Could mVisa spark a Mobile money war with other service providers in Kenya?

Visa announced today that consumers of a Visa-led bank partnership in Kenya will be able to send money to each other domestically without paying transaction fees using mVisa. Consumers can use mVisa to send money directly from their bank to a recipient’s bank account regardless of whether they use a smart phone or feature phone.

The partnership offering free person-to-person (P2P) transactions currently includes nine Kenyan banks who have either enabled mVisa on their mobile banking applications and/or have acquired merchants to be able to accept mVisa. These are Barclays Bank, Cooperative Bank, Ecobank, Family Bank, KCB Bank, National Bank of Kenya, NIC Bank, Prime Bank, and Standard Chartered Bank will be able to send money for free starting from today. Other banks, either live or about to go live with mVisa, include Diamond Trust Bank and Stanbic.

Implications to other Mobile money service providers

According to CA’s recently released sector statistics, Payments for goods and service through the mobile money transfer platforms hit Sh627.4 billion in the first three months of the year, demonstrating a higher appetite for the service as an alternative to hard cash and card payment. This new initiative by mVisa could hamper such profit margins for some of the already existing sector players, and Visa knows it.

“This is a significant move especially when you consider how much Kenyans spend on transaction fees for mobile money transfers every year. With 38.9 million active mobile phone subscriptions and Ksh. 515.9 billion in person-to-person money transfers within the last quarter of 2016, mobile money payments have become an integral part of Kenyans’ lives,” said Andrew Torre, Group Country Manager for Visa Sub-Saharan Africa.

“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. We are excited to continue to build momentum around mVisa to digitize payments with a scalable and interoperable solution that is not limited by the mobile network, bank, or type of handset used.” Added Torre.

One of the big boys in this sector, Safaricom, reported a 27 per cent increase in full-year pre-tax profit earlier this year. The increase in profit was attributed to Mpesa revenue, which grew 32 per cent to Ks55bn in the year to March 2017 and accounted for 25.8 per cent of the company’s Ksh213bn revenue.

Are Safaricom and the rest of the players in the Sh627.4 billion game supposed to roll over and watch a big chunk of their business go into the gutter? Personally, I expect them to put up a fight. What do you think?