Pandemic hurts Kenya’s banks but boosts mobile money

Pandemic hurts Kenya’s banks but boosts mobile money

Reports in the Kenyan press are making clear how much of a hit the country’s banks have taken from the recent surge in mobile money payments.

The banks expect a drop in net earnings for the year 2020 after reporting the loss of about $11.5 million worth of revenues from card payments to operators’ mobile payment platforms in the nine months between March and November last year. Deteriorating economic conditions and the Covid-19 lockdowns have also hit business.

The Central Bank of Kenya (CBK) has reported the figures, which seem to stem from customers no longer using debit cards, credit cards and prepaid charge cards during the pandemic and, instead, switching to mobile money payment platforms such as M-Pesa.

Transactions of up to Ksh1,000 ($9.17) could be made free of charge at the time, although the CBK further encouraged the practice by abolishing charges on the transfer of money from customers’ bank accounts to mobile money wallets and from wallets to accounts.

During the pandemic the banking regulator also increased the transaction limit for mobile money to Ksh150,000 ($1,376) from Ksh70,000 ($642) and increased the daily limit for mobile money transactions and the mobile money wallet limit to Ksh300, 000 ($2,752) from Ksh140, 000 ($1,284).

Traditional payment transactions – through debit cards, credit cards and prepaid charge cards – were badly hit, falling from about $138.07 million in March 2020 to $126.51 million in November.

The value of mobile money payments increased from an estimated $3.34 billion to $4.83 billion in the same period.

Whether this fall in earnings is entirely Covid-inspired or simply due to inherent problems that have been exacerbated by the pandemic is a matter of debate among analysts.

However, the facilitation of mobile money transactions, while necessary to lessen the health risks associated with handling money and queuing at banks, has undoubtedly hit banks hard – not to mention operators like Safaricom, whose earnings were affected by the fact that many M-Pesa and mobile banking transactions were free of charge for some months.

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