Mobile payment system gains currency

Walking around with bank notes is fast becoming obsolete as consumers embrace electronic payments.

It all began in Kenya, when M-Pesa became a preferred way of transferring money, buying goods and paying for services.

Last year, Kenyans made 824 million mobile phone transactions valued at Sh2.1 trillion. This is a major leap, considering that there is only Sh200 billion in cash in the economy.

Although it was not possible to quantify the amount transacted in cash, the trend is one of more consumers using electronic payment for their purchases.

In the past, most transactions have been between individuals, but companies are increasingly adopting electronic payments even to pay salaries.

Mr Peter Owaga, a risk analyst at an investment company agreed that consumers are using more money to pay for transactions but less cash.

In Britain today, the authorities have said that electronic payments overtook cash transactions.

According to the British Broadcasting Corporation, the UK Payments Council said that only pubs patrons are still settling their drinks bills in cash.

It said that cash payments declined by 48 per cent last year, signalling a significant shift in the way the public pays for such things as fuel, electronic and household goods.

SAVINGS

In 2013, the United States Treasury estimated that if all countries in the world switched from physical currency to digital, they could save one per cent of their Gross Domestic Product.

In Kenya, that figure would translate to a saving of Sh55 billion, enough to pay teachers their new salaries, finance another Thika Superhighway and some change to spare.

In Kenya and around the world, paper money is losing its traditional place as the primary mode of payment.

Mobile payments are developing at a dizzying pace, with technology giants such as Apple, Google and Samsung introducing their own payment systems, all of which are gaining traction across the world.

In Kenya, mobile money has become the second most acceptable method of payment, with Safaricom’s M-Pesa leading the pack.

Mobile money is not only being used for buying airtime and convenient for transfers, it also comes in handy for payment of salaries, utilities and other bills.

LEAVES A TRAIL

In addition, crypto currency such as Bitcoin is slowly gaining popularity. BitPesa, a brokerage service that deals in Bitcoin, announced earlier this year that it had raised Sh100 million from investors.

Thanks to technology, the public’s increased confidence in banks and the need for convenience, consumers are carrying less notes and coins and opting for digital equivalents.

Said Mr Owaga: “Digital money leaves a trail, unlike cash. It would be easier to spot bribes. Bribes paid in cash are next to impossible to trace. All activity in the criminal economy depends on cash.”

The money in circulation in Kenya went up by 15 per cent in 2013 and this cost the country an extra Sh1.2 billion to mint.

“It costs police money and time to guard cash and armoured vehicles, which ferry the cash,” he said.

Mr Owaga said in the first half of this year, Kenyans transacted Sh1.3 trillion through mobile money networks and Sh229 billion in cheques and electronic fund transfers, according to the Central Bank. But most people still used cash.

“The costs involved are the most important element while promoting the adoption of cashless transactions. Once you have cash with you, it is easier to settle small transactions without additional costs.

“Mobile money platforms charge you every time. For cashless transactions to become more popular, the costs incurred in small transactions, which many people are involved in, need to be scrapped,” said Mr Francis Mwangi, an analyst at Standard Investment Bank.