KENYA:Cash still king as digital financial tools make inroads

The unveiling of the new Kenya Bankers Association (KBA)-fronted payments switching system has undoubtedly been met with marked excitement.

For those engaged in the product development, this positive interest is encouraging and can only serve to renew our commitment to deliver a quality product.

We can’t afford to rest on our laurels, we must strive to ensure that we deliver a dynamic yet robust person to person mobile payments system. From the onset, it is also important to contextualize the role of PesaLink vis-à-vis the Kenyan national payments space. The simplification of PesaLink to one of a competitor to mobile wallets is in our view misplaced.

It may come as a surprise but up to 98 per cent of payments in Kenya are still made in cash form. Research confirms that other payment tools are still at their formative stage with very low transaction values this far.

Indeed, payment tools such as cheques, EFT and RTGS products still record much higher transaction values.

Suffice it to say that in this and many other global markets, cash is still king. In an effort to enhance and foster a cash-lite economy given the disadvantages that cash transactions present, due care must be taken to ensure that the payment systems play a complementary role.

The positioning of the systems cannot be adversarial in nature at this formative stage and must be nurtured to provide a value-filled interoperable ecosystem. Kenya’s payment market continues to be increasingly driven by the mobile network operators (MNO), enabling the mobile money economy in Kenya to continue thriving. This is supported by an 85.3 per cent internet and 90 per cent mobile penetration rate as reported by the Kenya Fintech Report 2017.

The same report points out how Kenya needs to tackle four fronts to confront the heavy dependence on cash that still exists. These four fronts include hardware upgrade, government support, competition in payment gateways and increased access to financial services. The latter is a key area where banks have leveraged on by providing a convenient and reliable platform dubbed PesaLink which gives customers the incentive to stay digital consequently promoting the cash-lite economy we desire. As widely posited by the KBA, among other think-tank groups in recent years, it is difficult to make huge strides in electronic payments without huge strides in the electronic stores of value that enable such payments.

Indeed, this realisation provided the rationale for the setting up of the Kenya Interbank Transaction Switch under the brand name PesaLink, geared at harnessing digital payment solutions for the local market. Founded under the Central Bank of Kenya, National Payment System (NPS) guidelines, PesaLink is managed and operated by KBA’s wholly owned subsidiary - Integrated Payments Service Limited (IPSL) - and was envisaged to in the first instance interconnect all banks in Kenya, and ultimately MFI’s,Saccos and other switches and MNOs as well.

The setting up of IPSL as a vision carrier commercial entity for KBA member banks was essentially to enhance ongoing financial inclusion efforts through diversified commercial banking delivery channels.


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