Plastic money companies bank on middle class for growth

 

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By CHARLES MWANIKI,

Companies offering plastic card payment technology are banking on growth of the middle class to claim a bigger share of the electronic transactions business.

Cashless or electronic payments consist of only three per cent of the total payments, with cash being the dominant mode of payment, according to a study done by MasterCard, which was commissioned by Central Bank of Kenya.

The MasterCard vice president and area business head for East Africa, James Wainaina, said in an interview the company is counting on the rise in number of point-of-sale terminals to push more such plastic cards into the market.

Plastic card providers are adopting the ‘tap and go’ Near Field Technology (NFC) to counter stiff competition from mobile phone companies whose money transfer and mobile payments services have gained wide consumer acceptance in Kenya.

“The consumer is going to have both options. Mobile wallets are mainly used to facilitate lower value peer-to-peer transactions, while with cards you are looking at customer to business transactions of a higher value,” said Mr Wainaina.

The cost of handling cash payments to a business is higher than that of electronic transactions, a factor that has seen businesses opt for both cash and electronic payments systems.

The growth in usage of cards is dependent on the reduction in the initial cost of point-of-sale terminals paid by merchants, which Mr Wainaina said is being addressed through devices such as smartphones equipped with card readers.

“This will increase card usage in terms of numbers and different merchant categories,” he said.

Central Bank statistics as at May show that there are 18,796 point of sale machines in Kenya, translating to hardly a card processing device per 1,000 people, limiting card usage.

Use of cards to shop and pay bills remains low in Kenya to date, with only 10.8 million prepaid, credit or debit cards in a population of 40 million.

84 per cent of these cards are debit cards, contributing to the heavy usage of cash as the preferred payment system as most people utilise them to make ATM withdrawals before subsequently using the cash to pay for goods and services.

In July, MasterCard launched a PayPass card for Kenyatta University alumni that utilises the ‘tap and go’ NFC technology to pay for goods, services and utility bills at places such as malls, hospitals and insurance firms.

The company also partnered with Equity Bank in January to provide customers with five million credit and debit cards featuring MasterCard PayPass technology, which are enabled with NFC capacity.

Transport sector has also been actively pursuing the NFC card technology. Equity in April partnered with global IT giant Google to launch BebaPay, a cashless commuter fare payment system that involves the use of pre-paid plastic cards to settle transport bills.