Visa, MasterCard in all out war for giant share of cash in retail stores

The race among electronic payment firms to tap the cash passing through small-scale retail stores is heating up with the entry of a second firm in the field.

Barely a month after MasterCard inked a deal with Equity Bank to issue at least five million cards to Kenyans and point-of-sale (POS) devices to retailers, Visa has announced a similar strategy.  

The companies hope to retain the billions of shillings passing through small businesses in financial institutions by use of plastic money.

In a press briefing on Tuesday, Visa’s general director for Sub-Saharan Africa, Mr Jabu Basopo said that the company would now target small-scale retailers and schools with its card payment technology.

“We have seen growth in the number of cards but we need to expand the acceptance footprint. We are working on technology that will make it easier for small-scale merchants to accept cards,” Mr Basopo said.

Currently, there are six million Visa branded payment cards in Kenya, a 20 per cent increase from last year. Visa claims transactions volumes this month amounted to Sh522 billion ($6 billion).

The use of cards to buy goods also increased by five per cent to account for 15 per cent of total volumes while ATM withdrawals account for 85 per cent of total volumes.

The plastic money companies make money by levying transaction processing fees- mostly borne by retailers using their network, charge for settlement, switch fee and license fees borne by banks issuing branded cards.

Central Bank data shows that Kenyans spent Sh111.86 billion on shopping with payment cards last year.

The total value of card transactions hit Sh1 trillion in 2012, a 73 per cent increase from the Sh578.1 billion reported in 2011.

And as Visa was rolling out their new strategy, MasterCard took a step forward by announcing a partnership with Chase Bank to issue cards to the youth.

Initially, MasterCard and Chase Bank will be rolling out the cards to over 26,000 University Students Community Organization (UNISCOO) umbrella before they are issued to other groups in partnership with the Youth Enterprise Fund.

“The population of 15 to 29-year-olds in Kenya stands at about 26 per cent of the population and this is a step towards extending financial inclusion to the youth who have previously been excluded from formal banking,” Chase Bank assistant general manager John Fernandes said.

Due to stringent requirements imposed by banks in Kenya, credit and debit cards have historically been perceived as products meant for the elite. However, as emerging markets become more crucial to the bottom line, card companies are hoping to demystify this notion.

Both Visa and MasterCard will be leveraging heavily on mobile technology as they reach out to the low-end market. 

Visa hopes to launch Mobile Point of Sales (MPos), devices that allow businesspeople to process card payments through their smartphones in Kenya later this year.

According to Visa Kenya country manager, Mr Victor Ndlovu, the mobile point of sale (MPos) technology could be launched locally by April. MasterCard is already distributing MPos technology in East Africa as part of the partnership with Equity Bank.

Mr Ndlovu added that the technology is ideal for small companies because it has a price-point between Sh4,350 and Sh8,700 ($50- $100) whereas acquiring a traditional POS system can go for as much as Sh52,200 ($600).