With lower foreign currency rates, the M-Pesa Virtual Visa card is undercutting Kenya’s commercial banks in the fight for a bigger piece of the country’s cross-border payments industry.
The virtual card costs Sh121.92 to the dollar for transactions at Visa’s 61 million merchant locations, and it is initially available to more than 30 million M-Pesa customers in Kenya.
When using their Visa cards to make dollar-based payments, bank customers would need more shillings, indicating that Safaricom is relying on price to take market share in a sector of the economy that has previously been dominated by lenders.
Payments made in foreign currencies using the KCB Group debit card are based on the following exchange rates: KSh128.10 for the dollar, KSh128 for the DTB Group, KSh127.95 for Cooperative Bank, KSh126.80 for NCBA Group, KSh126.80 for Equity, KSh125.37 for Standard Chartered, and KSh125 for Absa.
M-Pesa is Safaricom’s top revenue generator, demonstrating the expansion of the financial service.
Revenue from mobile money services increased to KSh107.7 billion, surpassing voice as the company’s largest revenue source because to the return to charging for transactions under KSh1,000 and improved commercial activity.
In comparison to voice’s 31.2 percent contribution during the review period, the financial service now represents 38.3 percent of the overall income of KSh281 billion.
Regulatory permission is required before Safaricom can launch additional M-Pesa services, like as investments and insurance.
M-Pesa merchant payments have increased, particularly during Covid-19 when customers are increasingly using cashless transactions to avoid picking up the highly contagious virus.
Launched in June 2013, Lipa na M-Pesa has aggressively sought out merchants across the nation, including both big and small companies including gas stations, supermarkets, corner stores, and restaurants.
This has caused it to surpass card payments, which have mostly served formal retailers and are managed by banks and their worldwide payments technology partners like Visa and Mastercard.
The number of active Lipa na M-Pesa merchants jumped by 72.8% to 387,000, underscoring the effect of rising demand for cashless transactions.
This indicates that the M-Pesa rate is between KSh3.08 and KSh6.18 less expensive than those of Kenya’s biggest banks competing to win a piece of Africa’s $40 billion a year subscriptions industry.
As a result of strong dollar demand from a variety of sectors outpacing meager inflows and driving the shilling to record lows, the exchange rate has grown to be a significant problem in recent years.
In comparison to KSh114.95 in April and KSh107.85 a year ago, the shilling closed trading at KSh117.90 units yesterday, increasing the cost of imports and payments made using foreign currencies.
“Partnering with Visa has enabled us to extend a very affordable Forex rate of only 3.5 percent which is one of the lowest in the market making foreign currency transactions more affordable for more than 30 million M-PESA customers in Kenya,” said M-Pesa Africa Managing Director Sitoyo Lopokoiyit.
Commercial Banks take a commission of four to seven percent on top of Visa’s exchange rate, which was yesterday quoted at KSh118 and corresponds to the average buy price of KSh117.99 set by the Central Bank of Kenya (CBK).
Users will be able to securely pay 100 million global retailers via their mobile devices using the M-Pesa Global Pay Visa Virtual card, without the need for credit cards or PayPal accounts, including Amazon and Alibaba.
Additionally, the virtual card targets the quickly expanding African subscription markets for services like Netflix and Spotify.
More than 30 million M-Pesa customers in Kenya are the first to have access to virtual card. By April 2023, it will also be available in Tanzania, where testing is already taking place, Mozambique, Congo, Lesotho, and Ghana.
The M-Pesa platform has limits on transactions, with a single transaction limit of Sh150, 000 and a daily maximum of KSh300, 000.
