MasterCard cuts Visa’s stake with Equity, KCB deals

MasterCard is seeking to spoil the party for its top rival Visa, inking deals with Equity and KCB for introduction of high-security cards that will help curb fraud at ATMs and points of sale.

Visa is the dominant global payment solutions firm in Kenya, but the shift from magnetic strip cards to chip-based versions by March 2014 has offered a chance for MasterCard to raise its market share.

Fraudsters have found it easier to steal customer information stored on the magnetic strips, enabling them to execute illegal transactions running into millions of shillings. This has prompted the shift to the more secure Europay MasterCard Visa (EMV) chip technology which MasterCard is using to deepen its presence.

Equity Bank, the largest retail bank with an estimated eight million customers, has started issuing MasterCard-linked EMV debit and credit cards.

Equity will replace millions of its self-branded cards with the MasterCard ones, offering an alternative to those backed by Visa for the first time.

“Get your new Equity auto branch MasterCard,” said the bank in a notice to its card holders.

KCB, the second largest retail bank with an estimated 1.3 million customers, also recently teamed up with MasterCard and retail chain Nakumatt to issue over one million chip-based cards.

Like the case with Equity, the partnership will deepen the uptake of MasterCard cards among KCB customer base that has largely relied on Visa-backed debit and credit cards.

READ: Fingerprint based ATMs now launched to protect your money

Financial Times notes that Visa has over six million cards in circulation in Kenya, giving it a market share of over 40 per cent out of a total of 15 million cards issued by the 43 banks.

MasterCard, which has also signed similar deals with SME-focused I&M and DTB banks, is betting on the flurry of activities to grow its business. MasterCard and Visa have the lion’s share of the global payment services market and see a huge growth potential in markets such as Kenya where uptake of formal financial services is still low.

Latest statistics show that there are 21 million deposit accounts in the country, but a significant number of these are being offered on mobile phone platforms.

The payment services firms are, however, interested on the smaller but growing rich and middle class consumers who use cards to close cross-border and interbank transactions.

MasterCard and Visa charge fees for a number of services for online transactions, use of ATM card in a different bank, card transactions in foreign countries and payments of services and goods in outlets like supermarkets, hotels and fuelling stations.

The firms’ aggressive expansion in Kenya and other African markets come at a time when they face lower revenues in the developed markets and increased competition from new players.

The French Competition Authority, for instance, recently ordered Visa and MasterCard to cut their interbank fees to around 0.28 per cent of the transaction value from about 0.5 per cent previously.

The firms are also facing increased competition locally from mobile payment systems such as M-Pesa run by Safaricom. Visa and MasterCard are, however, betting on increased demand from the rich and middle class with the implementation of the high-security cards that offer greater confidence in cashless deals.

Chip cards have an embedded microchip that contains security data and software, providing greater protection because it is more difficult to fraudulently copy the details.