WhatsApp Pay vs Safaricom M-Pesa

Facebook launched its WhatsApp digital payment service. Here’s what you need to know courtesy of the Genghis Business Commentary note ‘WhatsApp Pay vs Safaricom M-Pesa’.

The announcement of the payment service reverberated across the world due to the sheer scale of WhatsApp, which tallies 500 million Daily Active Users and 2 Billion monthly users in 180 countries. The target of the payment service is emerging markets with the first launch in Brazil and expected to be rolled out in Mexico, India, and Indonesia.

How WhatsApp Pay will work
Initially, it has to 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 simplicity in its integration with Facebook, Facebook Shops, Messenger, Instagram, WhatsApp, and WhatsApp Business. The key target of the service is e-commerce like WhatsApp Business.

Is Kenya attractive for WhatsApp Pay? – Yes
Facebook’s ecosystem is a possible formidable challenger in the Kenyan mobile money scene through its suite of highly popular apps.

In terms of mobile money usage patterns, payments are still under-utilized (creating an opportunity) at 26% compared to funds transfer which is the most popular usage of mobile money at 79%.

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.

A blow to M-Pesa? Not likely
In the domestic scene, M-Pesa is a giant in its own right, facilitating transactions to the tune of KES 4 trillion (USD 40Bn) a year.

Its key competitive edge against WhatsApp Pay and other upcoming money apps are its deep integration and seamlessness with the existing financial ecosystem.
In its corner, M-Pesa can count on
● A deeply entrenched ubiquitous brand.
● A large agency network.
● Its ecosystem of value-added services that work seamlessly from the single wallet including, lending and savings, M-Pesa ATM withdrawal services, bill payments.
● The existing integration, and relationships with business services (including banks) that allow Customer-to-Business and Business-to-Business transactions.
● Its advantaged position if banks get skeptical to accept WhatsApp Pay since it will be a competition to banks’ own payment platform Pesalink..
● There is also the possibility of regulatory skepticism of ‘digital invasion’ by the global tech giants if India’s case is anything to go by.
● There has been data privacy and trust concerns especially with Facebook’s ad and social media business practices’ use of personal data.
However, this is a call on M-Pesa
● A cloud-based rather than a SIM card-based M-Pesa can stand against WhatsApp Pay and other kinds of mobile/internet money.
● 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, WorldRemit, and PayPal and through partnerships with existing global e-commerce companies like Alibaba.
Our View
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. Past history shows that Safaricom is not one to sit as its market share erodes away.

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by Bryan Bett

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