Last year was not so rosy for mobile money platforms. The growth of mobile money payments declined considerably, raising questions about the health of the economy.
Latest Central Bank of Kenya data shows that even as mobile providers rushed to launch new mobile money products, growth of mobile payments slowed from 19 per cent in 2016 to 8 per cent in 2017.
In 2015, Kenyans moved Sh2.81 trillion on mobile phone, in 2016 Sh3.35 trillion while last year, the figure stood at Sh3.63 trillion.
Stakeholders have pegged the slow down on a prolonged electioneering period that led to a general decline in the economy, forcing many businesses to adopt a wait-and-see attitude towards expansions, growth and investments.
“Months of political uncertainty affected economic activity. Many sectors did less business than usual which translated into decelerated growth in payment channels in general,” said Mr Stephen Nduati, former head of national payment systems at the CBK, who now works as an independent consultant on mobile money in Kenya.
According to experts, prolonged political turmoil last year dampened Kenya’s economic growth and forced a number of companies to either downsize or close down entirely, inevitably shedding thousands of jobs.
This reduced purchasing power hence there was less money in circulation. Treasury Cabinet Secretary Henry Rotich last year warned that Kenya’s projected economic growth may have to be revised downwards from an estimated 5.5 per cent, citing the prolonged political crisis and drought. By the end of the year, the World Bank had pegged the growth at 4.9 per cent, the lowest in the past five years.
Mr Nduati further suggested that banks’ interests in and development of their own easy payment solutions had taken away business from telecoms and other mobile first companies.
“The launch of services that offer direct bank-to-bank transfers have attracted lots of users. This means that mobile first providers must keep innovating to attract and retain a wide customer base,” he said.
Pesalink, a service introduced by Integrated Payment Systems Limited (IPSL) last year to facilitate real time bank-to-bank transactions, could also have grabbed a chunk of the market share dominated by mobile systems providers in the country.
Michael Mbuthia, Chief Information Officer at IPSL, said that business has been brisk for the platform.
“We moved Sh25 billion in the one year we have been in business, and we expect to see this grow exponentially this year. What sets us apart from mobile systems is that our customers can transfer any amount from Sh10 to sh999,999 in a single transaction,” he said.
Pioneer mobile money payment system M-Pesa has capped transactions at Sh70,000 a day.
Safaricom has been the trailblazers of mobile money in Kenya, growing the original M-Pesa into a diversified product that serves a cross-section of customers.
But not even new innovations like M-Akiba, which allows users to buy government bonds via phone, managed to secure double digit growth in 2017 as has characterised mobile money transactions since the service was launched in 2007. Other players in the market include Airtel Money, Equitel, MobiKash and Tangaza Pesa.
The slowed growth in mobile payments is an important indicator of economic stress for low income Kenyans who dominate mobile transactions, as many of them remain outside the official banking system.
Tellingly, other forms of payments such as card and direct bank transfers through the Kenya Electronic Payment Settlement System (KEPSS) remained robust. KEPSS, through which people transfer large volumes of money through banks, bounced back from a decline of -1.2 per cent in 2016 to register a growth of 0.3 per cent in 2017.
“Tough economic times bite poor people the hardest, while the wealthy remain relatively cushioned against turbulence, especially if it is short-term. Which is why transactions by rich people might even have gone up during the election period as they had more time to spend money,” said Mr Nduati.
But according to Mr Isaac Ikinu, a director at Tangaza Pesa, the decline is normal and just signals that the market is approaching saturation point.
“The important thing is that we are still witnessing growth, even though it is not as fast as the preceding years. The growth curve will eventually taper off as the market stabilizes,” he said.