Central Bank Of Kenya Set To Take On A Bigger Role On Digital Payment Systems

According to recent reports the Central Bank of Kenya (CBK) is gearing up to toughen its overseeing of mobile money in Kenya. This is coming at a time when the Kenyan government is also moving to further protect the billions of Kenyan Shillings that are paid through the still expanding digital service platforms.
The Cabinet Secretary; Ukur Yatani made it known that the growth of numerous State services on digital platforms, has come with an increase in risks of cybercrime or fraud which could also potentially result in a sizeable loss of government revenue.
In the words of the Cabinet Secretary; Ukur Yatani via his draft 2021 Budget Policy Statement (BPS), “Disruption of mobile services due to infrastructural challenges or cybercrime and fraud could lead to significant loss of potential Government revenue, customer deposits and market confidence. The Government might therefore, be under pressure to compensate losses.”
He added that, “To mitigate against such threats, CBK is in the process of formulating a National Payments Strategy to address emerging risks and guide the payments ecosystem in Kenya.”
The Kenyan government right now carries out cash based services on digital platforms including the Integrated Payroll and Personnel Database (IPPD), the Integrated Financial Management Information System (IFMIS), the Government Human Resource Information System (GHRIS), the Kenya Revenue Authority’s online tax filing system; i-Tax as well as a number of other e-citizen services including the  Huduma number.
A review of the draft National Payments Strategy (NPS) revealed that the banking regulator is setting things in motion to create a tougher grip on the supervision of e-payment services.
The banking regulator made it known that, “Central banks have always been about money – how money is created, how money is held, how money is exchanged and how money or monetary value is moved.”
It added that it would be taking an important role in improving the safety, security, as well as the stability of the various payment systems.
The Central Bank of Kenya (CBK) revealed that it will be making sure that the Payment Service Providers (PSPs) are fully compliant with the tariff regulations and pricing regulations.
The Central Bank of Kenya (CBK) via its statement said, “The CBK is determined to ensure that pricing practices are reflective of CBK’s overall stance on customer-centricity, affordability and transparency, and is already working with the industry to make this outcome a reality.”
The Central Bank of Kenya (CBK) added that, “Further, the CBK will put particular emphasis on ensuring a culture of compliance cuts across all aspects of payments services, anchored on a strengthened regulatory framework and enhanced oversight.”
The statistics by the Central Bank of Kenya (CBK) revealed that individuals in Kenya transacted about 4.6 Trillion Kenyan Shillings via their mobile phones between January 2020 and November 2020. This indicated the steady growing important of the digital marketplace.
Aside from the risk of theft of funds on the e-payment platforms the increase in deals and or transactions in the digital marketplace, has grabbed the attention of the Kenya Revenue Authority (KRA). The Kenya Revenue Authority (KRA) has now began to focus on businesses that use the internet to sell and market their goods and services.
Mobile money providers which include Telkom’s TKash, Airtel’s Airtel Money, and Safaricom’s M-Pesa were able to transact more than 4 Trillion Kenyan Shillings in a year.
Telecommunications giant; Safaricom which is a Market Leader currently controls 98.8 percent of customers. This is according to the Communication Authority of Kenya (CA). It also revealed that Airtel Money alongside other service providers control a 1.2 percent share of the market.
The Central Bank of Kenya (CBK) has in recent times increased its role over telecommunications companies and now regulates the charges or fees for money transfers. It is also moving to encourage more competition between the market leader; Safaricom and competitors like Telkom and Airtel.
In 2020 the Governor of the Central Bank of Kenya (CBK); Patrick Njoroge instructed all mobile money service providers in Kenya to remove the fees for transactions that were less than 1,000 Kenyan Shillings as a part of the Coronavirus Relief Programme.
The directive which was at first meant to only be in effect for 3 months from March of 2020 was subsequently extended to go on for the rest of the year 2020. The extension was done without consulting the telecommunications firms and went on to cost Safaricom 6.08 Billion Kenyan Shillings and led to a 14.5 percent decline in Safaricom’s M-Pesa revenue in the period in question.
The Central Bank of Kenya (CBK) put pressure on Safaricom at the end of the moratorium to drop the fees for low amount M-Pesa transactions by as much as 45 percent.
The Central Bank of Kenya (CBK) is in addition, encouraging the seamless transfer of funds between Safaricom and Airtel including Lipa na M-Pesa in a move to foster competition and also reduce the transaction costs.
The Central Bank of Kenya (CBK) stated that interoperability in mobile transactions which was first implemented in 2018 for the sending of money between Airtel clients and M-Pesa clients, has not performed well enough to effectively enforce seamless transactions between both telecommunications companies due to the fact that it does not also include agents and merchants.
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