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Sharp drop in cash use among Kenyans, thanks to technology

A parking attendant captures payment details of a motorist in Nyeri town. Most county governments have introduced cashless payment systems to enhance efficiency in revenue collection. PHOTO | JOSEPH KANYI | NMG
A parking attendant captures payment details of a motorist in Nyeri town. Most county governments have introduced cashless payment systems to enhance efficiency in revenue collection. PHOTO | JOSEPH KANYI | NMG 

A public university college principal became the latest victim to lose Sh1 million in cash stashed in a bag that he had left in a hotel in Eldoret last week.

This is amid the ongoing adoption by Kenya of cashless modes of handling public and private funds, disrupting the role played by brick-and-mortar banks as cash custodians.

Kenya’s Safaricom #ticker:SCOM , for instance, has introduced a chip-embedded debit card, phone sticker and wristband for use in payment for goods and services which do not require one to own a mobile phone, but just a password.

While this is Safaricom’s strategy to fend off fierce competition from online-based platforms that have seen Internet-based QR code payment services introduced, the raging debate centres on future cash usage in Kenya.

Kenyans have a penchant for safe and fast payment platforms, while private and public entities see cashless payment modes as a way to secure their incomes away from crafty employees.

The win-win situation has seen public sector players introduce paybill numbers, as well as bank accounts details, for use by anyone seeking services, with e-receipts issued as proof of payments. In turn, banks send a confirmation message to the individual entity’s payment portal to confirm the same.

“As company directors, let’s start thinking about disruptions in the cashless space and visualise how it will be in 30 years. As a bank, we shall still be in business, but which business will that be?” asked Mr Charles Muchene, a non-executive chairman of Barclays Bank #tcker:BBK and East Africa Breweries Group #ticker:EABL .

He spoke during a one-day conference convened by the Institute of Directors, Kenya.

The e-citizen portal, hailed as Kenya’s path to full digitisation of government services, has every ministry and State agency advertising their paybill numbers and bank account numbers.

This has also seen payments to contractors handling public tenders worth over Sh1 million directed via cheques, thereby stifling corruption avenues and enabling security agencies to trail the money.

The Central Bank of Kenya has since directed banks to seek reasons and to document all withdrawals made by customers, with all large deposits in individual accounts not known to transact large sums of money being thoroughly scrutinised to combat fraud.

“In the case of the Ministry of Lands, a complete overhaul of the front office collections saw revenue rise from Sh800 million to Sh9 billion in 2012, a 1,125 per cent increase,” observes a study conducted by Accenture Development Partnerships.

Currency maker De La Rue has also aired fears over reduced demand for its services. It cites “orders shortfalls and market dynamics, for instance, cheque usage reduction and financial institution self-card personalisation,” in an article in the latest Export Processing Zones Authority annual report.

The Judiciary has also recorded higher collections, running into billions of shillings, with most courts now accepting mobile phone-based payments as proof of settlement of any service or fine charged.

County governments have embraced e-payments for parking and fee charges for various services, while traders paying for single business licences have been directed to do so directly into the county government’s accounts and the deposit slip presented to the county licence offices as proof of payment for issuance of an annual licence.

A survey across most companies shows many employees have been compelled to open bank accounts to receive their salaries, thereby reducing the use of the traditional brown salary envelope.

Retail chains have also adopted cashless payment services while banks have joined the fray to promote their own interbank cashless electronic transfer service, Pesalink.

It remains to be seen when and who else will join the cashless transaction mode, especially after payment platforms for matatu fares flopped.

According to CBK, use of cashless mobile-based transactions has cumulatively grown at an average of 28.65 per cent annually in the past five years, with Sh3.35 trillion moved in 2016 compared with Sh16.32 billion in 2007 when M-Pesa was launched.

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