The use of bank cards to shop for goods and services hit a record high at 4.4 million transactions in May, indicating increased consumer spending and the attractiveness of the convenience of the payment option.
Data from the Central Bank of Kenya (CBK) shows that the use of the cards, mostly ATM (debit) cards at point-of-sale terminals rose from a low of 676,275 transactions in August 2014.
This represents a compound annual growth rate of 27.16 percent in nearly eight years. The value of the transactions has also grown rapidly over the same period to hit Sh20.7 billion, a rate of 21.2 percent compounded annually.
The growing popularity of swiping cards at supermarkets, fuel stations, pubs, restaurants, and other establishments signals higher transaction-based income for banks.
Banks charge merchants (businesses) a percentage of what a customer pays at the establishment using a card. The service is free to the customer who only pays for the goods or service.
For businesses, the use of cards helps them to reduce cash management costs since the money is credited directly into the account. It also makes accounting easier and results in fewer “missed purchases” since lack of physical cash is not an impediment to a sale.
Supermarkets, whose daily sales can run into millions of shillings, are some of the biggest beneficiaries of the PoS systems which reduces their cash handling burden.
Banking substantial sums of cash require the use of cash management services –comprising courier firms and armed policemen— which adds to the cost of doing business.
A pileup of cash at the premises also introduces the risk of robbery.
Smaller shops that once only took cash have installed card readers, maximising their sales by expanding the payment options open to customers.
Debit cards have accounted for over 90 percent of all card transactions since 2009 and more than a decade later that figure stood at 98.8 percent in May 2022.
Uptake of credit cards is much lower since banks typically limit their issuance to high net worth clients. Bank cards are in a race against mobile money platforms led by Safaricom’s Lipa na M-Pesa to win a larger share of personal payments in the long term when the use of cash is expected to decline.
The volume of transactions in the M-Pesa system –including payments and credit— rose 43.1 percent to 9.7 billion in the year ended March.
The value of the transactions also rose by a near similar rate of 44.5 percent to Sh18.2 billion in the same period.
The use of both bank cards and mobile money accelerated in the wake of the Covid-19 pandemic –which was first reported in the country in mid-March 2020— which discouraged the handling of cash.
Despite the growth of bank cards in transaction values and volumes, the regulator says there is still scope to expand their usage significantly once the bottlenecks are removed.
“This said, usage of cards in Kenya is still relatively low. This may be due to the poor network of PoS terminals nationally, resulting from the high cost of PoS terminals and cost of acceptance for the merchant, negative perception of consumers due to incidents of fraud and poor stability of card payment systems,” CBK said in a national payments strategy paper.