CBK calls for reduced fees for digital and mobile payment platforms

Currencies

CBK calls for reduced fees for digital and mobile payment platforms


Patrick Njoroge, Governor of the Central Bank of Kenya. PICTURES | NJAU SALATON | NMG

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Summary

  • Mobile and internet-based payment platforms charge relatively higher fees for cash transfers and payments compared to banks.
  • The regulator says in the National Payments Strategy 2022-2025 document that the recent reduction in fees charged by mandated digital platforms in the wake of the Covid-19 pandemic has not gone far enough.
  • Safaricom’s M-Pesa platform, which has the largest market share in the mobile money category, has reduced its fees by up to 45% for low-value transactions.

The Central Bank of Kenya (CBK) has asked digital payment service providers, including mobile money companies, to reduce their prices, arguing that they have the leeway to charge customers less.

Mobile and internet-based payment platforms charge relatively higher fees for cash transfers and payments compared to banks.

The regulator says in the National Payments Strategy 2022-2025 document that the recent reduction in fees charged by mandated digital platforms in the wake of the Covid-19 pandemic has not gone far enough.

Safaricom’s #ticker:SCOM M-Pesa platform, which has the largest market share in the mobile money category, has reduced its fees by up to 45% for low-value transactions.

“Prices and tariffs for some payment services can be high in relative terms, while others are not easily understood by the average customer, the regulator says in the strategy paper.

“CBK is committed, working with the industry, to changing this reality and ensuring that the benefits of digitization are translated into affordable, transparent and customer-centric payment services.”

The CBK said the goals will be achieved through the gradual implementation of pricing principles that require balancing “short-term business objectives with long-term sustainable growth.”

They also aim to set the price of services in a way that is commensurate with low-value payments and other “public good” payments.

Mobile and digital platforms are more expensive than banks, due to higher prices and narrow bands of transactions they offer.

When sending 501 shillings to 10,000 shillings within the M-Pesa ecosystem, fees ranging from 12 shillings to 97 shillings may be charged depending on the amount transferred.

Sending 501 shillings to 10,000 shillings using Pesalink, the person-to-person payment service for banks, the fee is 40 shillings fixed.

Pesalink also allows a maximum of 999,999 shillings to be sent for a fee of 250 shillings, while a similar transaction using M-Pesa will cost over 600 shillings and take days due to higher platform fees and the daily transaction limit of 300,000 shillings.

The regulator’s push to reduce fees on digital payment platforms is seen as a move to bring greater equality in access to financial services. Most users of digital payment platforms are low-income people, which means they are charged more in fees based on their income or net worth.

Payment platforms first emerged to fill the void left by traditional banking services, including the need for instant micropayments.

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About Matthew R. Dailey

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