M-Pesa gets nod in cashless fare bid
What you need to know:
- Safaricom launched Lipa na M-Pesa to enable cashless merchant payments and further drive its quest to reduce reliance on the voice business, which now accounts for about 59.6 per cent of its sales.
Safaricom’s move to use M-Pesa to offer cashless fare payment got a boost last week after the mobile phone firm received Central Bank of Kenya’s approval. The banking regulator gave Safaricom the nod after it partnered with third parties to allow the Lipa na M-Pesa mobile payments system issue physical receipts.
Regulations guiding the rollout of the cashless fare system demand that commuters be issued with receipts after using their prepaid cards.
“Central Bank approved Safaricom as one of the cashless service providers on Wednesday and we expect the NTSA (National Transport and Safety Authority) to issue a notice next week,” said an executive at Safaricom on condition of anonymity without giving details. “We have partnered with some innovators and our system is now compliant with the receipt requirements.”
This will be put Safaricom in a head-to-head battle with three commercial banks – KCB Group, Co-operative Bank and Equity Bank – that on September 19 were approved to offer the cashless service. At stake are annual revenues exceeding Sh2 billion that will be generated for processing fare payments for the public service vehicle (PSV) operators.
Safaricom had in December registered more than 1,300 matatus and taxis on its Lipa na M-Pesa platform ahead of the July 1 deadline banning the use of cash in public transport fare payments. The deadline has since been pushed forward to December 1.
Safaricom in June said it was upgrading the Lipa na M-Pesa platform to allow it send a message to a terminal that will produce a receipt.
Equity has launched a cashless payment product dubbed Beba Pay in partnership with Google while Hong Kong firm Tap-to-Pay has partnered with KCB Group and Mastercard with their pre-paid plastic called Abiria Card. Beba Pay and Tap-to-Pay generate receipts after each transaction.
Firms seeking to offer the cashless fare payment will have to seek approval from the CBK to safeguard commuters’ deposits, ahead of the December deadline.
Safaricom launched Lipa na M-Pesa to enable cashless merchant payments and further drive its quest to reduce reliance on the voice business, which now accounts for about 59.6 per cent of its sales.
M-Pesa revenues stood at Sh26.5 billion in the year to March, up from Sh21.8 billion last year and Sh11.7 billion in 2011. The mobile phone operator has ambitions to turn M-Pesa into Kenya’s primary payment platform, prompting its vicious fight with Equity Bank.
The bank is seeking a larger share of the cash transfer market and piece of the voice business using its own overlay thin SIM card technology that Safaricom is opposing. Regulators have allowed Equity to operate the thin SIM in a one year pilot.
But its popularity has strained the platform on which the service now runs, causing occasional shutdowns and requiring routine upgrades to its capacity, now at 250 transactions per second. China’s Huawei has been building a second-generation platform to increase capacity to 600 transactions a second.
Safaricom is betting on its subscriber base for a larger share of the cashless fare market. The cashless fare system is expected to curb erratic increases in fares and enable Kenya Revenue Authority collect taxes from the industry.
The country has more than 22,000 licensed PSV operators, according to the traffic licensing board. Official data shows the public transport industry generated Sh218 billion in revenues last year, up from Sh205 billion in 2012 and Sh155 billion in 2009.
