Despite the rise in mobile based payments and use of plastic money, physical cash deals still hold a strong place in most Kenyans hearts. file photo | nmg
Rise of alternative means of making payment yet to change most people’s preferences.
Despite mobile and card payments almost becoming ubiquitous, nothing is about to diminish Kenyans’ penchant for physical cash.
Indeed, growth in the amount of currency in circulation, according to latest data from Central Bank of Kenya (CBK), maintained a nose-up trajectory in 2017, growing at seven per cent year-on-year, on average term—which was even higher than the six per cent average growth recorded in 2016.
But with the elevated year-on-year growth quantum in mobile and card payments, you would expect currency in circulation to be softening—and that’s not the case.
What exactly do I mean? In 2017, the volume of transactions passing on mobile and card platforms, including points-of-sale and automatic cash dispensing machines (ATMs), grew by 14 per cent year-on-year to a staggering 1. 8 billion transactions.
The volume of mobile payments alone, grew by 16 per cent year-on-year to 1.5 billion transactions. On the flipside, growth in cheque and electronic fund transfer (EFT) payments largely stagnated, but still remained elevated—at 31 million transactions.
It is quite noticeable that cheque payments posted the first year-on-year decline since the apex bank began externalising data series on cheque and EFT payments, declining by six per cent in 2017.
Could this be the beginning of the end of cheque books? I highly doubt. Debit cheques still remain a dominant feature in payments.
In 2017, a total of Sh2.5 trillion worth of payments were transacted via cheques, despite authorities, in 2009, capping the maximum payment value at Sh1 million. It will take some time before cheque books disappear.
In total, 1.8 billion payment transactions moved through the small-value retail payment channels. But despite the voluminous nature of transactions passing through mobile and card platforms, there’s no taking away physical cash from circulation. Just not yet.
Indeed, the value of notes and coins in circulation hit a record high in 2017—and looks unstoppable, for now. And that’s a big puzzle, and could also imply that previous cashless initiatives haven’t beared the desired fruit.
Usually, high usage of physical cash, as is the current scenario, has some embedded negative consequences, key among them being: (i) high cost of cash along the payment chain—as everybody, from the central bank to commercial banks, to traders on the streets, has to bear the high cost associated voluminous cash handling (ii) robberies and other related crimes (iii) entrenching a thriving informal economy and (iv) corruption, of course.
Consequently, a renewed drive should be initiated to accelerate the march towards a cashless society.
Indeed, the ubiquity of Kenya’s mobile payments should be at the heart of any cashless drive. As part of the renewed drive, certain retail outlets should be targeted with ‘no cash accepted’ initiatives.
Outlets such as petrol stations, supermarkets, pharmacies, auto part shops, bars or even dining restaurants really have no business accepting cash payments.
The ‘No Cash’ signs has helped catapult Sweden into an outstanding example of a cashless society, with Sweden’s currency in circulation plummeting to a 27-year low in 2017—although it is now worried about an accelerated disappearance of cash in circulation. It can work.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
