Early this week, WhatsApp launched its in-app payment feature dubbed WhatsApp Pay. It enables users to send money on WhatsApp just like one would send a photo. The payment feature is set to be integrated to all Facebook social media platforms: Whatsapp, WhatsApp business, Facebook, Instagram, Messenger and Facebook’s newly launched feature, Facebook Shops.
Many people have raised the alarm over what the new feature could mean for homegrown Safaricom payment service M-Pesa.
According to analysts quoted by People Daily, M-Pesa will survive Whatsapp Pay competition.
The head of Research at Genghis Capital, Churchill Ogutu said M-Pesa could very easily survive competition from a similar service.
“We do not see WhatsApp Pay as a big risk to M-Pesa but a wake up 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,” says Ogutu.
Ogutu says M-Pesa has taken a lot of years to form a large agency network and developed a strong ecosystem of value added services such as MShwari, KCB MPesa and Fuliza which are deeply entrenched in the market.
MPesa also has existing integration, interoperability and relationships with businesses such as banks and micro finance institutions, which may take a while for WhatsApp Pay to achieve. He says WhatsApp Pay could be deemed as too powerful to regulate and could therefore receive some skepticism from regulators and banks who may perceive 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, said that WhatsApp Pay was better off finding a different target market as opposed to trying to compete 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.
WhatsApp Pay could however turn out to be a formidable competitor owing to the fact that it will cost zero or much less for a transaction compared to M-Pesa’s costs which accounted for 34 percent of its revenue last year with a figure of Ksh28 billion.
WhatsApp Pay consumers will enjoy free services but merchants will be expected to pay a processing fee to receive their payments.
Elizabeth Nkukuu, Chief Investment Officer at Cytonn, acknowledges that WhatsApp Pay could present much stiffer competition to M-Pesa, even though it is entrenched in the Kenyan Market. WhatsApp Pay can position itself against other payment platforms such as Airtel Money, Equitel Money, Mobile Pay and T-Kash, which have failed to capture the market.
“I think it is a formidable competitor, especially if it comes with a lower transaction cost than M-Pesa,” said Nkukuu. “Most people are on WhatsApp anyway, if it’s cheaper, why not? With everything going digital, they may not need many agents now,” she said.
According to Ogutu, WhatsApp Pay will also present the added advantage of global payment reach achieved through its popular ecosystem of apps. This will attract the social media savvy younger generation who are less concerned about brand loyalty.
WhatsApp Pay was first launched in Brazil and the company already has plans for a global roll out.
“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,” Facebook said in a blog post on Monday.
The Financial Sector Deepening Report 2019, indicated that 73 percent of Kenyans use instant messaging apps with 87 percent of users between 16 and 45 using WhatsApp.
Despite the popularity of M-Pesa, Kenya still operates at a rate of 90 percent cash based transactions, presenting huge opportunities in the mobile money market in the country.