Safaricom to hide identity of Lipa na M-Pesa users

Safaricom #ticker:SCOM will introduce a feature blocking customer contact details when making payments through Lipa na M-Pesa to curb personal information being traded to advertisers or fraudsters.

The telco will only display the first and last few digits of a phone number, blocking the middle and effectively hiding the contact of the customer.

This is akin to the model banks use when sending account numbers to avoid disclosing details of their clients.

At present, people paying for goods and services leave their numbers and names with thousands of merchants.

With the phone numbers and buying habits, the merchants use the personal information to send unsolicited advertising through text messages.

The information can also be sold to third parties without consent in beach of the data protection law passed in 2019 to protect privacy.

Safaricom is keen to limit the use of personal information obtained from Lipa na M-Pesa transactions by third parties. 

“The plan is to hide your number where it will display say the first two or three numbers and the last ones and block out the middle, just the way banks do,” said an executive at Safaricom who asked not to be identified because the information is not public.

Safaricom move to curb use of clients’ data by third parties comes amid revelations that more than a fifth of Kenyan companies shared customers’ financial and personal information without consent.

A survey by consultancy Ernst & Young (EY) shows that 41 percent of firms transferred their clients’ data to third-party service providers.

More than half or 53 percent of these companies or 21.7 percent of firms captured in the EY survey did not seek the approval of their customers.

This violates the law that restricts the handling and sharing of personal data firms and government entities obtain.

Individuals in breach risk a maximum fine of Sh3 million or 10 years in jail, while firms risk a fine of up to Sh5 million or one percent of annual turnover.

The personal information was mainly shared for analysis, processing transactions, sending SMS alerts or to advertisers.

Some firms passed client data to partners in business, while others gave information to law enforcement officers for investigations.

The EY survey said there were also instances of selling the data to vendors. Sharing of client information to third parties has led to unregulated text messages, unsolicited emails or notifications of services and products like insurance policies.

Individuals also risk having their identities cloned, exposing customers to financial fraud.

Data has been described as the “new oil” and brokers play a huge role in extracting value from personal information in all its forms.

They collect it from hundreds of sources, including census information, surveys, public records and loyalty card programmes. They then sell the data to other organisations.

Kenya ranks third among countries that receive the most spam messages averaging 102 per month per subscriber, according to data from Truecaller, the Stockholm-based caller identification app.

Merchant payments through M-Pesa have grown, especially during Covid-19 as consumers increasingly make cashless transactions to avoid contracting the highly infectious coronavirus.

Lipa na M-Pesa was launched in June 2013 and has aggressively recruited merchants across the country, including large and small businesses.

This has seen it overtake the card payments – run by banks and their global payments technology partners such as Visa and Mastercard — that have largely focused on serving formal retailers.

Active Lipa na M-Pesa merchant tills surged 76.8 percent to 301,597 in the year to March.

For merchants, use of cashless payments has the benefit of reducing revenue leakages besides eliminating the risks and costs of handling notes and coins. 

Cashless payments are expected to grow in the coming years, partly due to increased digitisation and lowering of fees by payment service providers.

Kenya, however, still relies heavily on hard cash through which more than 90 percent of transactions are settled.

Lipa na M-Pesa is part of the expansion of the mobile money platform into an ecosystem offering payments, cash transfers, credit, insurance, savings and investment services.