The Central Bank of Kenya (CBK) is now banking on the rollout of the National Integrated Identity Management System (NIIMS), commonly known as Huduma Namba, to provide a key impetus to further deepen the adoption, safety and robustness of digital payments.
This comes at a time CBK is preparing to launch a digital shilling, the Bank Digital Currency (CBDC), that could easily dethrone the existing mobile money payment channels.
A CBDC issued by the CBK would be a sovereign currency in an electronic form and it would appear as a liability on CBK’s balance sheet and an asset to users holding it.
In the last few years, digital payments have gained momentum, especially mobile money, owing to its convenience and penetration in the country.
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According to CBK data, Kenyans make over 37.6 million transactions of about Ksh176 billion every day through various non-cash channels such as mobile money, cards, electronic bank transfers, and cheques.
Launching the National Payments Strategy 2022-2025 (the Strategy), CBK noted that mobile money transactions have shown the largest growth since the inception of the payment service.
Mobile money was launched in 2007 as a means of sending money between individuals. In 2013, merchant payments were added, and today, the variety of mobile money payment options have increased significantly.
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“While Kenya’s leadership on mobile money is widely acknowledged, much more remains to be done. The Strategy seeks to consolidate the gains made so far and marking out the path towards a new chapter in Kenya’s payment journey,” said CBK.
The value of mobile money transactions carried out at agents, as a proportion of GDP, has increased from 23 percent in 2010 to 60 percent in 2021. In terms of absolute performance, in 2021, there were over 2.2 billion transactions with a total value of over Ksh6.9 trillion.
This trend is expected to continue increasing once initiatives such as interoperability are fully rolled out, allowing customers to seamlessly transact across the ecosystem irrespective of their provider.
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“Although Kenya’s payments landscape has undergone significant changes in the last ten years, there are still areas with considerable opportunities for improvement such as cards, Bank P2P, EFT and RTGS,” added CBK.
“From a mobile money perspective, collaboration amongst industry players led to the launch of several
products in the market. In the public sector, the launch of government-to-person (G2P) payments in 2013 (eCitizen) was a major milestone. The Government still continues to leverage on electronic payments infrastructure to make social transfers such as Inua Jamii cash transfer programme and the payment of COVID-19 transfers by the Government and non-government entities that were channeled through mobile money rails.”
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CBK notes that while the recent improvements in various payments channels have been commendable, the same has not been reflected in terms of pricing of various payments services.
As a result, CBK could be eying a piece of the transaction fees in digital transactions, as well as lowering the cost of sending and receiving money digitally.
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