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No cash please: Kenya’s Mobile money use on the rise as market players look to replicate India’s UPI success

No cash please: Kenya’s Mobile money use on the rise as market players look to replicate India’s UPI success

This report is based on data provided by licensees in the ICT sector as per their license conditions and obligations. The information provided herein is subject to review during the subsequent quarter in case of any revisions or updates from the licensees.

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By Steve UMIDHA

Kenya’s digital payments grew significantly to 40.6 million subscriptions in three months to September 2024 from 39.8 million – representing a growth penetration rate of 78.9 percent, latest figures by the Communications Authority of Kenya (CA) show.

That’s still far below Sweden, China and India who are considered world leaders in cashless transactions.

Sweden in particular is now known as the world’s first cashless society on the planet after it saw 96.7 cashless transactions per person in 2017. In fact, the European nation could potentially eliminate physical cash by 2025.

Technological advances like mobile apps and account-to-account (A2A) payments are also reshaping how we pay.

And this is the league Kenya sees itself according to foresights by the regulator and other thought leaders like Moses Kemibaro, Founder and the Chief executive officer of @ Dotsavvy.

Writing from his LinkedIn account, Kemibaro wonders whether Kenya’s quest to fast-track the creation of a mobile payment system tipped to allow Kenyans to send and receive money instantly, irrespective of the type of bank a customer belongs to, could transform digital payments in the local market, akin to India’s UPI.

India’s Unified Payments Interface (UPI), established in 2016 by the National Payments Corporation of India (NPCI), is a real-time payment system that allows users to transfer money between bank accounts using a mobile app.

Kenya, through the Central Bank of Kenya (CBK) is seen to be taking a similar approach in developing a system known as a Fast-Payment System (FPS) in collaboration with industry stakeholders whose launch is looming.

An FPS system will integrate banks, mobile money platforms, and other financial service providers into a seamless, interoperable digital payments ecosystem.

“Kenya has long been a global leader in mobile money and digital payments, driven by Safaricom’s M-PESA, which boasts over 34 million subscribers as of November 2024. M-PESA has revolutionized financial inclusion, offering unparalleled convenience and accessibility.

However, this dominance has created challenges around interoperability, competition, and cost for consumers and businesses alike,” he says.

This initiative aligns with the CBK’s National Payments Strategy 2022–2025, which aims to realize a secure, efficient, and inclusive digital payments infrastructure for Kenya.

Drawing on lessons from India’s Unified Payments Interface (UPI) and its domestic card network, RuPay, Moses says Kenya’s FPS “could be a game-changer for financial inclusion, competition, and innovation.”

But first, issues like limited competition, high – associated costs and interoperability gaps must be addressed if Kenya is to be in the same league as India for instance.

“M-PESA transaction fees can be prohibitive for small businesses and low-income users. Interoperability Gaps: Lack of seamless integration with other platforms restricts consumer choice and increases friction in digital payments,” says Kemibaro.

By stimulating competition, he says FPS could level the playing field for smaller players like Airtel Money while encouraging new entrants like Google Pay and WhatsApp Pay while also lowering costs and encouraging partnerships.

“Collaboration between CBK, KBA, and global Big Tech players could create a robust ecosystem that drives innovation and scalability.”

CA latest figures

The number of active mobile (SIM) subscriptions grew by 1.6 percent to 70.0 million by end of September 2024 from 68.9 million recorded last quarter representing a penetration rate of 135.8 percent.

Active SIM (Mobile) Subscriptions refers to those SIM cards used at least once in the last three months and have generated revenue through making or receiving a call or carrying out a non-voice activity such as sending or receiving an SMS, accessing the Internet, Airtime top-up, transacting using mobile money and mobile banking).

On the other hand, subscriptions to mobile money services increased from 39.8 million to 40.6 million, translating to a penetration rate of 78.9 percent during the reference period.

The telecommunications sector demonstrated overall growth during the quarter under review. Mobile SIM, machine-to-machine (M2M), mobile money and broadband subscriptions all grew, reflecting the sector’s continued expansion and adaptation to consumer demands.

While 3G broadband subscriptions and data consumption declined, the report noted that the adoption of 4G and 5G technologies increased, “highlighting a shift towards higher-speed networks.”

Further, CA is foreseeing further growth this year and beyond with the country poised for significant advancements in both 4G and 5G uptake which is driven by the continued investments and increased consumer demand for high-speed connectivity.

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