Mobile money overpowers card payments in Kenya

Wednesday 20 January 2021 08:34 CET | News

Top banks in Kenya have raised a red flag over an expected significant drop in net earnings of USD 11 mln for the year 2020, due to the rise of mobile money.

The Central bank’s latest data shows that Kenyan banks USD 11.55 million worth of card payment business to mobile telephone operators between March and November last year as customers stopped using debit cards, credit cards and prepaid charge cards in favour of mobile money payment platforms such as M-Pesa, whose transactions of up to USD 9.17 were made free of charge.

During the period, CBK also provided a shot in the arm for mobile money payment options by abolishing charges on the transfer of money from customers’ bank accounts to mobile money wallets and vice versa.

The banking regulator also increased the transaction limit for mobile money to USD 1,376 from USD 642 and increased the daily limit for mobile money transactions and mobile money wallet limit to USD 2,752 from USD 1,284.

As a result, data from Central Bank shows that the value of payment transactions through banks’ debit cards, credit cards and prepaid charge cards declined by 8% to USD 126.51 million in November 2020 from USD 138.07 million in March 2020.

On the other hand, the value of mobile money payments increased by 44.5% to USD 4.83 billion from USD 3.34 billion in the same period.

So far, six top banks have issued profit warnings cautioning shareholders that their earnings for 2020 will fall by at least 25%, implying that the shareholders should brace for reduced or no dividends, while bank managers could go without bonuses. The lenders include Standard Chartered Bank Kenya, Absa Bank, I&M Bank, Diamond Trust Bank, NCBA and Co-operative bank, with signs that more banks could issue profit warnings.

Market analysts argue that while COVID-19 pandemic containment measures have hit the banks’ earnings hard, the lenders’ fundamentals had begun to weaken prior to the pandemic owing to macroeconomic shifts.

It is argued that a sharp coronavirus-related economic slowdown in Kenya will weaken banks’ loan quality and profits, but strong capital and liquidity and government support measures will provide financial resilience.

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Keywords: mobile money, card payments, COVID-19, telcos, banks, Kenya, mobile payments
Categories: Payments & Commerce
Countries: Kenya
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