Markets & Finance

Mobile money users risk losses under new rules

mpesa agent

An M-Pesa agent assists a customer in Nairobi. Safaricom introduced special SIM cards to reduce cases of sending money to wrong people. Photo/FILE

Mobile money users risk losing cash sent to unintended recipients if proposed regulations by the Central Bank of Kenya barring reversal of payments are passed into law.

The regulation is an effort to curb a loophole used by dishonest people to stop payments for goods or services they have received.

The rule could lead to a pile up of claims against mobile phone firms for erroneously captured transactions.

“A payer may not revoke a retail transfer instruction once it has been received by the payee’s payment service provider,” reads one of the proposed CBK guidelines.

CBK has also made it mandatory for payment service providers to ensure that amount being transferred on their platform are credited to the payee’s payment account by the end of the third business day after the receipt of instruction from the payer.

This will put pressure on banks with some of them indicating that electronic fund transfers, commonly referred to as EFT and which is different from real time gross settlement, takes four working days to be effected.

Telecoms companies have stated that they are consulting with the regulator on the issue but declined to give details.

“We are making our written submissions on the issues, consultations with the Central Bank and other policy makers are still in progress,” said Safaricom corporate affairs director Nzioka Waita.

Safaricom, operators of the widely used M-Pesa, have made efforts to deal with the issue of sending cash to the wrong number by issuing SIM cards that allow users to fetch the details of the recipient from saved contacts.

This was expected to limit errors while sending out money, but has not eliminated problem. The mobile operator also usually contacts the recipient in order to verify the payment was not targeted as debt clearance.

There have been instances where businessmen who have been supplied with goods and settled the amount through M-Pesa later revoke the transaction exposing sellers to losses. Landlords and other service providers have been exposed to such schemes.

Some M-Pesa agents interviewed Tuesday said that the transactions were usually logged with the service provider and a statement request from the recipient would show that the money was reversed to show it is outstanding.

“There are some people who try such tricks but if the recipient is enlightened he would follow up and it will be discovered as it will send a message stating the reversal,” said Richard Mutua, an M-Pesa agent in Nairobi.

Apart from mobile money services, the guidelines will also affect electronic payment services offered by banks such as RTGS, EFT, standing orders, direct debits and those of e-commerce companies such as Jambopay.

ALSO READ: CBK issues rules to curb mobile money laundering

Danson Muchemi, the managing director of Jambopay, said the regulations would contribute positively to the e-commerce environment as it gives confidence to companies that a payment will not be revoked while issuing services.

Some of the services that may be impacted include newspaper subscription and pay TV. He, however, stated there was need to also protect the consumer as service providers may withhold the service.

“They have to protect the interest of the consumers so that if they issue an instruction and then the service is not delivered by the merchant they have a remedy,” he said.

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