Why MTN, Airtel relaunched virtual cards

KAMPALA - Telecom firms MTN and Airtel have recently reintroduced their virtual card services after suspending the offerings about three years ago amid unclear circumstances.

Virtual cards are a digital version of a regular plastic debit card. Think of them as a card in your pocket that exists only on your phone or computer that has the capability of reducing risk if you lose your phone or when a website is hacked. 

The cards on both platforms enable users to make online payments on e-commerce platforms such as Jumia, Alibaba, and other digital subscription platform such as Netflix that accept card transactions.

The cards provide a convenient alternative to traditional payment methods, which often carry some relative risks to completing a transaction online.

However, in a shift from their previous banking partners, both MTN and Airtel have opted to use Diamond Trust Bank (DTB) in the relaunch. In 2018, MTN had collaborated with United Bank for Africa (UBA), a subsidiary of UBA Group and Mastercard to offer the product.

In recent interactions with New Vision, officials at both telecoms hinted that the decision to deactivate the service in the past was driven by several customer complaints about high currency conversion rates, the limited validity period of the virtual card by third-party providers, and other security concerns made the product expensive for customers to maintain.

So, what changed?

Mastercard, one of the largest payment card network processors, signed major agreements with both telecom firms to cement its position in the payments space.

In 2024, Mastercard completed its acquisition of a minority stake valued at about $200m (about sh734b) in MTN Group’s fintech (MoMo) segment as part of a strategic agreement aimed at expanding access to digital payment solutions across Africa.

In a similar move in 2021, Mastercard also purchased a nearly 25% stake in Airtel Africa, a parent firm to Airtel Uganda, valued at about $100m.

As part of the partnership, MTN and Mastercard agreed to integrate both virtual and physical Mastercard companion cards into every MoMo wallet. The move aimed at enabling users to access over 100 million acceptance locations globally to support MTN’s ambition to scale operations internationally.

The collaboration also focuses on expanding access to cashless payment solutions for small and medium-sized enterprises (SMEs). The parties have committed to facilitating secure and reliable cross-border payments to make it easier for businesses and individuals to transact across borders.

“The launch of the Virtual Card marks a critical milestone in enabling broader access to the digital economy. With this collaboration, we are enabling millions of Ugandans to transact securely and conveniently, ultimately contributing to the nation's economic development,” Muhammad Nana, Senior Vice President, Digital Partnerships, Eastern Europe, Middle East, and Africa at Mastercard, said during the launch event at Serena Hotel.

“We are committed to driving financial inclusion by leveraging our technology to deliver innovative solutions that meet the unique needs of consumers across Africa.”

MTN Group’s vision revolves around leveraging the rapid growth of its fintech segment and the opportunity to elevate the company's value by unlocking the latent potential in its fintech assets.

Cost of transactions

Unlike Airtel, MTN is maintaining its charge of sh1,000 to create the virtual card using the mobile money platform. On both platforms, moving money to and from the cards carries no cost for the customer. Security on both platforms has been enhanced to limit the creation of the card by a different person on a mobile device. 

Jemima Kariuki Njuguna, Chief Product Officer at MTN MoMo, said: "The Virtual Card by MoMo is a major milestone in our journey towards MTN’s Ambition 2025, which focuses on promoting financial inclusion and economic empowerment across Africa.”

Airtel Money Managing Director, Japhet Aritho, said: “DTB is among the few banks that are licensed by Mastercard to offer the service. The previous card had many challenges, and it's the reason we took a back seat rather than keep the exposure. Many complaints we got were that customers did not know what was happening with their money. Creating a mistrust of Airtel money.”

DTB CEO Godfrey Sebaana said, “Telcos have got a much broader penetration to the unbanked. Our conviction is to partner with the entities that have the data. We have entered the realm of payments through this channel, and we are going to innovate on the kind of products we can add onto this platform.”

In the 2023/24 fiscal year, the value of MoMo transactions surged to sh253 trillion, a significant increase from sh191 trillion in the previous year, according to the Bank of Uganda.

Mobile money has brought down transaction costs in many cases, particularly for long-distance payments and school fees, among others.

However, transaction costs and related taxes at certain levels tilt the balance for many transactions in favour of cash transactions and therefore deter further growth of mobile money.

While digital payment systems such as mobile wallets, online banking, and fintech solutions are experiencing steady growth, cash is expected to remain the dominant payment method in the near term due to ongoing challenges in digital infrastructure and the high transaction fees associated with electronic payments, according to the central bank.