Payments made using plastic cards dipped by a fifth in 11 months to November last year as mobile phone-based payments ate into commercial banks’ business.
The latest Central Bank of Kenya (CBK) data shows that card payments plunged 18.2 per cent to Sh1.1 trillion as at the end of November, compared to Sh1.4 trillion a year earlier.
In contrast, the volume of cash sent through mobile platforms grew by a quarter to gross Sh2.1 trillion over a similar period – nearly double the value of card payments.
The Kenya Bankers Association (KBA) — the banking industry lobby — attributed the drop in payments done using cards to the growing uptake of mobile money.
“Mobile money alternatives are more convenient than cards,” said Habil Olaka, chief executive of KBA.
“When other new payment alternatives arrive, they eat into the share of existing platforms,” Mr Olaka told Business Daily. The decline in card payment volumes comes at a time when banks have migrated to issuing new generation chip-and-PIN cards from the fraud-prone magnetic stripe type.
Declining card payments at retail outlets such as supermarkets, gas stations and hotels is likely to hit the earnings of Kenyan banks given the lenders earn commissions from processing such payments.
Equity Bank, for example, rakes in an average of Sh40 million monthly in revenue from commissions on payments processing from volumes of about Sh1.8 billion every month.
The battle for the control of the lucrative retail payments now pits Kenya’s 44 commercial banks against six mobile money platforms. Data from CBK shows that there are 13.9 million payment cards in use at November last year, with debit cards accounting for 90 per cent of the total.
Statistics show that there are only 17,015 point of sale (PoS) machines in Kenya, translating to one PoS serving about 2,350 customers, limiting card usage avenues for shoppers.
Kenya has 24.9 million mobile money users who transact across six platforms — M-Pesa, MobiKash, Airtel Money, yuCash, Orange Money and Tangaza — backed by a network of more than 121,000 agents.
Safaricom chief executive Bob Collymore said the convenience, wide reach and increased scope of mobile money services will continue to power growth in volumes.
“Mobile money is so very convenient. Mobile money transfer costs are still relatively inexpensive, despite the imposition of excise duty,” said Mr Collymore.
Dr Peter Muriu, a lecturer at the University of Nairobi, said merchants prefer mobile payments due to the lower cost in processing fees compared to banks.
“Merchants are also using mobile money for purchases, both for its convenience as well as the low cost,” said Dr Muriu, who teaches financial and monetary economics.