The wide adoption rate among Kenyans using their mobile phones to make transactions and send money could make it difficult for MasterCard to grow its business in that country.
That is the view of Standard Investment Bank's head of research in Kenya, Francis Mwangi, reacting to the company opening its East African regional office in Nairobi late last week.
The Kenyan capital is the base for MasterCard's fifth office on the continent after Cairo, Casablanca, Lagos and Johannesburg.
But the company faces an uphill battle to get Kenyans to use its payment services, as four in five cellphone subscribers in the country have signed up for mobile money transfers, according to Kenya's communications commission.
“I think it will be a tough environment for them to operate in, because of Visa's market dominance and the preferred use of mobile money transfer services,” says Mwangi.
“I would say their target will mainly be the high income earners. To me their selling point would be the distribution of chip-enabled cards: Visa is yet to launch this in the market,” he said.
Potential for MasterCard to grow its market share in Kenya's payment services industry, however, does exist if it is able to compete and taps into increased usage of debit and credit cards in the country.
Data from Kenya's Central Bank in 2011 said the value of transactions made with debit and credit cards rose 12% year-on-year, to $6.72 billion.
Use of debit cards dominated the market, marking a 9% year-on-year rise in the value of transactions amounting to $5.1 billion in 2011. Approximately 96% of the 2.5 million cards issued last year were debit cards.
Last year, the number of cards in circulation rose to 10.1 million, against estimated deposit accounts of 15.4 million.
“Nairobi's reputation as an African commerce, trade and development hub made it a strategically sound location for MasterCard to establish its regional headquarters,” said Daniel Monehin, area head, East & West Africa and Indian Ocean Islands, MasterCard Worldwide, at the opening late last week.
“We believe it is a natural recognition of Kenya's role as the financial heart of the East Africa region,” he said.
The company is the latest high-profile organisation to set up operations in Kenya, following increased interest from global technology firms supporting massive investment in fibre-optic infrastructure in that country.
“Opening of the office I would say is following in the footsteps of Google, Nokia and Visa, all of whom have opened their regional offices in Nairobi over the past five years,” notes Mwangi.
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