By Kevin Ayugi
The journey to contactless payment options is helping economies across the world increase transparency in the financial markets while also addressing threats like money laundering on a grand scale. To a consumer, it is more convenient, reliable and reduces the exposure to theft.
Sweden, which aims for a cashless economy by 2023, has a mature payment market. As per the latest available records, over 80% of Swedes use cards with 58% of payments being made by card and only 6% made in cash. The journey has largely been powered by factors such as a robust card payment system, strong internet infrastructure, a popular mobile payment app known as Swish, and a supportive legal framework.
Closer to home, the Rwandese government has made great strides in promoting cashless payments through the Smart Rwanda Master Plan that seeks to digitise all government financial transactions thus allowing citizens to make online payments as well as use of debit and credit cards for services in health care, finance and education, among other areas.
Somalia has made similar efforts with the launch of a national payments system which is allowing the country to centralise its digital payments. Kenya also remains a case study when it comes to cashless economy thanks largely to mobile money payment pioneered by Safaricom’s mobile money service, Mpesa. It would be nice for the Central Bank of Kenya (CBK) to enhance a robust National Payment System by accelerating improvement of payment services.
It is time to create and maintain control over the standardised practices of payment system players. In 2020, the emergence of the Covid-19 pandemic proliferated digital-only payment policies in Kenya owing to government’s directives to explore ways of cashless payments to reduce the risk of spreading the virus. With a few taps on your smartphone screen, you can pay for a product or a service.
A 2021 report by Visa estimated that 71% of businesses in Kenya use cash payments, while the preference for this mode by their customers stood at 22%. The report shows high usage of digital payments including mobile money transfer, card payment, contactless cards, and bank transfer was concentrated in food, beverage, and entertainment places, tours and accommodation, agriculture, transport and delivery, and professional services.
Despite the explosion of cashless transactions, cash is still predominantly king with some segments of the population still finding the current payment systems hard to access, hard to use, or simply beyond their means in terms of access and relevance.
Accelerating further digital transformation
There is a need to upscale digital transformation to meet customers demand for seamless transactions. This is catalysed by the fact that the bulk of the Kenyan population is characterized by young people who are considerably fast adopters of innovation. Digital transformation is not only about using modern equipment and software but also about revising approaches to management, communications, and corporate culture.
Therefore, it is a prime prerogative especially of financial institutions to rethink customer experience which influences digital transformation by automating and personalizing the entire customer journey to ensure client retention, satisfaction, and business sustainability. It may mean revising the operating model, creating new directions, and uniting into a partner ecosystem that will take service to a fundamentally new level.
Consumer protection
A thriving cashless economy requires trust in financial service providers, confidence to use financial products, tailored product design, and a strong and enforced consumer protection framework. Financial institutions have to ensure that consumers’ are guaranteed their privacy –customer data and identity protection should come first. This also involves targeted and proportional regulation to strengthen confidence in electronic/digital payment options and enforce financial inclusion. Lenders can contribute to this by heavily investing in digitization and automation of services.
Proactive digital literacy
The East Africa Banking industry trends report 2021-2022 by Deloitte Africa urges financial institutions to prioritize cyber security and embed it in organizational culture. This is because a surge in cashless transactions has given rise to complex cyber-crime cases including vulnerability to hacking and data breaches.
Financial institutions have a unique opportunity to take a proactive approach to customer education on cybersecurity. This can be done through development of consumer education strategies and campaigns that are aligned to the business goals. The Kenya Bankers Association, for instance, conducts an annual card and online safety awareness campaign dubbed “Kaa Chonjo”, which seeks to contribute towards alleviating fraud in the financial services sector and empower consumers with information on secure use of cashless transactions. This not only builds stronger relationships but also provides an opportunity to enhance anti-fraud efforts.
With the National Payment Strategy 2022-2025 by CBK aiming to have a secure, fast, efficient and collaborative payments system that supports financial inclusion and innovations that benefit Kenyans, the digital financial services sector has a key role to play to accelerate the journey to a cash-lite society.
Writer is a Chief digital officer at Family Bank Limited.
