The battle for the mobile market share between Kenyan market leader Safaricom and international behemoth Airtel last week escalated into a technology contest that left Safaricom further bruised, even as it unveiled its latest groundbreaking technology.
Safaricom, which brought mobile money to the world and to Africa, with the unveiling of its Mpesa money transfer system three years ago, last week unveiled a new tie-up with international credit card supplier Visa, which will allow mobile virtual credit card payments.
But Airtel had already - five days earlier - announced an identical tie-up with Visa competitor MasterCard, and plans to roll out the service to 16 African countries.
Safaricom, still not used to such tight competition, had waited until the actual product launch before unveiling its new initiative, whereas Airtel's announcement was made ahead of the launch.
For consumers, the race now brings two new services that allow them to use credit cards through their phones.
The Safaricom service will see Mpesa customers able to transfer money from their phones to a Visa prepaid card with I&M Bank as the merchant partner. But Airtel's 1time Shopping Card collaboration with MasterCard Worldwide and Standard Chartered Bank will allow its customers to use their mobile phones to make online purchases from MasterCard merchants worldwide.
This offering could have a profound impact in Africa, deepening the use of credit cards. “We notice that the unbanked doesn't have ability to pay by credit card or, in this case, debit card, and so we decided to bring something the unbanked community doesn't have,” said Safaricom CEO Bob Collymore.
There are close to 400 million mobile phone users in Africa, and an unbanked population of 230 million households. Moreover, analyst firm Gartner predicts Africa will see 56% mobile penetration by 2014, from the current 10%.
Mpesa's virtual card, dubbed PrePay Safari Card, will give its 14 million customers access to Visa's global network of over 28 million accepting merchants across the world and 1.6 million Visa ATMs. Subscribers will be able to load the international debit card using their phones, and make online payments. “This moves Mpesa to a different level altogether, as it marks a linkage between Mpesa and the world's biggest payment card network,” says Collymore.
This convergence of plastic money and mobile money was intended to further leverage the take-off of Mpesa's mobile money success in Kenya.
“The fact that individuals or businesses do not need to incur heavy capital expenditure setting up infrastructure to tap into the business opportunity introduced by Mpesa has been a major accelerator for growth,” says Collymore.
Once Airtel's service goes live, customers shopping online will be able to request a single-use shopping card number, which Airtel money services will generate. A confirmation message is then sent to the consumer's handset to notify them that the transaction is complete.
In a statement at the unveiling of the card in Nairobi, Airtel International CEO Manoj Kohli said Airtel 1time Shopping Card “will help consumers overcome the daily challenges in their lives”.
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