Homegrown money transfer service, M-Pesa, could easily survive competition from a similar service by Facebook launched in Brazil on Monday, analysts have said.
The payment service, dubbed WhatsApp Pay, will enable one to send money on WhatsApp just like one does a photo and is integrated with all Facebook social media apps including Facebook, Facebook Shops, Messenger, Instagram, WhatsApp and WhatsApp Business.
“We do not see WhatsApp Pay as a big risk to M-Pesa but a wakeup call. M-Pesa will have to innovate away from the SIM card-based platform to take opportunities unbound by network or geography and give it more versatility,” said Churchill Ogutu, the head of research at Genghis Capital.
According to Ogutu, M-Pesa has over time formed a large agency network and formed an ecosystem of value added services such as KCB M-Pesa, M-Shwari and Fuliza entrenching itself deeply in the market.
Additionally, it has existing interoperability, integration and relationships with businesses such as banks, something WhatsApp Pay may take a while to achieve.
He said WhatsApp Pay could receive skepticism from regulators who deem it too powerful to regulate and from banks who will view it as competition to their own payment platform, Pesalink.
“Its key competitive edge against WhatsApp Pay and other upcoming money apps are its deep integration and seamlessness with the existing financial ecosystem.
Interoperability with the existing financial ecosystem will be critical to success of WhatsApp Pay as a challenger,” said Ogutu.
Aly Khan Satchu, an investment analyst, says WhatsApp Pay would be better off targeting a different market segment as opposed to competing directly with M-Pesa in the local market.
“M-Pesa is ubiquitous in Kenya and deeply entrenched. Therefore, Facebook would be wiser to target lower hanging fruits than going toe to toe with M-Pesa,” said Satchu.
However, WhatsApp Pay will be a formidable competitor to M-Pesa considering that it will charge zero or near zero transaction costs, unlike M-Pesa where the charges brought in Sh28 billion accounting for 34 per cent of the platform’s revenue last year.
Consumers will use the payments service free of charge but merchants will pay a processing fee to receive payments.
Elizabeth Nkukuu, the Chief Investment Officer at Cytonn, says although M-Pesa is well entrenched in the Kenyan market WhatsApp Pay could offer a much stiffer competition than local competitors such Airtel Money, Equitel Money, Mobile Pay and T-Kash.
“I think it will be a formidable competitor especially if it comes with a lower transaction cost than M-Pesa.
Most people are on WhatsApp anyway, if it’s cheaper why not? With everything going digital, they may not need many agents now,” said Nkukuu.
According to Ogutu, WhatsApp Pay will have a global reach through its popular ecosystem of apps and can easily resonate with the social-media savvy young generation who are less concerned with brand loyalty.
There are plans to roll out WhatsApp Pay all across the globe in the near future.
“Payments on WhatsApp are beginning to roll out to people across Brazil beginning today and we look forward to bringing it to everyone as we go forward,” said Facebook in a blog post on Monday.
According to a 2019 report by Financial Sector Deepening (FSD), 73 per cent of Kenyans use instant messaging apps with 87 per cent of users aged between 16 and 45 using WhatsApp.
With 90 per cent of daily transactions in Kenya being cash based, there still remains a huge opportunity in mobile money sector in the country.
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