A cashless society should be the goal of the financial sector

Kenya’s success in providing access to basic financial services has been recognised world over thanks to innovations such as agent banking and alternative payments systems.

In a market place where cash is considered king and where 97 per cent of transactions are carried out in cash, moving the masses from this status quo is no doubt a challenge; however, it is not impossible.

Emerging economies such as Brazil have achieved a banked population of 85 per cent, while countries like the United Kingdom, Sweden and Denmark record their banked populations at between 98 and 100 per cent. In comparison Kenya’s banked population stands at 69 per cent.

But while one could argue that these countries enjoy the advantage of being more economically developed than Kenya, we cannot deny that the challenge we face in increasing financial access/inclusion and in the process making the switch from cash to cashless means that players in the financial services sector have work to do.

The Kenya Bankers’ Association is making significant headway in its drive to edge out the magnetic strip cards in favour of Europay, MasterCard and Visa (EMV) cards, setting deadlines for ATM, Point of Sale and card issuance EMV compliance beginning September through to March next year.

Flexibility and security

The significance of this move is that card issuers in the market will be offering state-of-the-art technology to their customers in the way of EMV cards. EMV cards offer consumers a wide range of flexibility, convenience, security, functionality in terms of their ability to transact cashlessly. These cards are a form factor and point towards a cashless transactive future.

The secret of the success developed and emerging economies enjoy lies in their ability to convert consumers from cash to cashless. These countries have done this by enhancing the efficiency of their National Payments Systems and providing easy access to infrastructure that supports cashless transactions.

In Brazil for instance, there are 24.9 Point of Sale (POS) terminals per 1,000 people, making it convenient for consumers to carry out cashless transactions. In Kenya this number is at 0.4 POS terminals per 1,000 people, making it easier for consumers to use cash rather than cards to transact.

In an environment where EMV card technology is becoming more and more prevalent, there is still a need for consumers to be continuously educated on the benefits of using cards to facilitate their financial transactions.

Despite having a relatively more developed financial landscape compared to neighbouring economies, the attitude of the ordinary Kenyan towards card usage is that there are more suited to the higher income consumer. The financial sector needs to work together to debunk the myth that cards are the preserve of the middle and upper classes; these cards need to be available to all consumers.

There needs to be a very active engagement with all consumer segments in the economy to empower them into financial inclusion by migrating them into a cashless card-based ecosystem. However, much investment needs to be poured into this ecosystem to make it truly enabling.

Convinient access

Having less than one POS terminal for every 1,000 consumers is a deterrent to the use of cards and points to a shortfall in providing convenient access. The other piece that needs to be solved to create this ecosystem is to ensure there is sufficient commercial incentive for all the players in it to actively encourage low value payments. Most transactions in the economy are sub-Sh300 transactions. So for the cashless journey to accelerate, then card transactions need to migrate into this value space.

Imagine walking to the kiosk to get your morning bread, milk and newspaper, and using your card rather than cash to pay for these items. Convenience is not just about being able to use your card at the mall; it’s about being able to use it wherever you go. Convenience is not for the few who can shop where the POS terminals are, which right now is in middle to upper class establishments: convenience is for everyone. There is need, therefore, to ensure that there are no impediments stopping consumers from using their cards to make purchases of say, less than Sh500.

As we move towards this goal, we can be sure that Kenyans will continue to enjoy the benefits of foregoing cash, which is an important aspect of enhancing financial inclusion.

The writer is the Vice President and Area Business Head, East Africa, MasterCard Worldwide