Why cash still reigns king in settling day-to-day transactions

Cash has remained pivotal in the settlement of everyday transactions in Kenya, solidifying its position as the most preferred mode of discharging payments irrespective of the rapid growth in digital solutions.

While mobile money has been the story behind the expanding financial inclusion which now stands at 89 percent according to the recently published FinAcess HouseHold Survey, it is the cold hard cash that still bares significance.

According to Metropol Credit Referencing Bureau Chief Executive Officer Sam Omukoko, culture and experience remains a key determinant of the mode of pay where the older generation find more comfort in holding physical cash.

“It is a generational thing and a belief of what money entails. Many people grew up knowing hard cash as the only mode of transaction and still hold the same beliefs to date,” he said.

Omukoko however expects the outlook for payments to shift as the younger generation drives up the adoption of digital solutions but expects cash to still bare a significant hold of transactions.

The Central Bank of Kenya (CBK) led survey showed cash being employed in the settlement of up to 96 percent of daily expenses ahead of mobile money accounts, bank transfers and paybill solutions.

Cash similarly topped the resolution of other monthly bills, the settlement of school fee balances and asset clearance.

Mobile money accounts meanwhile came in second with a share of less than 50 percent of payments ahead of bank transfers while paybill/till number platforms came in last with a mere share of less than 10 percent.

This despite the rapid rise of mobile money transactions according to sector statistics from the Communications Authority of Kenya (CA).

While there was no record for mobile based transactions back in 2009 at a time when mobile penetration stood a low 49.7 percent with 19.5 million mobile subscriptions, this picture has since changed for the better.

Mobile subscriptions have then risen to 49.5 million as at December 2018 as penetration strikes 106.2 percent attributed to the hold of multiple sim-cards by Kenyans.

Active mobile money transfer agents now stand at 233,931 from 161,853 in 2016 helping facilitate the transfer of up to Ksh.2.1 trillion with Ksh.731.9 billion representing person to person transfers.

Mobile money subscriptions may have peaked however as mobile subscriptions seemingly near the ceiling.

In spite of handling a greater sum of transactions, mobile money subscriptions closed at 31.6 million in 2018 from a slightly higher total of 31.9 million in December 2016.

Kenya Business Guide research analyst Titus Maina says the growth of mobile money will persist but will not be as rapid as it has been in recent years as the growth in subscriptions generally slow.

According to Maina the reliance on mobile money for transactions remain a playout between costs and convenience.

“Business people are finding it expensive to install mobile payment platforms such as paybills and till numbers. For consumers, tax increases on mobile money transactions have raised the cost of mobile cash transfers,” Mr. Maina told Citizen Digital.

“A majority of people in rural areas only rely on mobile money to receive funds from family members living in the cities. These dwellers hardly further their exploration of digital payments,” he added.

Excise duty increased on funds transfers through mobile platforms under the 2018 Finance Act accented into law in September of 2018 in ongoing fiscal consolidation by government which has since turned the convenient mode of pay into an apparent premium.

Similarly, mobile money has had its fair share of challenges to this point as highlighted by the FinAccess survey.

Attempted fraud mainly through social engineered tactics, repetitive system downtimes of mobile money platforms and the usual unavailability of agent floats by transfer brokers have in totality dampened the sentiments for digital solutions in facilitating everyday transactions.