Plastic Money use up 12pc as Cashless Transactions Grow

 

Nairobi, Kenya: The value of transactions made through plastic cards rose by 12 per cent last year, driven by rising consumer preference for cashless transactions. New Central Bank of Kenya (CBK) data shows pre-paid, charge, credit, debit and automated teller machine (ATM) cards accounted for transactions worth Sh577.9 billion last year, up from Sh517.3 billion between January and December 2010.

Consumers used ATMs more than any other plastic card platform, having made transactions worth Sh140 billion. Commercial banks added 114 new ATM machines country wide, increasing the total to 2,205 machines as at the end of December, compared to 2010 when they added 264 machines.

“People who have cards are doing more transactions,” said Suprio Sengupta, a general manager at I&M Bank. Commercial banks, which have stepped up marketing of plastic money, opened 0.9 million deposit accounts in the third quarter of last year.

As more individuals got into the formal banking system, 2.5 million new cards were issued, 96 per cent of them being debit cards whose value of transactions went up by nine per cent to Sh432 billion.

The number of cards in circulation rose to 10.1 million, while the average number of transactions running through debit, credit and ATM cards rose to 9.6 million, 61,000 and 0.6 million per month.

In 2010, an average of 7.2 million, 57,000 and 0.5 million transactions per month were transacted through debit, credit and ATM cards respectively.

George Wainaina, the managing director of plastic payments infrastructure provider, Kenswitch, said new developments in the banking industry, such as agency banking, would bring more people under the formal payments environment and away from cash, increasing use of plastic money.

Incidents of fraud have also slowed the uptake of cash-less transactions in Kenya.

“The use of better technologies like chip cards will allow for better security and reduce fraud. With the increase in Internet users, expect more payments to go online to the Internet but the greatest challenge remains to ensure that transactions remain secure,” said Mr Wainaina.

Better Internet connectivity has also increased the speed of retail payments and made them more convenient as cardholders warm up to the wave and pay technology.

“These reflect a shift away from the cash-based transactions to plastic money transactions,” said the CBK in a report released last month which noted that the value of payments and transfers done using mobile phones had surpassed the value of payments done using cards.

The increase in the plastic money use last year comes on the backdrop of increased growth of mobile money — another alternative payment system whose growth is also quickly being adopted by consumers.

The Communications Commission of Kenya this month said that 83.9 per cent of the customers who signed up for mobile phone services between July and September last year also signed up for money transfer services.

There were 1.02 million new sign-ups for money services out of a total of 1.2 million new subscriptions in the third quarter of 2011, with deposits made through phone services going up from Sh48 billion between April and June last year to Sh56 billion— an increase of 5.9 per cent.