Visa’s payment service stirs competition in mobile money

A global payments firm Visa has taken the competition for mobile money service a notch higher with the launch of mVisa that enables Kenyans use mobile phones to transact cash and make payments.

The rollout of the service will enable Kenyans make free domestic mobile money transfers using mVisa.

The daily limit for person to person transfers will be Sh250,000 with the per transaction limit being Sh100,000. This is in comparison with mobile money services whose daily transaction limit is Sh140,000 while per transaction limit is Sh70,000.

Visa has not placed a limit on personal transfer to a merchant but the transactions might be subject to limits imposed by the different banks on the platform. The firm is coming to terms that not all Kenyans swipe cards as a payment method.

This is despite the infrastructure including the availability of thousands of merchants with point of sale devices and the millions spent per year in marketing card payments in Kenya. The company has instead taken up the mobile cash transactions which it hopes to ‘cash in’ on mobile penetration in its latest onslaught in the market to gain acceptance.

Payment for goods or services with a card has largely been a preserve of the rich and swiping a card had been restricted to high-end establishments. This is as the vast majority of Kenyans prefer making their payments in cash and now mobile money.

The firm is however courting Kenya’s low end market with its new mobile based mVisa service. The service will enable every day Kenyan make payments using their mobile phones to their regular service providers including Boda Boda, the neighborhood kiosk and even the mama mboga.

The firm last Thursday announced free person-to-person money transfers on its mVisa service that enables one use the mobile phone instead of a debit or credit card  to move funds from their bank account in to another person’s account or pay for goods and services, with the money going into the merchant’s bank account. The service uses the same concept that mobile money services use. They use their bank’s mobile phone applications to make the transactions. Visa said it is scrapping fees charged for person-to-person transfer in a bid to popularise the service.

The mVisa service will also enable individuals pay for goods and services by keying in mVisa merchant identity numbers or scanning a QR code that gives the merchants details.

The new Visa service will be competing with M-Pesa, Airtel Money, Equity Bank’s Equitel and the recently launched Pesalink owned by Payment Services Ltd, an affiliate of the Kenya Bankers Association.

mVisa has the advantage of not having to deal with interoperability issues that has been cited in the mobile money sector as being a hindrance for smaller players, who  may not have the numbers that the likes of Safaricom have - with over 22 million customers on M-Pesa.

Visa East Africa General Manager Sunny Walia said cash is his biggest competitor and having mVisa is meant to wipe out the large amounts of cash in circulation and instead get Kenyans to take up electronic payments, which are more secure.

He observed that despite having over 145,000 outlets that accept Visa in Kenya and over 10 million Kenyans holding debit and credit cards, only 10 per cent of the card holders use cards to pay for goods and services.

Kenyan consumer

Walia said the launch has been necessitated by huge number of Kenyans who use mobile payments. “Collectively, the Visa ecosystem has more than 10.5 million cards in this market but only about a million are active at the point of sale. The Kenyan consumer is mobile savvy and prefers mobile transactions,” he said.

Among the factors that have limited use of cards include fear of fraud among Kenyans, who according to Walia are ‘not sure what’s beneath the POS terminal that they are about to swipe their card’. ICT Cabinet Secretary Joe Mucheru noted that Visa had in the past imposed solutions that worked elsewhere, without regard to the uniqueness of the Kenyan market.

“The hook they (Visa) have used in other markets may not necessarily work in our market,” said Mucheru. “From what they have demonstrated with mVisa, they appear to finally understand our market.

They have taken into account the customers and merchants by removing the barriers enabling them to use their phone and do not need to use your card. They have understood and grasped the market.” mVisa has been piloting the service in Kenya since September last year with nine Kenyan partner banks that have either enabled mVisa on their mobile banking applications or have acquired merchants to be able to accept mVisa.

The move is expected to bring droves of users looking for cheaper alternatives for transferring funds. “This is a significant move, especially when you consider how much Kenyans spend on transaction fees for mobile money transfers annually,” said Visa Sub-Saharan Africa Group Country Manager Andrew Torre.

“With 38.9 million active mobile phone subscriptions and Sh515.9 billion in person to person money transfers within the last quarter of 2016, mobile payments have become an integral part of Kenyans’ lives.”

“There is a strong sense of community here with people often sending funds to family, friends and even strangers in times of need, celebration or crisis. We hope to enhance this by eliminating barriers such as transaction costs, while giving customers a convenient, secure and affordable experience,” he further noted, adding: “We are excited to continue to build momentum around mVisa to digitise payments with a scalable and interoperable solution that is not limited by the mobile network, bank, or type of handset used.”

The firm has also converted many of its existing merchants into accepting mVisa. It said plans are underway to have the service accepted at thousands of merchants aggregated through Direct Pay Online and Jambo Pay, enabling an even easier e-Commerce experience for Kenyans.

“Smaller merchants in particular, have realised that they no longer have to invest in expensive point of sale infrastructure as mVisa enables bank to bank payments in a convenient, secure and affordable manner,” said Torre.

 The ICDC also incorporated its subsidiary the Kenya National Trading Corporation which engaged in wholesale trade and the export-import business. It began operating in 1965 aiming to eliminate middlemen who made the final price of goods costly to traders.

ICDC continued to consolidate its place in Kenya’s industrialisation, newspaper headlines described it as a “roaring success” that was making Kenya the “workshop of East Africa.”

In the 1970s, its network of agents across the country included 630 in produce and provisions, 91 in textiles, 100 in hardware, 25 in wines and spirits and 23 in bicycle spare parts.

In 1970, President Jomo Kenyatta ordered non-citizen traders with short-term licences to immediately close their businesses. ICDC was to help potential African businessmen acquire the vacated premises.

It would provide loans of up to 75 per cent of the cost of stock in shops and a ten-year loan of 75 per cent of the cost of buildings, said Mr Wamae.

In the case of the first loan ICDC would require security in the form of land or building for the amount of the loan advanced.

In February that year, Asian traders had also been warned by the corporation’s chair John Keragori against undercutting prices in order to undermine Africans. He said ICDC was fully committed to the rapid Africanisation of commerce in the country.

There was also reluctance to lease premises to Africans and rents were even pushed up so as to turn them away.

Banks were also not loaning many Africans due to the fear that the loans wouldn’t be repaid.

“The main burden of financial assistance has fallen on the shoulders of the ICDC,” said ICDC Chief Manager P.M Waweru. ICDC urged locals to organise themselves into cooperatives or companies and come up with a ‘viable industry’ which the ICDC would help finance. It would finance mainly the manufacture of goods presently imported.

It was hoped that the establishment of small industries in the rural areas would help absorb thousands of school leavers who were migrating in numbers to big towns to seek employment.

President Kenyatta had directed that loans were to be repaid in five years instead of three.

With the help of ICDC, a factory to process wool had been put up in Nakuru while a vegetable one had been set up in Naivasha to cater for small scale agriculturists. In December 1974, ICDC signed a deal with Saltec International from Rome for the establishment of a salt refinery and works in the coast.

In April 1975, the government said it would set up a giant textile mill at Eldoret at a cost of Sh235 million.

This was colossal money by then.  It would be known as Rivatex and would be an undertaking of the ICDC.

By then, government had shares in 32 industrial organisations with the help of the ICDC. It also became the majority shareholder in Kenya Wine Agency Ltd (KWAL) in 1970, a venture that saw it earn Sh860 million in 2014 by selling a 26 per cent stake to Distell Ltd, a South African firm.

By 1976, more than 9,000 Kenyans had received commercial, industrial and property loans amounting to more than Sh500 million since independence.

However, challenges emerged in recovering some of the loans. In 1979, ICDC refused to offer Sh50,000 loan to any trader if the security offered didn’t have a title deed or lease because it became difficult to recover. Outstanding loans stood at Sh94 million.

Loss making projects

By May 1979, the loans given had increased from Sh30 million to Shs330 million in a span of two years. Staff had risen from 50 to 280 while investments had risen from Sh50,0000 to Shs560 million in the same period.

In September 1986, 27 out of 61 ICDC projects performed poorly. It spent Sh27 million in rehabilitating the loss making projects. No dividends were offered to shareholders that year. In the 1980s it was owed Shs237 million in unredeemed loans to 3,449 persons.

Though it is not visible as it was in the formative years of the country, ICDC still fights to be relevant despite government thinking that it should be merged with other State investment arms to address capital challenges. Last year, in November, it slashed its loan interest by three per cent to usher in the era of capped interests. It had been charging 16 per cent and now charges 13 per cent.

On February this year, it financed a Sh650 million real estate project - the 36 three bedroomed furnished Oceania Apartments at the Coast.

It is also involved in other projects such as Runda Paradise, Zumia heights in Mombasa and an industrial park in Eldoret that is projected to cost Sh6 billion. It also has a 23 per cent stake in Centum at Sh462.5 million.