Debit card transactions drop with rise in cashless payment options

Money Markets

A cashier swipes a credit card at a supermarket. Photo/FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Volume of transactions done using debit cards fell by 28 per cent in February compared to 2013.
• The value of transactions stood at Sh105 billion, Sh30 billion less than February last year.
• The number of transactions recorded this month is the lowest in the last 15 months

 

The volume of transactions conducted through debit cards dropped by 28 per cent in February following increased usage of multiple payment channels.

Data from Central Bank shows that Kenyans conducted 10 million fewer transactions using cards this February compared to the same month last year when debit card transactions were at 33 million.

The value of transactions done using the debit cards stood at Sh105 billion, Sh30 billion less than February last year.

The number of transactions recorded this month is the lowest in the last 15 months. Banks installed 100 new ATMs in the one year period to February, pushing the number to 2,507.

Danson Muchemi, the chief executive of Jambo Pay, an online and mobile money payment channel, attributed the drop to increased uptake of mobile banking, electronic commerce and security concerns over card usage.

“Card industry has not been able to address fully security fears which have not been a (major) concern to mobile money,” Mr Muchemi said.

Banks are currently attempting to address the security concerns by issuing customers with the more secure chip-based cards.

The banks, through the Kenya Bankers Association had agreed on a deadline of March 31 this year, but following failure to migrate most customers to the new cards, they extended the transition period to May 31- end of this week.

Shift to EMV had been necessitated by security concerns following frauds through the ATM systems. Kenyan banks lose as much as Sh3.8 billion through fraudulent transactions every year, according to findings by consulting firm Deloitte.

The number of mobile payments in the same period grew to 65.6 million from 53.4 million in February last year.

Most banks have linked their systems with mobile money services allowing customers to move funds from the bank to their phones and vice versa. The product allows the customers to bypass ATMs.

“Integrations are also happening through third party service providers reducing the need to carry cash,” said Mr Muchemi.

For example, the public can now settle electricity bills, water charges and subscription fees for Pay TV through the Internet or mobile money. Introduction of agency banking has also seen banks contract more than 20,000 third party outlets to help with withdrawal and deposit transactions.

Equity Bank and KCB, the two largest banks in the country, have reported that agency banking, a payment channel introduced in 2010, handled more transactions than their ATMs in the month of March this year.

The drop in card transactions is likely to impact on ATM commissions earned by banks. Most banks charge a standard fee of Sh30 per transaction at the ATM.