The Central Bank of Kenya (CBK) has asked digital payment service providers including mobile money firms to cut their prices, arguing that they have the headroom to charge customers less.
The mobile and internet-based payment platforms charge relatively higher fees for cash transfer and payments compared to banks.
The regulator says in the National Payments Strategy 2022-2025 paper that the recent reduction in the fees charged by the digital platforms mandated in the wake of the Covid-19 pandemic has not gone far enough.
Safaricom’s #ticker:SCOM M-Pesa platform, which has the biggest market share in the mobile money category, reduced its charges by up to 45 percent for lower value transactions.
“Prices and tariffs of 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 determined, working with the industry, to change this reality and ensure that benefits of digitalisation translate to affordable, transparent and customer-centric payment services.”
The CBK said the objectives will be achieved through gradual implementation of pricing principles which require the balancing of “short-term commercial targets and long-term sustainable growth.”
They also aim at pricing the services in a manner that is proportional to low-value and other “public good” related payments.
Mobile and digital platforms are more expensive compared to banks, an outcome of higher pricing and the narrow bands of transactions they offer.
When sending Sh501 to Sh10,000 within the M-Pesa ecosystem, one can incur charges ranging from Sh12 to Sh97 depending on the amount transferred.
Pesalink also allows one to send a maximum of Sh999,999 at a fee of Sh250 while a similar transaction using M-Pesa will cost more than Sh600 and take days due to the platform’s higher fees and daily transaction limit of Sh300,000.
The regulator’s push for lower charges on digital payment platforms is seen as a move to bring greater equality in access to financial services. Most of the users of the digital payment platforms are low-income individuals, meaning that they are charged more in fees as a share of their income or net worth.
The payment platforms initially emerged to fill the gap left by mainstream banking services including the need for instant micropayments.
– Business day