M-PESA's Tango with Payment Cards
The why, The Journey, the concerns and the future | Vol 54| Dec 19th, 2023
(sneaking back into Substack slowly…)
Happy Holidays Everyone🎄❄️🎅🏽🥳
The biggest news, arguably, from last week in African Fintech is M-PESA’s announcement of their intention to issue about 60 million physical debit cards. In this volume, we will explore M-PESA tango with different variants of the Payment card and what the opportunity is.
I had my heels in 1 hand, and our RFP submission in the other. I deftly mounted an okada my Nairobi driver had hailed for me, the rider was speaking Swahili, I was speaking flustered English - the only thing both of us understood were the words - Safaricom Head Office.
This👆🏽 is not fiction, it’s a true account of one of my BD trips to submit a response to an RFP to supply a turn-key Card issuance solution for Safaricom. After the submission, I surveyed my surroundings, asked a few questions, and realized that the trip was a fruitless exercise - someone just wanted information. I informed my Bosses of my thoughts and moved on. And it turned out to be so.
This was my 1st encounter with Safaricom shopping for a Payment card, but before we explore the deep dive, let’s remind ourselves of some facts 👇🏽
Some Facts about M-PESA
They are the largest part of the Safaricom business, contributing 38% to annual revenue last FY, also contributing almost half of the Group PBT.
They are present in 7 countries including Ethiopia
In 2023 they entered Ethiopia and attained an impressive record of 1 million customers. On the Group level, they have about 30M active customers.
Apart from their core, they have 2 main offerings, a Consumer app and a Business app.
In their last Annual report, they attained the feat of processing an average of 1 billion dollars a day.
Summary: They are not a small fry looking for a market entry strategy.
The Journey
Since its birth and explosive success, M-PESA has explored different ways to ensure it does not remain an East African local champion. Some of it has been largely successful like their partnership with Western Union and Visa. Some of it left hard lessons, like their foray into West Africa.
In all, we see an innovative behemoth playing the game of attack and defense as it navigates partnerships and product launches.
So they have Western Union, Payfast, East African Block, AliExpress, and a Virtual card under lock. Is the desire to have a physical payment card a misstep or a part of the big picture?
What is the Opportunity
Apart from various calls to have a debit card, like this tweet from 3 years ago
We’d like to explore reasons M-PESA might be exploring a card product, as we have established in the last section that interconnectivity isn’t a problem.
📌Time to complete a Transaction: The payment flow for M-Pesa requires users to follow through several stages before a mobile transaction is completed compared to a tap-and-go which will be way faster.
📌Open their customer base to the Global Payments ecosystem allowing them to transact online and offline. The Virtual card is only allowed for online transactions.
📌Gives M-PESA access to the banking industry as an attack strategy even as Kenyan banks explore a share of the mobile wallet world by launching their mobile money transfer platform, Pesalink.
📌Reduction of processing errors: Errors in the wrong payment amount input have been reported frequently. It is believed that card payments, especially NFC, will eliminate this.
So what do you think? Are these big enough reasons?
What are the concerns?
Even though some sources note that the 60 million cards haven’t been issued, other sources note that there has been a successful pilot project of 16, 000 payment cards. Furthermore, it says the Mobile Money giant worked with 47 companies across Kenya using the card for its mobile money services.
Looks like they are thinking about it properly right? But what are people afraid of with this move?
👉🏽The End of Mobile Money?: M-PESA is the largest mobile money success story ever, our poster child of hope that we can trade, survive, and thrive without the plastic ( and all it represents ) on this continent. People feel it is a let-down and the beginning of the decline of OUR dear mobile money. Thoughts?
👉🏽M-PESA is disrupting their ecosystem: Some other thoughts say that M-PESA has held its market share for about 15 years because it ran innovation in the closed loop system. Opening it up using a debit card will give the competition the access they have been looking for to cannibalize it.
👉🏽Control and Flexibility: Everyone who has run an Issuing or Acquiring processing project knows the ropes: Fees, project length, complexity, frequent changes.. etc. Is M-PESA able to bear all that? Can they promise their customers the same service, fees, and features with this change? Is Visa willing to integrate their existing products - Fuliza, BNPL, and all just to make them happy? t
What are your thoughts on the above, valid reasons to be concerned?
What Opportunities exist in the future
Last thoughts on this - M-PESA is large enough to seriously consider their own Card Scheme( not product). There are successful African and International projects they can learn from as well as Talents they can bring onboard to make this a reality.
An M-PESA Scheme leveraging the current 2 sided marketplace and their numbers can attract partnerships giving them access to the UPI system in India, the CUP rails in China, Elo in Brazil, and Verve in Nigeria. Owning the card scheme affords them the control and flexibility they need to offer the best of both worlds - An interconnected wallet and card payment offering.
The Weekly Roundup
Instead of the usual Last week’s roundup, let’s do something fun in this segment.
let’s use 30 seconds to answer this poll
💥If you still want to catch up on last week’s news? here you go
https://www.linkedin.com/feed/update/urn:li:activity:7142458345042481152
💥Registration is ongoing for the 1st Cohort of our School of Fintech for 2024, secure a seat here
And that is all for this week’s newsletter. Stay safe and Happy Holidays.👋🏽
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