Co-op targets matatu billions with cashless fares platform

Co-operative Bank is taking on rivals Equity’s BebaPay and Safaricom’s M-Pesa with plans to roll out a service that will enable commuters to pay cashless fares.

The top tier lender — majority owned by the co-operative movement — said it is exploiting its close ties with public service vehicle (PSV) savings and credit co-operative societies (saccos) to introduce a cashless matatu payments solution.

Co-op Bank is working on a prepaid card that uses tap-and-go technology as well as an online payment technology platform through which matatu owners will track all fare transactions in real time.

“We are working on a cashless matatu payments solution. After all, we bank majority of the matatu saccos in Kenya,” Co-op Bank told the Business Daily in an email statement.

The matatu payments solution has been developed by Co-op Consultancy and Insurance Agency, a wholly owned subsidiary of the lender and is tasked with providing the product ahead of the government’s July deadline for a ban on cash transactions in public transport.

Co-op Bank is currently piloting the innovation that empowers matatu owners and saccos to track ticket payments in real time — giving the owners access to total collections at any time.

Each matatu will have a unique and independent link that will enable the owner to track all collections via mobile phones, tablets or a computer.

The digital system will help curb employee fraud by matatu crew as owners can track payments in real time and the money collected in a bank account, making it investor friendly.

A cashless PSV industry will also reduce avenues for bribery to traffic police officers as it eliminates liquidity and cash in the sector.

The Nairobi bourse-listed bank is seeking a piece of the chaotic but lucrative public transport sector as matatu owners will pay a commission based on every transaction.

The government has gazetted regulations to outlaw the use of cash for bus fare payments from July.

There are about 22,052 licensed PSV operators in Kenya according to data from the Traffic Licensing Board (TLB) with all of them operating under a sacco or management company.

This arrangement under saccos, Co-op says, puts in pole position to work with matatus given that it is the “de facto sacco bank”.

The bank says having public service operators under corporate entities makes the industry organised and easy to access — providing opportunities to lend to such saccos higher amounts to expand fleet compared to individual owners.

Co-op hopes to mobilise cheap deposits from the multi-billion shilling industry.

The public transport sector was valued at Sh205 billion last year and is dominated by matatus, buses, boda-bodas and three-wheelers popularly known as tuk tuks.

This has whetted the appetite of other firms such as Hong Kong-based TaptoPay, Safaricom, MasterCard, Visa, Equity Bank and Google who stand to rake in at least Sh2.05 billion annually in revenue by processing fare payments for PSV operators.

READ: Visa takes on M-Pesa with cashless bus fare plan ahead of State ban

Equity and Google launched BebaPay, a pre-paid card used to settle public transport bills, in April last year.

The card uses NFC technology dubbed ‘tap-and-go’ where users pat the card on an NFC-enabled phone to make payments.

BebaPay has so far signed up 36 matatu saccos and bus companies where the prepaid card can be used including Citi Hoppa, Compliant, Metrotrans, Star Bus and Ummoinner.

BebaPay cards were last week withdrawn from the Philippines after barely six months of use, following a decision by the Bank of the Philippine Islands (BPI) to stop issuance of the cards and replacing them with MasterCard-powered prepaid cards.

This sparked fears over the continued use of the Google cards in Kenya given that Equity has also adopted MasterCard debit cards that allow tap-and-go payments using NFC, a possible substitute for BebaPay.

Safaricom joined the fray in December last year, assigning M-Pesa paybill numbers to matatu operators under the Lipa Na M-Pesa service where travellers do not incur any transaction charges.

Matatu owners pay a one per cent commission based on the value of total transactions when using M-Pesa.

The telco in March said that it had already signed up more than 2,500 public service operators from more than 50 saccos countrywide.

“M-Pesa is continuously innovating to provide business payment solutions for large, medium and small enterprises. Lipa Na M-Pesa has enrolled kiosk owners, retailers, SMEs, fuel stations and PSV Saccos,” Safaricom said in a statement.

MasterCard has announced it is exploiting the on-going migration to PIN and chip ATM cards to issue new debit cards with PayPass technology where users tap the cards on a mobile phone or point of sale to make payments.

The New York-based firm has already signed deals to issue new high-security ATM cards with NFC technology known as MasterCard PayPass to Equity and KCB — setting the stage for its entry into cashless payments industry.

“MasterCard is keen on playing a significant role in the mass transit sector and is already working with local banks for the implementation of the relevant payment technology for Kenyan consumers,” said James Wainaina, MasterCard’s vice president and area business head, East Africa.

Visa also plans to roll out cards with payWave technology to defend its turf where rival MasterCard has been aggressively seeking new partners.

TaptoPay, a wholly owned subsidiary of Hong Kong Stock Exchange-listed Advanced Card Systems Holdings, has partnered with the Kenya Bus Service (KBS) to pilot pre-paid plastic dubbed Abiria Card.

The global provider of automatic fare collection services is currently installing electronic card readers and running trials of its Abiria Cards in 50 KBS buses using 5,000 cards.

KBS, a franchise operator of buses, says it will invest about Sh270 million on the automatic fare collection system across its fleet of 272 buses by end of June.