Money Markets

Card payments drop for the first time in five years

A cashier swipes a debit card at Samrat Supermarket in Nyeri. Card payments plunged 17.4 per cent to Sh1.2 trillion. PHOTO | FILE
A cashier swipes a debit card at Samrat Supermarket in Nyeri. Card payments plunged 17.4 per cent to Sh1.2 trillion. PHOTO | FILE 

Payments made using plastic cards dipped nearly one-fifth last year, the first drop in five years, as swiping to pay bills took a beating from the buoyant mobile money industry.

The latest Central Bank of Kenya (CBK) data shows card payments plunged 17.4 per cent to Sh1.2 trillion last year compared to Sh1.5 trillion in 2013.

In contrast, the volume of cash sent through mobile platforms grew by a quarter to gross Sh2.3 trillion last year— nearly double the value of card payments.

Analysts attribute the drop in card payments to the increased acceptance by retailers of mobile cash for payments of goods and services due to convenience, cost efficiency and security.

“Merchants are accepting mobile money for purchases, both for its convenience as well as the low fees charged,” said Peter Muriu, a lecturer at the University of Nairobi.

“There is less paperwork; better transparency and accountability via the electronic records, and more independence and self-sufficiency for users,” said Dr Muriu, who teaches financial and monetary economics at the School of Economics.

It means Kenyans last year moved an average of Sh6.5 billion everyday through mobile money and swiped plastic cards to settle bills to the tune of  Sh3.4 billion daily.

The decline in card payment volumes comes at a time mobile money providers are battling for a piece of the lucrative retail payments market by signing up merchants such as supermarkets, fuel stations and hotels  to accept mobile cash.

Mobile-based retail payment platforms include Safaricom Lipa Na M-Pesa, Lipa Sasa Na MobiKash, Airtel Money’s ‘buy goods’ module while Tangaza Pesa is currently piloting MyDuka.

Safaricom charges retailers a one per cent transaction processing fee on the Lipa Na M-Pesa service, which is cheaper compared to the average three per cent levy banks charge merchants to use their points of sale (PoS) terminals.

MobiKash CEO Duncan Otieno said there is increased demand for mobile money services due to the wide reach of agents compared to the number of PoS machines in Kenya.

“We have signed up retailers including very small shops, unlike banks which only give their PoS terminals to shops with high turnovers,” said Mr Otieno in an interview with the Business Daily.

Mr Otieno said mobile cash volumes on MobiKash gross Sh500 million monthly, mostly retail payments and salary processing. The platform has about 3,000 merchants.

Data from CBK shows there were 13.9 million plastic cards in use at the end of last year, with debit cards accounting for 90 per cent of the total.

Statistics show there were only 17,511 PoS machines in Kenya as at December 2014, translating to one PoS serving about 2,300 customers and limiting card usage.

Safaricom in June 2013 launched Lipa Na M-Pesa and has so far enlisted 139,000 outlets including airlines, hotels, supermarkets, public service vehicles and oil marketers.

“There is growing momentum and demand for convenient payment solutions made accessible by mobile phones,” Safaricom said in a statement.

Kenya has 25.2 million mobile money users who transact across six platforms — M-Pesa, MobiKash, Airtel Money, yuCash, Orange Money and Tangaza Pesa — backed by a network of more than 123,000 agents.