Visa has joined its global rival Mastercard in the race to corner mobile payments and wallets, which have proliferated in many parts of Africa and become big business for the likes of Vodacom and MTN.
Last week, the payments giant launched Visa Pay, a new service that allows mobile wallets to integrate and make payments through its system.
Mobile money has become a mainstay in parts of Africa, but real financial inclusion continues to be hampered by a lack of access to certain mainstream services.
According to Christian Bwakira, group chief commercial officer at fintech operator Onafriq, while many of the world’s largest digital merchants have started accepting mobile money payments, most international merchants still do not.
This has meant that using mobile money in the global commercial space is cumbersome, resulting in a gap between financial inclusion on the African continent and access to the global financial system.
“Essentially, this means that individuals using mobile money can’t do things like make payments on an international airline’s website or pay for a Netflix account, small businesses can’t purchase ads on social media platforms like Facebook or search engines like Google, and content creators can’t get paid by the social media platforms they make content on,” he said.
For many years this was a market that went largely unattended by the world’s elite payments providers, given a lack of access to formal banking services and non-use of cards, their main business.
But mobile payments growth by operators including Vodacom, MTN, Safaricom, Airtel, Orange and Econet has become hard to ignore. Vodacom and MTN have more than 120-million such customers between them.
Across lots of parts of Africa, we are seeing new fintechs coming in and being more dynamic, more customer-centric than the telcos and taking significant share...
— Godfrey Sullivan, senior vice-president for products and solutions at Visa CEMEA
Visa and Mastercard have begun to make inroads to capitalise on the opportunity. Visa Pay is the company’s boldest step yet in the market as it also looks to plug weaknesses it sees with how mobile operators are provisioning financial services.
“Across the CEMEA [Central Europe, Middle East and Africa] market, things are really evolving very quickly. Mobile money in Africa is becoming increasingly important, with M-Pesa and MTN. But is also — in some respects — struggling to keep up with new, smartphone-based payments solutions,” Godfrey Sullivan, senior vice-president for products and solutions at Visa CEMEA, said during a media briefing in San Francisco.
“For example, Wave in Senegal has about 90% market share, and it’s not a telco. It’s competing directly with the telcos, but is giving customers a much better user experience, a new approach to pricing and is actually overtaking mobile money.
“Across lots of parts of Africa, we are seeing new fintechs coming in and being more dynamic, more customer-centric than the telcos and taking significant share. In Kenya, MPesa is the basis for so much, but everyone says this is a fantastic opportunity to erode their market share. And so, we’ve seen a lot of fintech innovation taking place.”
For now, Mastercard appears to be ahead having bought equity stakes in both Airtel and MTN’s mobile money businesses, weakening the strategic imperative for these companies to use the new Visa offering.
Even then, Mastercard has chosen to focus much of their efforts on remittances, not interoperability. It remains to be seen how the rivalry will play out over time.
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