GlobalData Plc

Visa’s challenge to M-Pesa will fail

Visa’s rival mobile money service offers some benefits over M-Pesa but ultimately can’t compete with its dominance and appeal to Kenyan consumers.

Visa is taking on Safaricom’s M-Pesa with its own mobile money service, mVisa. Visa is the largest card scheme in the world, present in almost all global markets and dominant in most of them, but it finds itself in the role of the underdog in Kenya. M-Pesa is so popular and prevalent in Kenya that, alongside competing mobile money providers, its existence has stunted the growth of the Kenyan payment cards market. The infrastructure to support payment cards does not exist in Kenya, and with most consumers and merchants using mobile money services, there is no reason for such infrastructure to be used, even if it were to be built.

As a result, Visa has had to move away from its usual card-based strategy and take on M-Pesa at the mobile money game, through the mVisa service which launched in India in 2015. mVisa has found some success in India, with 30,000 merchants signed up to accept the service – though it should be noted that India is such a large market with such an abundance of small merchants that mVisa is by no means a dominant player in the market.

Visa is trying to position itself as a democratizing force in Kenyan mobile payments, since the mVisa service is not limited to a single mobile network operator like M-Pesa is with Safaricom. However, in reality mVisa is actually more restrictive for users than M-Pesa, since it requires a bank account with one of the (currently four) partner banks to function, while M-Pesa’s main selling point is that it doesn’t require a bank account to use. In fact, M-Pesa (and other mobile money services) have essentially removed the need for a bank account among Kenyan consumers, since a mobile money account fulfils all the essential requirements of a bank account.

Aside from these factors, the single biggest barrier Visa faces in growing this new service is the extent to which M-Pesa is entrenched in the market. Following Kenyan regulators’ efforts to promote openness in mobile payments and the launch of a rival service from Equity Bank obliging it to cut its fees, M-Pesa is no longer the only realistic mobile money option. However, it is still by far the biggest provider in the country, with a 77.4% share of mobile money subscribers in Kenya in 2014.

Visa’s new service may be able to attract some users, and may be of some value to merchants due to its mobile network-agnostic nature. However, these advantages will not be enough to make it a real challenger for M-Pesa.

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