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Kenya banks lose $11m of revenues to telcos

Top banks in Kenya have raised a red flag over an expected significant drop in net earnings for the year 2020. The Central bank’s latest data shows that Kenyan banks lost Ksh1.26 billion ($11.55 million) worth of card payment business to mobile telephone operators between March and November last year as customers stopped using debit cards, credit cards, and prepaid charge cards in favor of mobile money payment platforms such as M-Pesa, whose transactions of up to Ksh1,000 ($9.17) were made free of charge.

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 mobile money wallet limit to Ksh300, 000 ($2,752) from Ksh140, 000 ($1,284).

As a result the volume of transactions through banks’ debit cards, credit cards, and prepaid cards declined by eight per cent to Ksh13.79 billion ($126.51 million) in November 2020 from Ksh15.05 billion ($138.07 million) in March 2020. The volume of mobile money payments, on the other hand, increased by 44.5 percent to Ksh526.8 billion ($4.83 billion) from Ksh364.51 billion ($3.34 billion) in the same period.

Although this shift of activity from bank to mobile money was mostly due to the effects of the global COVID pandemic, it is important to note that mobile money platforms were already growing in popularity before the health crisis hit in earnest. Safaricom’s M-Pesa, for example, already boasted around 20.5 million Kenyan users at the start 2020.

However, I believe that this loss of revenue by banks to telcos will most likely only be temporary. The fee waiver on mobile money transactions will most likely be lifted in the future and the vast majority of bank users will go back to using bank services as they did before.

That being said, mobile money platforms will continue growing in popularity as they did before the pandemic and will enjoy this extra push in exposure to new users, who will opt to keep using mobile wallet services despite them no longer being free.

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