Is the New WhatsApp Pay a Threat to Safaricom’s Mpesa?

When Facebook’s CEO Mark Zuckerberg announced the new WhatsApp Payment Service, the world paid attention.

WhatsApp has 500 daily active users (DAU), which makes explains the interest in the new payment service.  Further statistics show that 2 billion people across 180 countries use WhatsApp every month.

Imagine the number of transactions Facebook is targeting with WhatsApp Pay. Most of the users are in emerging markets.

India has the largest number of users (200 million) followed by Brazil (120 million). Facebook intends to roll out the service in Brazil and then expand to other major markets including India, Mexico, and Indonesia.

How does WhatsApp Pay Work?

Facebook is exploring the simplest method of transferring cash to another WhatsApp user. In fact, the tagline for the service is “Send money on WhatsApp just like photos”

Users will need to link the service to their MasterCard or Visa debit or credit card.

Facebook rolled out WhatsApp Business to enable business owners to post their products and link to their e-commerce or online stores.

WhatsApp Pay comes in to complete the loop by allowing customers to pay for products directly from their WhatsApp account.

Imagine a scenario where you can shop and pay for products directly on WhatsApp without integrating any other payment method.

Further, WhatsApp Pay integrates seamlessly with all other social platforms that Facebook owns.  It will integrate with Instagram, Facebook, Facebook Shops, and Messenger.

Potential Performance in the Kenyan Market

WhatsApp is popular among the youth in Kenya despite the presence of other competitive social media platforms.

A survey in 2019 indicated the 87% of Kenyan youth between 16 and 45 years used WhatsApp daily.

Add the popularity of Facebook-owned social platforms and you will see the potential boom of WhatsApp Pay in Kenya.

Kenyans pay for goods and services in cash. Mobile payment services have been cashing in on the preference for cash payments.

A survey by Financial Sector Deepening in 2019 indicated that 90% of all transactions in Kenya were cash-based.

The big question is, can WhatsApp Pay outdo Mpesa?

WhatsApp Pay versus Mpesa

Look through the window and you will see an Mpesa signage or a shop painted green. In fact, our towns are saturated with Mpesa kiosks.

Airtel Money has been trying to match up the service but Kenyans have proved loyal to Mpesa despite the disparity in charges.

Even with occasional increases in charges, Mpesa is still growing within and across borders.

Mpesa transactions in Kenya are estimated at 40 Billion US Dollars every year.

Safaricom works tirelessly to expand the Mpesa network, which overtook its core business of telecom services.

In addition to expanding to other East African countries, Mpesa has partnered with banks and SACCOs to facilitate easy and quick bank transfers.

Other services that have strengthened Mpesa’s reach include Fuliza, KCB-Mpesa, and M-Shwari.

The reliance on users’ bank accounts is a major drawback for WhatsApp Pay in Kenya. Most of the major banks in the country have binding partnerships with Mpesa.

Hence, the integration with a competing payment service may suffer rejection.

Banks are known to be slow to adopt change, especially where their clients’ data security is involved.

Facebook has been trying since 2018 to introduce WhatsApp Pay in India with no success.  The regulators feel like the global giant is invading the emerging market.

The Kenyan banking sector is likely to respond in the same manner given the duration it took to integrate Mpesa to customer bank accounts.

Read Also: WhatsApp Has Introduced A Fingerprint Lock Feature

The opportunity for WhatsApp Pay

Despite the supremacy of Mpesa in the Kenyan market, the newbie payment service may still have an opportunity.

The e-commerce space has been expanding rapidly in the country. Business owners are doing everything possible to increase their online presence and business.

The Covid-19 crisis has increased the speed of adopting digital technologies in the Kenyan market.

Technology has proved a key element in reaching clients in a time when free movement across counties is restricted.

The banks may be reluctant to change but the young generation of customers is open to new digital solutions.

The popularity of loan apps in Kenya is a clear indication that the youth need an alternative way to access quick loans.

The push from entrepreneurs who see the opportunity on social media and WhatsApp Business may force banks to adopt WhatsApp Pay.

Facebook is likely to explore other ways of funds transfer other than relying on the user’s bank account. For instance, PayPal is still a reliable payment method.

Kenyans have also been exploring like Chipper Cash, which allows mobile money transfers across borders at no cost.

International banks might also step in and fill the gap that local banks create if they delay in integrating WhatsApp Pay.

In addition, should Facebook offer a better deal than Safaricom, banks will open up to the digital solution.

The Threat of Cloud-Based Solutions

Both Mpesa and WhatsApp Pay are currently SIM-card based. Users cannot register and transact without a valid SIM card.

With the rapid growth of fintech in our day, another giant can emerge with a cloud-based solution.

Millions of users may be open to a cloud-based money transfer that does not necessarily require them to own a SIM card.

Consider the large number of teenagers on social media that cannot legally own a SIM Card of bank accounts.

SIM cards also restrict some online businesses from maximising mobile payments. A cloud-based solution can easily expand as long as customers have a considerable guarantee of safety and reliability.

Final Thoughts

Safaricom is a local giant in both telecom services and mobile money transfers. However, in the global scene, the company has miles to go to become a force. Digital innovations will continue in the current business environment.

Many companies have realised how much they can do without many of their employees. The alternative is digital technology. The push to launch WhatsApp Pay is an indication of the direction that businesses are likely to take in the near future.

Kenyans are loyal to Mpesa and its 35 million-customer base is impressive. However, the younger generation may be open to new payment systems that integrate across all social media platforms. The technical strength and popularity of Facebook Inc cannot be overlooked as well.

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