Does cashless matatu system have a regulatory framework?

What you need to know:

  • Actually, a lot of the details, particularly about the market structure, interoperability and the regulatory framework for this cashless matatu system, remain scanty.
  • In developed economies, regulatory frameworks for such an investment environment are publicly available, open and transparent enough for each type of stakeholder be they technical, financial, legal or consumer.  
  • The Ministry of Transport, the Communications Authority of Kenya, the Central Bank of Kenya, the Matatu Owners Association and interested ICT players must try harder to come together and address these and many other salient issues.


The President launched the cashless matatu payment system in style last week.  

Boarding a matatu from State House to the city centre, the President used the payment card “My1963” to pay his fare as the smiling Safaricom CEO, Bob Collymore, the Matatu Owners Association chairman, Simon Kimutai, and the Cabinet secretary for Transport and Infrastructure, Michael Kamau, all watched.

The cast above could not be any more impressive, and the trajectory towards a cashless matatu payment system was now definitely unstoppable.   

With a looming deadline of December 2014, when all public transport vehicles are supposed to have adopted the system, the launch of the My1963 cashless payment card was more than timely.

IMPROVED REPORTING

Now Kenyans do not need to carry cash in order to pay for transport services. They simply need to sign up onto the My1963 system, top up the card and use it in the matatu.  

The benefits expected include decreased corrupt activity between matatu drivers and traffic police, since there will no longer be easy loads of cash circulating within the transport industry.

The other benefit is that carjacking of public vehicles would be less attractive since the crew and passengers are less likely to have carried sufficient cash to make the robbers' evil attempt worthwhile.

Additionally, matatu owners are going to have a better grip on the financial transactions administered by crews on a daily or even hourly basis, because the digital cashless technology automatically records them and provides financial reports.

SCANTY INFORMATION

These same reports would make it easier for the government, through KRA, to get its share from the multibillion-shilling matatu industry that often goes without paying income tax.  

Furthermore, given that the card registration process requires a national ID or a passport, the government can trace and zero in on criminals or terrorists within the public transport system.

So, at face value, everything looks fine and everyone should be happy. But there’s more.

Actually, a lot of the details, particularly about the market structure, interoperability and the regulatory framework for this cashless matatu system, remain scanty.

At the top of the list is the question of choice for passengers. Are all passengers supposed to subscribe to only one card the My1963 card?  

IS THERE CHOICE?

There have been other cards already in circulation, including BebaPay, Abiria Card and others. However, with the President, the Minister for Transport and the chairman of the Matatu Owners Association seemingly promoting the My1963 card, one wonders what the fate of the rest will be.

Put differently, is the market structure deliberately designed to be monopolistic or will it allow for competition, choice and subsequent future innovation around the matatu cashless payment system?

Secondly, considering that the top-up mechanism for the “My1963” is premised on M-Pesa, the famous Safaricom mobile money system, what happens to passengers who are not privileged to be Safaricom or M-Pesa customers?

Wouldn't the system be more convenient from a consumer point of view if it had provision for topping up by any of the mobile money players?

MULTIPLE VENDING MACHINES

Thirdly, does the ticket-vending machine or card reader that the conductor uses to debit or charge the passenger allow for interoperability?

In other words, does the vending machine process passenger cards from different suppliers or will each card supplier also require its own card reader?

This would make things cumbersome and inconvenience the conductor, who has to carry multiple vending machines.

Finally, what is the criterion for determining which matatu saccos belong to which card system and, by extension, which payment service provider?  

This is a particularly touchy subject, considering that the payment service provider would charge a commission for each transaction, and in the public interest it is best that such criteria not be based on proximity to State House.

TRANSPARENT REGULATIONS

Whereas there is no evidence of that being the case, it is still necessary to remember that such an arrangement would not be sustainable, since State House tenants are there for a limited time that would ultimately expire.  

Upon expiry, the public transport sector would then be exposed to unnecessary cashless system disruptions.  

That is why in developed economies, regulatory frameworks for such an investment environment are publicly available, open and transparent enough for each type of stakeholder be they technical, financial, legal or consumer. At the moment this does not seem to be the case.

THE OFFICIAL POSITION

All these questions are actually not new, given that the initial deadline for going cashless was moved from June this year to December, to allow stakeholders to deliberate on and streamline these issues.  

We still have a few weeks to go, but it appears the official position has already been declared and the industry has to prepare for and adopt the My1963 card system.

The Ministry of Transport, the Communications Authority, the Central Bank of Kenya, the Matatu Owners Association and interested ICT players must try harder to come together and address these and many other salient issues.

Ignoring them simply provides opportunities for lawyers to earn easy money by launching court injunctions that would cripple such a noble project.

Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Twitter:@jwalu