By Roseleen Nzioka
Nairobi. Kenya: Facebook Inc, owner of WhatsApp, the most popular global social communication service has this week launched a digital payments service dubbed “WhatsApp Pay.
According to information from Nairobi’s leading investment solutions provider Genghis Capital, the WhatsApp payments service will work through its suite of mobile apps including WhatsApp mobile app.
WhatsApp is most popular, especially in emerging markets with the largest number of users such as India (200Mn) and Brazil (120Mn). This informs its target of the payment service to emerging markets with the first launch in Brazil on June 16 and expected to be rolled out in Mexico, India, and Indonesia.
The pay service will initially be linked to users’ Visa or MasterCard credit or debit cards, which could initially restrict it to bank customers only.
“The attractiveness of the service is its ubiquity in its integration with Facebook’s extremely popular platform of social media apps including Facebook, Facebook Shops, Messenger, Instagram, WhatsApp, and WhatsApp Business,” said Genghis Capital.
Genghis says that Kenya is attractive for WhatsApp Pay as only 10% of the country’s economy uses digital transactions.
“Overall, Kenya’s economy is still cash-heavy; with about 90% of daily transactions still cash-based according to a 2019 report by the Financial Sector Deepening, a large opportunity for payment service providers.
“The large opportunity coupled with the popularity of the social media platforms, one could not but wonder whether the social media giant will be an intimidating risk to the dominant M-Pesa ecosystem,” says Genghis Capital.
Although WhatsApp Pay may at first appear as a risk to Kenya’s own widely successful mobile money platform M-Pesa, Genghis Capital states that M-Pesa has several advantages which include:
- A deeply entrenched ubiquitous brand that that has outgrown its mother company, Safaricom
- A large agency network that not only facilitates M-Pesa transactions but other money and telecom services working as customer service centers
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Its ecosystem of value-added services that work seamlessly from the single wallet including, lending and savings, M-Pesa ATM withdrawal services, bill payments. Growth of M-Pesa has mainly been from the ‘new business’ channels which include KCB M-Pesa, M-Shwari and Fuliza against the traditional channels; withdrawal charges and peer-to-peer charges
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The existing interoperability, integration, and relationships with business services (including banks) that allow Customer-to-Business and Business-to-Business transactions. Interoperability with the existing financial ecosystem will be critical to the success of WhatsApp Pay as a challenger.
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It is an advantaged position if banks get skeptical to accept WhatsApp Pay since it will be a competition to their own payment platform Pesalink. Banks will also be critical to success.
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There is also a possibility of regulatory skepticism of ‘digital invasion’ by the global tech giants if India’s case is anything to go by. India’s regulators have delayed approval of WhatsApp Pay for mass-market despite the trials that have been running since 2018. The tech giants due to their massive power and influence could be problematic to regulate especially for small economies.
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There has been data privacy and trust concerns especially with Facebook’s ad and social media business practices’ use of personal data. With the additional and critical data from the payment service (payment account details, transaction details, etc), it is easier to see people rather stick to their ubiquitous and proven platform.
Even with these advantages, Genghis Capital sees the entry of WhatsApp Pay as a “wake up” call to M-Pesa to evolve into a cloud-based system rather than the current SIM card-based system.
“M-Pesa can stand against WhatsApp Pay and other kinds of mobile/internet money. These cloud-based monies eliminate the majority of restrictions to access customers unbound by geography or telephony network offering almost immediate scalability of the service to millions of users.
“M-Pesa Global is a service that would get close to competing in the global arena due to its partnerships with global entities such as Western Union, MoneyGram, World Remit and PayPal and through partnerships with existing global e-commerce companies like Alibaba,” said Genghis Capital.
