Top 200 African Banks: Visa VS Mastercard VS UnionPay

Issuing bank cards in Africa, where cash and mobile money are king, is a strange sort of bet. But, for the past 15 years, the two United States payment giants Visa and Mastercard have been fighting a battle for supremacy in the payments space, which the Covid-19 pandemic and the accelerated development of fintech have only intensified.

In recent years, their duel has been shaken up by the arrival on the continent of China’s UnionPay, which has been targeting the position of Mastercard. Since 2018, the Chinese heavy­weight, which was launched back in 2002, has been keen to increase its activity in African markets and has been active in seeking partnerships with local financial institutions.

Following on from its 2018 deal with South Africa’s Standard Bank and Nigerian fintech giant Interswitch, the company, which brings together 175 Chinese banking players, announced an alliance with PostBank in Uganda in November 2020, and with Bank of Africa in Morocco in May 2021. UnionPay is present in Africa in more than 40 countries.

Visa’s African advantage

In contrast with Mastercard, Visa still has some leeway, holding a leading position in almost all its markets, especially in the Union Economique et Monétaire Ouest Africaine zone, where Mastercard has only a small presence (7% market share in 2018) compared to Visa’s 47% hold on the market. “In Southern Africa and the Eastern region, the game is becoming more balanced”, says Yoann Lhonneur, of the Paris-based strategy consulting firm Devlhon Consulting.

Like Visa, Mastercard has several trump cards to play to develop its services quickly. First, the US group, whose 2021 turnover is expected to be close to $19bn, can use its financial power to buy companies that threaten its development or can expand its customer base.

“Fintechs that want to expand geographically can quickly be held back if they do not have the support of investment funds or industrial operators,” says Lhonneur. “Players like Visa and Mastercard have enormous advantages because they have a network role that allows synergies and offers international growth prospects.” According to data provided by Devlhon, Visa and Mastercard processed about €23.5bn ($26.8bn) in transactions on the Absa Bank network in 2019, compared with €395m ($450m) for the rest of their competitors (UnionPay, American Express, Discover, JCB, etc.).

Platform purchases

Mastercard’s March 2019 investment of $300m in Network International is the perfect example. The operation enabled Visa’s rival to develop a partnership with this specialist in payment solutions in the Middle East for the development of services in Africa. The partnership resulted in the creation of a digital platform in early 2021 that allows merchants to accept different types of payments, from USSD (a protocol that allows data to be sent and received without internet access) to QR codes, mobile money or NFC (contactless phone).

In April, Mastercard, led since January by Michael Miebach, invested $100m in Airtel Money. There are several advantages for a card provider to invest in mobile money, as the head of a pan-African operator explains: “As a financial partner, it is easier for them to know what these companies are planning to do and thus become privileged partners. It is also a way for them to diversify, taking into account the threat that mobile money represents to their core business [payment by card].”

The company that can kill costs will win. “The problem in Africa are the margins being made,” says Jean Sideris, a former employee of Visa and Mastercard, now at consulting firm Edgar, Dunn & Co. “For an average transaction of around $3 on the continent – compared to around $50 in Africa and Europe – the charges and commissions of the current operators are too high.”

The article comes from the TAR118 print edition, featuring our ranking of Africa’s Top 200 banks.