The value of mobile transactions rose to Kshs. 367.8 billion in 2018 from Kshs. 3.8 billion worth of daily transactions. This is because the number of mobile money subscribers rose to 31.62 million from 1.35 million users in 2007 while active mobile money agents hit 223,931 down from 158,292. This illustrates how the digital economy has grown.
When M-Pesa started, the penetration of phones was still low. However, due to an increase in the use of mobile money, it encouraged an increase in the number of users. Before any recorded case of Covid-19 in Kenya, there was free interaction of customers and their service providers thus enabling both uses of hard cash and mobile money. When Covid-19 cases started to rise in March, the government discouraged the use of hard cash to prevent a further rise in Covid-19 cases.
To encourage the increase in the use of mobile money, the government had to partner with Safaricom who are the main providers of M-Pesa. This led to the reduction of transaction cost when using M-Pesa. Before the government partnered with Safaricom, only transactions below Kshs. 100 was free but now, transactions of Kshs. 1,000 and below are at a free cost. This has facilitated the use of mobile money, credit, and debit cards.
Photo credits: Safaricom Ltd
The measures have however impacted on revenue earned by the operators with Safaricom for instance reporting the loss of an estimated Ksh.5.5 billion in M-Pesa in three months to June 30.
What about the future?
The losses recorded are due to an increase in the number of transactions below Kshs. 1,000 as other users make several similar transactions below Kshs. 1,000 evading transaction costs. On Tuesday, the President opened the Economy after a long lockdown leading that led to a drop in economic activities.
The question now remains whether the government will still partner with Safaricom to maintain the Kshs.1,000 that isn’t charged transaction costs.
Before the outbreak of the deadly virus and government partnering with Safaricom to reduce transaction costs, we had little transactions especially in business centers that allowed mobile transactions. Therefore, the outbreak has led to some improvement in transactions whereby even small businesses allow mobile transactions for low price commodities due to an increase in the uptake of till and Paybill numbers making it easier to purchase goods.
It will be interesting to see what will happen after citizens find a way to live with the Virus i.e. whether transaction costs will go back to how they were or this will be the new normal. However, this goes it has been a breath of fresh air to anyone transacting via M-Pesa.
Author: Edwin Simiyu
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