CBK ends free M-Pesa transfers, rejects banks’ fee push

What you need to know:

CBK says only mobile money transactions below Sh100 will be free as providers reinstate the sending fees.
The regulator says that since the waiver was introduced the monthly volume of person-to-person transactions increased by 87 percent between February and October 2020.
Over this period, the volume of transactions below Sh1,000 increased by 114 percent, while 2.8 million additional customers are using mobile money. Business-related transactions also recorded significant growth over the same period.

The Central Bank of Kenya (CBK) has rejected bankers’ push to reinstate fees on transfer of cash between accounts and mobile phone wallets, even as it ended free M-Pesa transactions of up to Sh1,000.

The banking regulator yesterday offered relief to Safaricom after it opted not to extend the waiver of charges on M-Pesa transactions—which had cost telecommunications firm Sh9 billion in the six months to June.

But banks failed to lobby the CBK to return the fees of moving money between their mobile wallets and bank accounts that saw some like KCB Group lose Sh1.5 billion in the nine months to September.

The reliefs on mobile phone payments were introduced from March 16 to encourage cashless payments on mobile phones as part of efforts to contain the spread of the coronavirus.

“There will be no charges for transfers between mobile money wallets and bank accounts,” the CBK said in a statement yesterday

“Saccos regulated by the Sacco Societies Regulatory Authority (SASRA) may levy a charge for transfers between sacco accounts and mobile money wallets,” the banking regulator added.

Before the financial reliefs were introduced, most bank-to-M-Pesa transactions attracted fees ranging from Sh30 to Sh197.

Safaricom and banks were pushing for the CBK to involve them should the regulator decide to extend the tenure of free transactions beyond end of December.

The CBK had earlier announced the removal of charges on M-Pesa transactions of up to Sh1,000 from March 16 until June 30, a period when bank-to-mobile phone transactions would also be free.

The regulator later made a unilateral decision to extend the relief measures until December 31, drawing protests from Safaricom and banks who have lost billions of shillings to the free service.

Yesterday, the CBK said the free M-Pesa service had led to increased use of the mobile money transfer and added users to the telco’s cash service.

“Over this period the volume of transactions below Sh1,000 increased by 114 percent, while 2.8 million additional customers are using mobile money. Business-related transactions also recorded significant growth over the same period,” said the CBK.

Bankers also reckon said that the waiver of fees on bank-to-mobile phone transactions triggered an increase in deposits as small businesses embraced the digital channel and cut branch visits for cash deposits.

Safaricom’s chief executive, Peter Ndegwa, said last month that the telco was in advanced talks with the CBK over the resumption charges on low-value M-Pesa transactions.

Safaricom says that the free M-Pesa transfer cost it Sh9 billion in the six months to June, which saw the firm report a six percent drop in net profit to Sh33.07 billion—the first fall in nine years.

At Sh9 billion, the estimated revenue loss is equivalent to 25 percent of the Sh35.88 billion Safaricom made from the M-Pesa platform in the six months to September and 7.2 percent of total revenue in the same period.

Banks and Safaricom have been fearing that the CBK could extend the free service amid the spike in Covid-19 infections and fatalities.

Kenya has reported 66,723 confirmed cases of Covid-19 from 41,546 on October 12, reflecting a 60.6 percent growth. Deaths have increased to 1,203 from 777 a month ago, representing a 54.83 percent jump.

Local health officials have been warning of a second wave of the pandemic akin to what is happening in Europe where several countries have reinstated lockdowns or partial lockdowns to try to stem infections.

Soon after the CBK announced the extension of the relief measures to the end of the year, Safaricom unsuccessfully lobbied the regulator to make changes that would limit the revenue loss.

This came after the telco noticed that customers were splitting high-value M-Pesa transfers into multiple transactions to avoid paying any fees.

“What has happened a lot in those transactions below Sh1,000 is that people are starting to split transactions. If they want to send Sh60,000 they split it into 60 transactions. And believe it or not, people actually do that,” Safaricom said.