The start-ups build on top of popular mobile money services M-pesa, Zap and Yu cash. The fear of losses through fraudulent transactions has made companies hesitant to take up mobile phone payment systems, a survey by consultancy firm Financial Sector Deepening (FSD) has established. Photos/FILE
The fear of losses through fraudulent transactions has made companies hesitant to take up mobile phone payment systems, a survey by consultancy firm Financial Sector Deepening (FSD) has established.
Interviews with 75 businesses in Nairobi, Limuru, Kisumu, and Nakuru showed that companies mostly fear that fraudulent customers can request reversal of mobile phone payments after delivery of goods or using services.
FSD recommends a comprehensive review of policies and procedures that guide the reversal of transactions done through mobile phones.
“There is widespread belief that mobile money operators automatically reverse such transactions, without even checking with or informing the original recipient of the funds,” says the FSD report. Mr Ignacio Mas, an independent consultant with Bankable Frontier Associates, and Ms Amolo Ng’weno, the managing director of Digital Divide Data, were involved in the study which carried out in February.
It found that mobile payments currently take up to four working days to conclude since networks used by telephone firms are not integrated with merchant companies’ systems, making reconciliations cumbersome.
The study also established that local businesses are not ready for cash-lite transactions since they are yet to adopt internal practices that allow for an all-electronic environment.
Majority of processes are still done manually.
Mr Mas said very few of the businesses interviewed have a vision of using electronic payments and typically use mobile money for only one function like accepting utility payments or paying salaries.
Fraudulent transactions
Fraudulent transactions can happen when a customer does a correct payment for goods and services but later calls the mobile money operator’s contact centre claiming that the transaction was done in error, or to the wrong phone number.
In a recent interview with the Business Daily, former Safaricom CEO Michael Joseph, who is also former director of mobile money at Vodafone Group Services, said that the company was migrating its mobile money transfer service M-Pesa to a new platform that would speed up payments.
He said the move would allow for the integration of its services with those of other vendors and enable users to make instant payments for corporate services, effectively making it easier for reconciliations to be done and payments to be received faster.
Safaricom’s M-Pesa is the most popular mode of mobile money payment service in the country, transferring more than one trillion shillings per annum and with more than 35,350 agents as at the end of last year.
“Mobile money is the backbone where people can access other financial products,” said Mr Mas, while presenting the FSD study results.
Businesses prefer cash and cheque payments for lower value transactions and Real Time Gross Settlement (RTGS) system for higher value transactions, the study found.
Ms Ng’weno said mobile money payments were being used predominantly to make payments for utilities and schools fees, late-night bar payments and taxi cabs, emergency or unplanned payments to field workers, and online retailers for whom cash is not an option, among others.
More sense of control
“Larger suppliers pay predominantly with cheques which are preferred to bank transfers because they give more sense of control and smaller suppliers deal with cash,” said Ms Ng’weno, adding that it was easier for payers to track status of payments when using cheques and easier for payees to identify whom the payment was from.
Fraudsters have been sending fake short messages (SMS) to individuals pretending that they are legitimate transactions and it is feared that this could lead to sending fake messages as payment of goods and services.
The study says that in the event a fraudster gains access to a phone where they are sending the payment, they could label and save their number in a manner that makes the SMS look legitimate.
“I do not want to say that it happens but this is what the perception is,” said Mr Mas, adding that while new applications should be made to help integrate corporate and mobile banking systems and make it more difficult to make erroneous transactions, regulators should also look into reducing the amount of time it takes to clear payments. [email protected]
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