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rowth in Electronic Payments Cuts Cash Handling Costs for Businesses
Source: Business Daily
Source Date: Monday, November 14, 2011
Focus: Citizen Engagement, Institution and HR Management
Country: Kenya
Created: Dec 01, 2011

The value of payments effected through mobile phones, plastic cards and electronic fund transfers grew by nearly half last year, reducing the cost of handling cash for businesses as well as the spending on printing currency. Fresh data from the Central Bank of Kenya (CBK) shows that consumers continued the rapid uptake of alternative payment methods in the 12 months ending June this year, driven by the convenience offered by new inventions by commercial banks and telecommunications companies. The use of mobile money transfer services and plastic money soared as more individuals were roped into the formal banking system. The CBK data showed the value of transfers through mobile money increased by 53.89 per cent to Sh919.22 billion as at the end of June. The number of transactions effected through mobile money transfer services increased by 44.90 per cent to 364.06 million transactions over the same period. Debit cards issued rose by 68.47 per cent to approximately seven million, while the total number of cards in circulation increased by 22.06 per cent to 8.6 million. Credit cards usage grew marginally to 117,835 from 111,383 as at June 2010, with the value of transactions effected increasing by 26.40 per cent to Sh555.17 billion. Operators in the plastic and mobile money sectors said Kenyans were warming up to the cash-less alternatives due to their increased safety records and convenience. "Handling cash is very expensive and also insecure. Savings made through plastic and mobile money payments are more than it would cost to use cash," said Oscar Ikinu, the managing director for Mobile Pay Limited which owns Tangaza Money Transfer Services. The volume of payments made through electronic fund transfers increased 55.6 per cent in 12 months to June, showing increased public awareness and acceptance of the payment system. The value of transactions done through the system also increased 11.8 per cent, but the average amount per transition decreased by 38.1 per cent. The system which is also known as the Kenya Electronic Payments and Settlement System (KEPSS) had moved a volume of 1,048,206 transactions worth Sh18.7 trillion as at the end of June this year, compared to 673,368 transactions worth Sh16.8 trillion over the same period last year. Tangaza Money is seeking permission to roll out mobile money transfer services that is independent of network service providers. The mobile money platform, which is available across all networks, uses an individual's finger prints which are checked against the Registrar of Persons, reducing the risk of fraud. Mr Ikinu said the cost of accessing banking services in the rural areas is still high, including transportation costs to the nearest service points. Through Tangaza, borrowers can get loans and make payments without having to go to a bank. The banking regulator said that mobile money operators saw their customer base increase over the twelve-month period with Safaricom's Mpesa still being the market leader with a market share of 64.43 per cent followed by Zap and Yu with 24.42 and 11.15 per cent respectively. Mobile money customers increased by 72.40 per cent to 17.99 million while the number of agents went up by 46.03 per cent to 46,588. There were 31,902 mobile money agents as at June 2010, with Mpesa having a market share of 59.5 per cent, Zap 27.5 and Yu 13 per cent. George Wainaina, the managing director at Kenswitch Limited, said that physical cash places a large burden on the exchequer and ultimately the taxpayer including the cost of cost of printing the cash, transportation, distribution, securing, insurance and replacement costs. "The advantage it has over paper money is that the value itself has no wear and tear and the associated replacement cost is less," said Mr Wainaina. Kenswitch allows consumers from various banks to access their funds through 922 ATMs across the country. Automated teller machines (ATM) owned by commercial banks in the payment card industry increased to 2,183 from 1,943 ATMs in December 2010, while withdrawals increased by 18.34 and 38.06 per cent to 110.56 million and 115.70 million for acquirers and issuers respectively. "The growing usage of cards signifies a growing shift from cash based payments to non-cash payments by the public," said the CBK in its report. Two months ago, Financial Sector Deepening Kenya (FSD) said that if the country adopts electronic money with the aim of reducing cash formal inclusion would rise to 70 per cent of the population and overall exclusion would reduce to 20 per cent. Their last survey done indicated that overall financial inclusion increased to 67.3 per cent from 58.7 per cent while exclusion dropped to 32.7 per cent from 41.3 per cent between 2006 and 2009.
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