UnionPay's big push in Africa.
Globally, card payments have been dominated by American giants. Providing payment solutions is big business with healthy margins, as long as scale can be achieved. In 2017, Mastercard had revenues of $12.5bn with profits of $3.9bn, a 30% margin. Visa in 2018 had earnings in excess of $10bn on revenues of $20bn, a 50% margin.
A lesser-known but fast-growing competitor is the Chinese company UnionPay. Dominant in China and also a number of countries in Asia, it has overtaken its American rivals to have the largest base of cardholders in the world, having issued over 7.59bn cards (a little less than the world's population!).
With the Chinese giant looking to expand its services across the African continent, in May it named veteran Mauritian banker, SBM Group Chairman, Kee Chong Li Kwong (right) as chair of UnionPay's Africa Regional Council.
China is arguably the most advanced country when it comes to digital payments. Payments via social media platforms are the norm while payments using QR codes are prevalent and mobile payments are quickly replacing physical cards.
As countries increasingly adopt a cashless society and prioritise financial inclusion, digital payments using mobile technology are the obvious solution.
According to Zhang Luping, General Manager of the African operations of UnionPay International, the company's future growth in Africa will be through mobile payments, which he has stated as being strategically important to their future business development.
The first step is to develop a good acceptance base and he says that they have reached an 80% coverage including POS ATMs. The company will partner with financial institutions to issue UnionPay cards -- and has done so in a number of countries including in Mauritius and Kenya, where they have issued student and payroll cards.
But the company sees the biggest growth in developing a cashless society through mobile payments and QR codes, and helping governments to build national switch systems.
"We developed the China national switch and have contributed to financial inclusion in China," he says. "We have some of the most advanced payment technology in the world, and can ensure that this meets all international standards and is interoperable."
Across Africa, financial inclusion cannot be disassociated from people having physical IDs. Many are looking at the Indian model, where unique biometric IDs were rolled out to over 1bn citizens -- on the back of which people can access government services. The Aadhaar card, as it is known, is something many African countries are looking at.
There have been some pilots in Africa where this biometric ID has come with a payment chip, enabling governments to make welfare and other payments directly to an account linked to the card, in turn enabling users to withdraw money directly without having to go to government offices to collect their dues.
Working with governments to provide payment solutions embedded in these digital IDs are areas that are being explored by the likes of Visa, Mastercard and UnionPay.
Should payment providers be worried about cryptocurrencies and initiatives such as the new currency that is being launched by Facebook, the Libra? Like regulators and financial institutions, payment providers are monitoring developments closely. In some cases, they are also developing their own blockchain solutions.
One thing is for sure: with financial inclusion in Africa hovering at around 30%, the scope for rapid growth is huge. n
[c] Copyright IC Publications 2019 Provided by SyndiGate Media Inc. ( Syndigate.info ).
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|Date:||Aug 5, 2019|
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