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How WhatsApp payment likely to affect M-pesa if the trials succeeds and introduced worldwide.

How WhatsApp pay likely to affect M-Pesa

If there's an event that Safaricom PLC should follow closely, is WhatsApp's payment trials being done in India.
 The success of this program, could adversely affect Safaricom M-pesa and most probably in a negative way. It could even mean the end of M-pesa, but why?
According to the latest financial report released by Safaricom days ago, M-pesa was among the top revenue generators that saw Safaricom make a whooping 63.4 billion profit for the period ended march 2019. During this period, M-pesa alone generated r Ksh.74.9 Billion in revenue.
But to reach this great hights, the M-pesa story had to start from somewhere, and it's wider acceptance changed how financial transactions are handled, becoming a major economy driver in the country.
So, how will WhatsApp payment affect this giant?
WhatsApp partnered with various Indian banks through the Indian government to carry out a pilot project in UPI money transfer service.
The decision to choose India as their piloting country could have been informed by the fact that India has the largest WhatsApp users in the world.
How does WhatsApp pay work?
With government approval, WhatsApp partners with a number of banks. Then a new WhatsApp update is rolled out and users have to update their WhatsApp apps in order to include the new payment feature.
Since WhatsApp account is created using a phone number, one has to register the same phone number with the bank, or as the case in Kenya, use the number that you have linked with your bank account as your WhatsApp contact number.
Then you are required to add your bank account on WhatsApp by following these steps:

  • Go to settings then payments
  • Accept and continue
  • Verify your phone number via an SMS you will receive from the app.
  • Out of a list of various banks that accept this payment platform, select your bank.
  • If you have more than one bank account select the one you want to link.
  • You can later change the bank account if you wish.
How to send money with WhatsApp Pay.
  • Open a chat window with the person you want to send money to.
  • Click on the payment icon just like how you usually do when sending videos or files.
  • Enter the amount you want to send
  • Enter your UPI pin to complete the transaction.
  • The recipient will get a notification, and you will also get a notification from your bank about the transfer.
  • In order for such a transaction to be complete, both the sender and the recipient must have active WhatsApp payment accounts.
Unlike M-pesa, WhatsApp payment will directly use your bank account just like equitel, and any money you send will be directly from your bank account and any amount you receive will be directly deposited also to your bank account.

How is this payment platform likely to affect M-pesa if introduced?
First let's look at how M-pesa makes it's profits, and how it has evolved since its inception.
These are the channels that M-pesa generate its revenue:
  1. When a registered user sends money to another M-pesa user, registered or not.
  2. When you withdraw funds from your M-pesa wallet from an agent or ATM machine.
  3. When you make payments such as utility bills or school fees etc through Lipa na M-pesa.
  4. You send money to your bank account.
  5. When buying goods and services through 'buy goods and services'.
Over time, M-pesa has developed smart ways to ensure they maximize their returns.
First launched in 2007, M-pesa quickly became a sensation, transforming financial transaction services in the country.
It quickly took most of the roles initially performed by banks, and in order to remain relevant banks had to think outside the box. With the bold one's like Equity choosing to rival M-pesa by introducing their own platform known as Equitel, many banks like KCB and others decided to collaborate with M-pesa.
Such collaborations allowed M-pesa users carry out various bank transactions including:
  • Directly withdrawing money from their bank accounts to M-pesa.
  • Making bank deposits directly from M-pesa
  • Checking account balance.
  • Borrowing mobi-loans.
  • Opening bank accounts.
Most of these transactions increased M-pesa revenue, as well as bringing more business for banks.
As a way of making M-pesa more fluid, Safaricom introduced Lipa na M-pesa, a feature that allows all registered M-pesa users make payments for utility bills like water and electric bills or shop at any retained outlets directly from their M-pesa account.
This greatly reduced M-pesa agent's transaction returns as their major activities just became depositing. Remember their major earnings were from M-pesa withdrawals.
In a smart move, M-pesa has partnered with CBA bank to introduce a loan product known as M-shwari and an overdraft facility known as Fuliza. Both have seen major uptake, with Fuliza expected to be a major revenue generator for M-pesa.
If you compare the WhatsApp model to M-pesa, then WhatsApp could have a upper hand over M-pesa as follows:
  • It will greatly reduce transaction charges, since payments will be directly made from a bank account. Currently M-pesa acts as a middleman, and users have to pay for any M-pesa transaction except depositing cash to the M-pesa wallet. 
  • The simplicity of doing a transaction. As simple as just sending a photo.
  • It will greatly reduce the need to have many international accounts, since you can send money to anyone anywhere in the world.
  • WhatsApp has a simple secure platform with no ads or unwanted notifications. This will greatly add to their advantage.
  • Banks will likely welcome this new payment method as a way to cut off M-pesa from the banking chain, since WhatsApp directly transacts from the bank account.
  • Other mobile money platforms could also welcome this new platform, and could find means of collaboration in order to tame Safaricom's outrageous market dominance.
In order to stay a float, M-pesa will have to find a way of collaboring with WhatsApp, or totally go back to the drawing board.
In the mean time, they should just cross their fingers hoping the trial doesn't become successful, or never gets implemented in the country.

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