The Central Bank of Kenya has put an end to the era of free mobile-money transfers below Ksh.1000 ($9) with effect from January 1, 2021. According to CBN, the measure will not be extended anymore. The implication of this is that customers will be required to now pay transaction fees for transfers below Ksh.1000, but not below Ksh.100. Additionally, mobile money-to-bank transactions are equally set to be free. In March this year, the CBK waived fees for mobile money transactions of up to Ksh.1000. This saw several digital transactions record their best year yet.
What Does The New Rule State?
The statement from the Central Bank of Kenya reads as follows:
“CBK has reassessed the emergency measures with the objective of consolidating the gains made so far and also facilitate a transition towards sustainable growth of the mobile money ecosystem. Following consultations with Payment Service Providers (PSPs), CBK will allow the emergency measures to expire on December 31, 2020, and PSPs will introduce revised pricing structures from January 1, 2021, with the following elements:
- There will be no charge for person-to-person transfers of up to Ksh.100 to any customer and network.
- There will be no charges for transfers between mobile money wallets and bank accounts.
- To facilitate the integration of Savings and Credit Societies (SACCOs) with the mobile money ecosystem, SACCOs regulated by the Sacco Societies Regulatory Authority (SASRA) may levy a charge for transfers between SACCO accounts and mobile money wallets. CBK will oversee these charges in the context of the products that banks and PSPs offer to SACCOs.
- Going forward, PSPs will propose pricing structures that reflect the “Pricing Principles” that CBK has introduced. These “Principles” aim to support the development of an efficient, safe, and stable payments and mobile money ecosystem where the customer and public interests are adequately protected. It is noted that the wallet and transaction limits that were announced on March 16, 2020, will remain in force as was communicated earlier. CBK will continue to monitor developments in the payments ecosystem and take any necessary actions.”
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What Does This Mean For Fintech Startups In Kenya?
The new rule will affect fintech startups in Kenya, particularly those into mobile money operations.
“The values transacted during the period increased significantly from the previous quarter following the Governments directive on the use of cashless payment systems to curb the spread of COVID-19,” noted the Communications Authority of Kenya.
The end of the waiver, noted Genghis Capital Equities Analyst Gerald Muriuki, would therefore mean that Kenya will not see the same volume and value in the transaction when the accompanying costs return.
“In the short-term, we may not see the volumes we have been seeing thus year, but in the longer term, there exists a case for more cashless transactions,” he said.
“The future will feature a more cashless environment as seen in the emergence of new digital currencies.”
According to CBK, mobile money subscriptions in Kenya stood at 64 million in September, 2020. This is against a lower sum of 59.4 million in April, 2020 while the number of transactions hit 163.3 million from 125 million within the same period.
The value of mobile transactions as of September meanwhile touched a high of Ksh.483.2 billion from a low Ksh.308 billion in April.
Additional the number of mobile-money agents expanded to 263,200 from 242,275.
According to data from the Communications Authority (CA) covering the period between April and June, all mobile-money transfer values including person to person, and customer to business grew on the back of the fees waiver.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer