Mobile money slowly turning East Africa into cashless society

In an analysis of the national payment systems in the region, the value of transactions done through cheque and other debit and credit instruments is far larger than the payments through credit cards.

In Uganda, payment by real time gross settlement (RTGS), which allows for funds in accounts in two different banks to be transferred in an hour or less, posted the highest value as a payment option with over Ush117.8 trillion ($50.4 billion) transacted through this method according to the latest figures from the Bank of Uganda in the 2010/2011 financial year. Electronic funds transfer came second with Ush8 trillion ($3.4 billion), cheque transactions had a value of Ush5 trillion ($2.1 billion) and mobile money transaction had a value of Ush300 billion ($127.8 million).

A similar trend can be noticed in the payment systems in Kenya, Tanzania and Rwanda, where EFT and other payment options are far greater in value than payments through mobile money. This shows that mobile money transactions still lag behind other established forms of payment, and that the micro transactions might still be a long way to go.

Key transformation

Even if one cannot yet pay for a cup of coffee by mobile money, the service has already transformed Uganda, and indeed East Africa, into a pseudo-cashless society if one considers that it enables the payment of utilities like water, electricity, Pay-TV and lately tuition fees.

“Cash will always have a place but the idea of cashless is more about the proportion. The focus would be on at least half of the transactions being cashless,” noted Jackie Namara Rukare, the Head of Marketing at Stanbic Bank.
Kopo Kopo’s Lyon agrees.

“When we frame the conversation, we focus more on creating a “less cash” society than a “cashless” society.”

The advantages when this happens can’t be overemphasised. George Wilson Ssonko, a researcher with Bank of Uganda, says it not only minimises the dangers associated with carrying cash, it also, for the Bank, reduces costs of printing new money and shredding old notes. 

So far, the sort of pseudo-cashless society mobile money has created caters, in large, to middle and high class people.

To be able to make low value payments like, say, a kilo of sugar, a bar of soap, or a pack of salt at one’s nearest kiosk, Stanbic’s Namara, like Dorman’s Jobanputra, believes people will have to have greater faith in mobile money as a form of payment for such goods in the same way they believe in cash.

To grow such faith, though, mobile money will have to evolve in speed, efficiency, and user friendly costs, all of which the service still scores badly on, including in Kenya, says Kariuki Gathitu, the team leader at his start-up Zege Technologies, which processes mobile payment transactions on demand as opposed to scheduled processing.

In a truly cashless society, these efficiencies will have to move in tandem with a healthy relationship between telecoms and financial institutions, which is still fraught with tension but is mutually beneficial to both.

“Banks must decide at what point and how much they want to interact with mobile money,” noted Stanbic’s Namara.

Her bank and MTN are developing linkages so that the telecom’s mobile money subscribers are able to access money through the bank’s ATMS. But Namara could neither deny nor confirm this work in progress other than to say once it’s ready the media will be the first to know. 

Airtel, however, has already beaten them to it. The telecom has established partnerships with a number of retail service providers and banks so its customers, on its revamped Airtel Money platform, can make purchases as well as access their bank accounts and withdraw money from their ATMS and all other inter-switch ATMs across the country.