Visa Inc Connects Rwanda

Under the deal, Visa promises to connect Rwanda’s ATM network to its network of more than 15,500 banks and nearly two billion cards globally. It will also install merchant card readers in shops and introduce e-commerce for Rwandan businesses to sell and buy goods abroad via the internet—a service that is expected to boost exports. This service will be the first of its kind in Rwanda and it is expected to break Rwanda’s landlocked nature and help it bridge the gap between exports and imports. In order to ensure that everyone in the country can take advantage of this opportunity, Visa will provide financial literacy education on these services to rural communities and to bank and government employees.

Visa, in partnership with local commercial banks and outlets, will also increase the number of Point of Sale (POS) machines that accept Visa’s cards in shops, hotels and restaurants across the country. At the moment few outlets offer this service, but the development will undoubtedly minimise the need for Rwandans to move around with huge piles of cash. The service will also increase liquidity levels in the banking system. Because money will not need to physically leave the banking system, banks can increase their loan portfolios.

The new developments will also facilitate financial transaction for business travellers and tourists in Rwanda as they will be able to withdraw or pay for goods and services through their Visa cards. In the same regard, Rwandans travelling abroad will also be able to purchase goods using their Visa cards.

The one substantial difference, however, is that international Visa users can buy goods or services on credit, while the Rwandan Visa card, at the moment at least, functions primarily as a debit card. Visa, however, intends to offer its Rwandan customers the option of credit and pre-paid cards in the near future.

But, as Visa’s Group President for Asia Pacific, Central Europe, Middle East and Africa Elizabeth Buse highlighted during the launch event, the benefits of this new partnership will not benefit Rwandans alone. “Make no mistake: This is absolutely a commercial activity from our perspective,” said Buse. “It is driving more volume and revenue across the Visa network.”

Visa, said Buse, decided to launch their service in Rwanda because it saw great potential in the 86 percent of the country’s population that lacks access to traditional financial services. There are also currently more than four million mobile users in Rwanda and the target is to reach six million by end of next year.

Moreover, said Buse, Rwanda also provides an “extraordinary development and economic framework.” “There is an openness to develop public private partnerships, which is very unusual among governments and there is a strong focus on developing ICT infrastructure,” she said. With Rwanda’s focus to maximise the use of ICTs to speed up development, Visa believes that modern payment solutions have a critical role to play in ensuring Rwanda’s reaches its Vision 2020 strategy, which entails making the country a middle income nation with a per capita income of more than $1000 by 2020.

Visa, which hopes to generate more than half of its revenue outside the US by 2015, faces biting competition from rival MasterCard, who is also expanding into virgin markets such as Africa to diversify its sources of income.

One way the company hopes to achieve this target was to acquire Fundamo, a mobile financial services company that provides a platform on which South African-based telecom giant, MTN Group, and its subsidiaries, offer mobile money transfer services. According to the Director for Emerging Markets Solutions at Visa Ginger Baker, the Fundamo acquisition, “gives us a process and capability for mobile payments we haven’t had before…we will be developing a number of other solutions with that asset [Fundamo],” said Baker a day after Visa’s Rwanda launch.

On Nov. 16, Visa also announced a partnership with MTN Group to develop a separate product known as Visa Prepaid Account, which can be accessed through a mobile phone to offer consumers in developing countries a secure, reliable, globally interoperable electronic payment account. The product, says Visa, is now being tested in Nigeria and Uganda. Although MTN Group has not yet stated its plans to use Visa Prepaid Account in Rwanda, the company is already providing mobile money transfer services in Rwanda on Fundamo.

In Rwanda, says Governor of the National Bank of Rwanda (BNR) Ambassador Claver Gatete, Visa can expect a population and government eager to take advantage of the country’s existing ICT infrastructure. According to Gatete, since last year, BNR has put in place a payment infrastructure to facilitate a quick migration from traditional practices to modern practices.

The country, he says, has introduced Rwanda Integrated Payment Processing System (RIPPS), which provides the ground on which other payment related infrastructures are built in order to have a fully automated and fast national payment system. Gatete says that systems such as Real Time Gross Settlement (RTGS), Automated Clearing House and Central Securities Depository (CDS) for equities are operational and Rwanda is ready to link these systems with other countries. “What is very important for us is that if the private sector has to grow, there has to be a financial sector behind it, and for it to be there, it has to be enabled by modern payment infrastructure,” explained Gatete.

Rwanda is also blessed with a national fibre optic network spanning all corners of the country. Fibre optic provides a reliable access to faster internet and allows rapid transfer of data during these electronic payments whose ultimate goal is to provide a rapid service in a secure manner.

“With that kind of infrastructure, Rwanda is set to become a financial hub and this is going to happen because we have started benefiting from that infrastructure,” said Gatete.  Visa, he added, has come to Rwanda at the right time when the economy is “trying to take off.” Rwanda’s economy is expected to grow at around 8.8 percent this year with low inflation, a stable currency and a strong financial sector.

However, Gatete stressed that an IT infrastructure, such as the one Visa will introduce, is key to a sustainable growth. “No matter what you say, what you do, if you cannot have an IT infrastructure that would allow the business to take place, allow payments, and allow rapid movement of cash in and out then I don’t think you can achieve the economic growth that you intend to achieve.”

By having Visa, whose payment solutions are globally emulated, the entire equation will be solved. “This is the only way we can reassure the stability of the investments coming in Rwanda. In this case, we not only need a payment infrastructure but also we need infrastructure that is going to bring in everybody,” said Gatete. “It is not the people with good jobs, the people in urban centres but also everybody including those in the rural areas including those with no bank accounts to ensure we have enough resources.”

The banking sector has also welcomed Visa’s entry. Currently, it is only Bank of Kigali and Ecobank whose ATMs accept Visa cards in Rwanda, however, more local banks are willing to partner with Visa by getting its licensing first in order to start offering the payment services to Visa’s cardholders.

But payments using Visa’s card are still expensive in Rwanda and according to Herman Klaassen, CEO of Banque Populaire du Rwanda(BPR), which has 55 ATMs—about half of all ATMs in Rwanda—this is something that banks would discuss with Visa to ensure that the service are available but at reasonably affordable costs.

Another challenge the partnership must deal with is to ensure that as Rwanda migrates into electronic payments and banking, the money involved in such transactions stays secure. Rwandans are not well versed with the use of technology, which has been a major challenge to the uptake, and usage of mobile banking and money transfer services in the country.