KENYA: Digital payments on the rise in hidden-sight


Digital payments have continued to rise inconspicuously to break the trend of cash dominance discretely, even as cash remains king in the settlement of transactions on the outside.

Mobile-money which continues to be the key driver behind the digitization of payments and financial inclusion has continued to pay dividends for the cross-over into paperless transactions having sustained an average year over year growth.

According to industry statistics from the Communications Authority of Kenya (CA) data, the net value of transactions stood at Ksh.2.1 trillion at the end of March to represent a seven percent jump in the average value of a single transaction, quoted at Ksh.2,704 over the period.

The improved average came on the back of increased mobile financial services (MFS) subscriptions to 784.4 million and an increase in mobile-money agents in the country to 223,084.

Meanwhile, a new survey published at the end of July by the Central Bank of Kenya (CBK) backed Financial Sector Deepening (FSD) shows the continued stranglehold of the choice of cash against growing digitization.

Insights from the report quotes the frequency of mobile transactions per person at a flat 12 daily from 2016, with cash remaining predominant in the settlement of daily expenses and monthly bills.

While digital cash remains competitive on the clearance of less frequent payments such as remittances, Kenyans still hold on to cash to meet recurring expenses including the payments of school fees, goods and services.

“Is the continued dominance of cash masking a trend towards digital?” The report poses.

“With the exception of the employed, most people receive their incomes in cash. This does appear to be changing however, with farmers, business owners and the employed receiving less money in cash and more via digital in 2019 compared with 2016.”

“Interestingly, while a relatively high proportion of dependants receive income digitally, this is declining, with a corresponding increase in income received in kind,” the report adds.

Abojani Investments Chief Executive Officer Robert Ochieng affirms the masking of the rise in digital payments by cash, expounding on the complexities of tracking and recording payments made via digital channels.

“It would be hard to quantify transactions such as person to person transfers (P2P) in mobile money. Some of this transactions represents payments for actual goods supplied or services offers which sit outside the scope of deals done under till numbers and pay-bills,” he said.

Mr. Ochieng argues for further unregistered transactions in the digital space under the cloud of change which has witnessed a significant surge in e-commerce in recent years.

P2P transactions went up 43 percent in the first three months of the year from 2016 to top Ksh.737 million to keep in touch with the year over year growth of mobile-commerce transactions.

However, Kenya Bankers Association (KBA) Head of Research Jared Osoro argues for the expansion of the scope of the digital payments landscape to beyond just the support of payments in a quest to strengthen the case for digital solutions in financial services.

“We need to transition from payments, meaning, using the platform as a mechanism of enhancing our savings and credit behavior. We are only there partially,” Mr Osoro told Citizen Digital.

“Payments are necessary but not sufficient there being no add-on products that speak to intermediation.

While big events in finance including the recent implementation of demonetization have on instances provided impetus towards the adoption of digital transactions, the case for validation in Kenya remains informed by a slow and gradual process.

“The future is certainly towards digital despite there being challenges including taxes. It would be however important to focus on ways and means to sustain digital transactions,” said the Consumer Federation of Kenya (COFEK) CEO Stephen Mutoro.

Besides MFSs’, the Real Time Gross Settlement (RTG) system and Electronic Funds Transfers (EFTs) provide for other obscured avenues to track digital payments.