CBK gets bigger role on digital payment systems

National Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG

What you need to know:

  • Treasury CS Ukur Yatani says the growth of State services on digital platforms came with increased risks of fraud or cybercrime which could lead to significant loss of government revenue.

The Central Bank of Kenya (CBK) is set to tighten oversight of mobile money as the government moves to safeguard billions of shillings paid through its expanding digital service platforms.

Treasury Cabinet Secretary Ukur Yatani said the growth of State services on digital platforms came with increased risks of fraud or cybercrime which could lead to significant loss of government revenue.

“Disruption of mobile services due to infrastructural challenges or cybercrime and fraud could lead to significant loss of potential Government revenue, customer deposits and market confidence. The Government might therefore, be under pressure to compensate losses,” Mr Yatani said in his draft 2021 Budget Policy Statement (BPS).

“To mitigate against such threats, CBK is in the process of formulating a National Payments Strategy to address emerging risks and guide the payments ecosystem in Kenya,” he added.

The government currently runs cash-heavy services on digital platforms including the Integrated Financial Management Information System (IFMIS), the Government Human Resource Information System (GHRIS), the Integrated Payroll and Personnel Database (IPPD), the Kenya Revenue Authority’s online tax filing system, i-Tax as well as other e-citizen services including Huduma number.

A review of the draft National Payments Strategy (NPS) shows that the banking regulator is set to have a firmer grip on the supervision of e-payment services.

“Central banks have always been about money – how money is created, how money is held, how money is exchanged and how money or monetary value is moved” the regulator said, adding that it would play an important role in enhancing the safety, security and stability of various payment systems.

The CBK said it will also ensure that payment service providers (PSPs) are fully compliant with pricing and tariff regulations.

“The CBK is determined to ensure that pricing practices are reflective of CBK’s overall stance on customer-centricity, affordability and transparency, and is already working with the industry to make this outcome a reality” it said.

“Further, the CBK will put particular emphasis on ensuring a culture of compliance cuts across all aspects of payments services, anchored on a strengthened regulatory framework and enhanced oversight” the regulator added.

Statistics by the CBK show that Kenyans moved about Sh4.6 trillion through their mobile phones between January and November last year --indicating the growing significance of the digital marketplace.

Apart from the risk of theft of funds on the e-payment platforms, the growing deals in the digital market place has caught the eye of the Kenya Revenue Authority (KRA) which has now set sights on businesses using the internet to market and sell products.

Mobile money providers like Safaricom’s M-Pesa, Airtel Money and Telkom’s TKash transact more than Sh4 trillion in a year.

Market leader Safaricom #ticker:SCOM controls 98.8 per cent of customers according to the Communication Authority of Kenya (CA) while Airtel Money and other service providers hold 1.2 per cent market share.

CBK has increased its role over telecoms companies regulating charges of money transfer and pushing for more competition between leading provider Safaricom and its competitors Airtel and Telkom.

Last year Governor Patrick Njoroge ordered the mobile service companies to scrap fees for sending less than Sh1,000 as part of the coronavirus relief programme.

The move which was initially for three months from March was extended for the rest of the year without consultations costing Safaricom Sh6.08 billion or 14.5 per cent decline in M-Pesa revenue in the half-year.

At the end of the moratorium, CBK pressured Safaricom to cut low-value M-Pesa transaction fees by up to 45 per cent.

CBK is also pushing for seamless transfer of funds between Safaricom and Airtel including Lipa na M-Pesa in a move to lowers costs of transactions and enhance competition.

The regulator said interoperability in mobile transactions was introduced in 2018 for sending money between Airtel and M-Pesa clients have not gone far enough to enable seamless transactions since it did not include merchants and agents.

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