Digital payments in Africa are yet to be fully tapped, according to iPay MD.
The MD Mr Philip Nyamwaya, speaking at the launch of an affiliates program to unlock Africa’s Digital Payments markets said that Kenya is leading the way in Africa’s dash from cash, although on many fronts, cash is unfortunately still king.
“Cash is still king in Africa and the digital payments market is yet to be fully tapped,” he said adding that as an economy, the country has made great strides in the recent past, however E-commerce is still in its early days.
“Compared to other markets, Kenya is leading the way in Africa’s dash from cash, although on many fronts, cash is unfortunately still king,” he noted.
There are about 45 million mobile money accounts in Kenya with deals worth Sh3.9 trillion ($38.73 billion) settled by mobile phones this year according to latest data from the Communications Authority of Kenya.
Nyamwaya was speaking during the launch of the iPay affiliates programme where the firm is targeting web developers, merchants and digital marketers with clients who are selling online or in-store.
According to the Oxford Business Group, the popularity of mobile money in Kenya has continued to expand against traditional payment methods. However, the fragmentation of the digital transaction market could see cash remain the preferred option for many people.
Growth in mobile payments reached 8% in 2018, and totaled KSh3.6trn ($36bn) in value, according to data released by Central Bank of Kenya (CBK).
The study also noted that while steady, the pace of expansion was slower than in 2016 and 2015, when growth rates of 19% and 17% were recorded, respectively. Muted consumer spending as a result of a combination of factors, including lower-than-expected economic growth, contributed to the slower pace of growth, according to industry stakeholders cited in local press reports.
Despite the more subdued performance last year, the overall trend for the segment over the past decade has been robust; the value of mobile money transactions has jumped more than 20-fold, from just KSh166.6bn ($1.7bn) in 2008, the first full year the CBK recorded statistics for the segment.
A key driver of growth has been the M-Pesa mobile money system, which was launched by local telecoms operator Safaricom in 2007 and allows users to send money, pay bills and apply for loans through their mobile phones.
M-Pesa controls 81% of the mobile money market and had 22.6 million subscribers as of June 2017. It has also been cited as the key factor behind the rapid increase in Kenya’s financial inclusion, which has risen from 26.7% in 2006 to 75.3% in 2016.
Kenya also has the highest rate of mobile money penetration in East Africa – at 59% – and the 10th highest in sub-Saharan Africa, according to GSMA Intelligence.
Despite the growth in mobile money payments and the increasing number of banking options, the use of cash remains key for many Kenyans.
According to the 2016 FinAccess survey, released by the CBK, 94.6% of business owners still used cash as their main mode of payment, with similarly high levels among casual (94.7%) and agricultural workers (92.8%). Conversely, only 43.3% of regular employees were paid in cash, with 47.2% receiving their wages electronically.
“Furthermore, highlighting the important role that cash plays in the economy, Willie Kimani, CEO of supermarket chain Naivas, told a digital payments industry event in March this year that cash still accounted for more than 60% of the company’s transactions, followed by card (17%) and M-Pesa (16%).” a statement by Oxford Business Group noted.
Digital payments in Kenya
Some industry figures have cited the complexity and fragmentation of Kenya’s digital payments system as a factor facilitating the dominance of cash.
The program that has now been launched by the iPay will see website designers, digital agencies, who refer merchants to use iPay as the payment gateway share 5 percent to 10 percent revenue with them for the lifetime of that merchant.
“The merchant can be online or have a physical store preseence, this will be an added value to the web designers eCommerce product offering, even as we grow our transactions base,” Mr Nyamwaya said.
CBK governor Mr Patrick Njoroge says that innovations in mobile phone financial services have allowed for a 75.3% financial inclusion, one of the highest in Africa.
“Innovation will likely come from the intersection of ICT and financial services as it has in the past, but we need to take this beyond simple transfers. Kenya is about to introduce the M-Akiba mobile bond in which a rural Kenyan can participate for $30. Savings vehicles like this could be transformative for low-income populations,” he said adding that there are many platforms and incubators which could also bear fruit in innovative forms.
“It is also important we have innovators that help us move away from standard lending models and products to accommodate income volatility challenges among the lower income segment. This type of innovation is essential for SME growth and can be done,” Mr Njoroge said.
iPay is a payment Gateway that allows you or your merchants to receive payment, send payments or pay bills conveniently. iPay is able to process payments from Mobile Money (MPESA, Airtel Money, Equitel) Mobile Banking (Pesalink), the eLipa eWallet, local bank debit cards, Visa and Mastercard credit cards as well.
The firm has been in opertion in Kenya since 2010 and are also active Uganda, Tanzania Togo with Rwanda going live soon.