Mobile money dims use of debit cards in Kenya

The use of payment cards in Kenya has shrunk despite the rising number of people acquiring the cards. This is after users stifled use of the cards since the start of the year, with the value of transactions registering a huge decline.

According to new official figures from Central Bank of Kenya (CBK), the use of the cards is facing turbulent times as  more people  holding them avoid to shop or pay for services using the system.

The worst hit are debit cards, whose use was on the rise as banks replaced ATM cards with the gadgets to enable consumers carry out various transactions besides withdrawing cash.

Cbk data

As at October, the value of transactions carried out using debit cards a month had shrunk to $1.15 billion (Sh100 billion), down from $1.6 billion (Sh139 billion) in February.

The data from CBK shows it has not been a good year for debit cards, the most popular payment cards in Kenya. In the first quarter of this year, Kenyans carried debit card transactions worth $4.3 billion (Sh374 billion) , with the highest value being recorded in February.

The value of transactions fell to $4.2 billion (Sh365 billion) in the second quarter of the year. April recorded the highest value of transactions during the period at 1.4 billion, with May’s dropping to $1.38 billion and June’s standing at $1.37 billion. 

The debit card transactions went further south in the period July to September, where transactions reached $3.7 billion (Sh322 billion).

 The drive to use the financial instruments has been spearheaded by banks, majority that have been replacing ATM cards with debit cards. Equity Bank, Kenya Commercial Bank and Cooperative Bank are among financial institutions that are issuing out debit cards to new customers in the place of ATM cards. Initially, a customer who wanted a debit card had to apply formally.

The cards enable holders to purchase goods and services at supermarkets, hotels, hospitals, fuel stations and other retail outlets. One can also pay utility bills that include water and electricity using the card at supermarkets.

Analysts blame stifled use of the cards to mobile money, whose value of transactions and number of subscribers continues to rise. “Mobile money has taken over cashless transactions  making it hard for any other system to thrive,” noted economic lecturer Henry Wandera.

Mobile innovations

“It has become part and parcel of Kenyans’ lives that people cannot think of debit or credit cards. This is because it is immediate and convenient,” he added. Mobile money is further being entrenched through innovations from service providers.  Safaricom recently launched Lipa na M-Pesa (pay with M-Pesa), a service that encourages people to use its mobile money platform to buy goods and services at reduced charges.

Safaricom Chief Executive Bob Collymore  said the  platform will mainstream M-Pesa to be a business payment solution.