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'Kenya's digital payment system is too fragmented'

'Kenya's digital payment system is too fragmented'

Digital payment options for goods or services in Kenya are too fragmented and the reality is that cash could remain king in that market, according to financial experts.

Speaking at the #WhatsNextMettaNBO forum hosted by Metta Nairobi, Francis Mugane, General Manager at Interswitch said this fragmentation clutters up the payment till.

"In terms of backend and reconciliation, the investment the merchant has to make is very high for (it) to be sustained. Because they are working with several different partners they don't even benefit from the economies of scale, because you are negotiating different prices with different partners," said Mugane.

This has affected the customer experience and the reason why users are opting for the simplicity of cash payment, he added.

The Kenyan consumer can make use of several options for digital payment including: mVisa, MPesa Till numbers, MPesa 1Tap, Airtel Money, T-Kash from Telkom Kenya, Visa cards, MPesa Bank Transfer with various bank applications, payment through supermarkets point system and PesaLink.

Together these constitute 33% payments compared to over 60% generated through cash, according to statistics from Naivas Supermarkets.

Mugane said that his company is working closely with retailers and have developed a solution to facilitate various payment methods and consolidate them in one payment channel.

"Because you are offering one channel, as a retailer you can begin to know about your customer. That is the biggest step retailers can take," he said.

Card payments

Mugane said that card payments are still lagging behind in the country, adding that in a market with 12 million debit cards and 250,000 credit cards, there are only 17,000 point of sale (PoS) terminals.

Most PoS systems are also costly to small retailers, averaging around US$400.

Wambui Mbarire, CEO of the Retail Trade Association of Kenya said most consumers would rather physically withdraw money from an ATM than use a card for direct payment.

Retailers will need to sensitise and educate the market on the card payment option that they have, she added.

Willie Kimani, Chief Commercial Officer of Naivas Limited confirmed that card payment constitutes about 17%, while M-Pesa payment is still at 16%. Cash takes over 60%while the rest is corporate purchases through bank transfers.

"Less than 0.05 percent of the card payments are credit cards," said Kimani.

He revealed that Naivas is launching NaivasPay to try and ensure card payments have a better reach in the market.


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