CBK pushes for competition against M-Pesa in new strategy


Central Bank of Kenya Governor Patrick Njoroge. [David Gichuru, Standard]

The Central Bank of Kenya (CBK) will in the next four years work towards curtailing the dominance of Safaricom’s mobile payment platform M-Pesa by increasing competition to offer choice to customers.

This is part of CBK’s second National Payments Strategy for the period between 2022 and 2025 unveiled yesterday.

CBK says in the document that choice will be an important feature of Kenya’s National Payment System ecosystem to encourage uptake and efficiency. “Encouraging competition will be a key enabler for effective and viable payment options,” the report says.

M-Pesa is the most dominant player in this space. It had 98.4 per cent of registered mobile money customers by end of September last year, according to data from the Communications Authority of Kenya. Airtel Money and Telkom’s T-Kash share the remaining 1.6 per cent of the customers. Without naming M-Pesa, CBK says such dominance in the mobile payment ecosystem is limiting choice for customers.

The apex bank says a lot of customers have not been able to accept payment channels from other payment instruments, even when they have been less costly and offered better services.

The threat of market concentration in the mobile payment ecosystem also impacts negatively on the government, CBK says.

“Market dominance in the mobile money space impacts the cost of delivering government services as both a large payer and recipient of payments,” the strategy report says.

The sentiments contained in the 89-page report are likely to kick up a storm.

For a long time, Safaricom’s competitor, Airtel Kenya, has been pushing for M-Pesa to be separated from the other telecommunications services to boost competition.

Its argument has been that a lot of customers are not willing to jump ship from Safaricom due to the grip of M-Pesa, which has become instrumental in shopping and payment of bills.

Airtel has also been pushing for Safaricom to be declared dominant, a situation that would see the listed company share some of its resources with other players.

However, Safaricom and the competition watchdog have insisted that the only way the company can be declared dominant is if they abuse their market leadership.

Otherwise, the Competition Authority of Kenya says separating Safaricom’s business is akin to punishing success. The CBK payments strategy also explores the usefulness of new Central Bank Digital Currency, with the CBK recently issuing a discussion paper on the same.

Putting a lot of emphasis on cashless transactions, one of the goals of the 2022-25 strategy is to lead to the emergence of a fully digitised, 24-hour economy by enhancing features of the new Real Time Gross Settlement (RTGS) system.

Moreover, under the strategy, the financial regulator will be hoping to review the current cheque-valued threshold with a view to eliminating cheques altogether. Other than choice, other core principles of the strategy include trust, security, usefulness and innovation

The first payment strategy was for 2004-2008 and led to the formulation of RGTS and the introduction of mobile financial service, which was a new area for the country, said National Treasury Principal Secretary Julius Muia. “We were learning as we were running,” he said during the launch.

Dr Muia said the strategy is “in alignment with the digital transformation agenda.”

CBK Governor Patrick Njoroge retraced the journey of Kenya’s payment system.

“We have achieved a lot, but much more remains to be done,” he said, noting that even as technological changes and innovations continue to gather pace, they come with certain risks that need to be assessed.

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