Uganda and Rwanda, which all have well developed mobile money markets, by the end of 2016. It is also exploring a partnership in Nigeria.
Eric Musau, an analyst with Standard Investment Bank, described mVisa as “a very good proposition” that could mount a challenge to Mpesa.
“It’s the first workable solution to challenge Mpesa and it’s up and running,” he said. “They’re not going to be a threat overnight but I expect them to give Safaricom a run for their money.”
However, the new system faces an uphill task in drawing customers away from Mpesa, which has been a runaway success for making payments and transferring money over a mobile phone in a country where many people lack a bank account.
mVisa is largely aimed at people with bank accounts, although prepaid cards are available. Mpesa users, in contrast, only need a mobile phone. Mobile phone penetration in Kenya is almost 90 per cent, while the number of people with bank accounts is less than half that.
While mVisa has signed up 1,500 merchants, there are 30 times that number of merchants who accept Mpesa.
Building up a large network of banks and merchants will be key to attracting customers, said Mr Musau, adding that Safaricom also had the advantage of being able to control its charges while mVisa’s fees are set by the banks.
Mr Musau said that Safaricom, which has been developing a payment card of its own over the past year, was likely to fight back. “They’re not going to take this lying down,” he said.
Saraficom has already begun testing a payment card linked to Mpesa accounts to grow its transaction business, although said on Wednesday it did not yet have a date for when it would roll out its cards.
Stephen Chege, director of corporate affairs at Safaricom, said: “We are still in a pilot phase for the card after which we shall decide whether to roll it out commercially.”
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