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The Central Bank of Kenya is looking to tighten its regulatory reins over digital payments services like mobile money. It has, therefore, released a draft National Payments Strategy for public comments.
Kenya’s mobile money space is, perhaps, one of the biggest success stories across the globe. Since millions move on a daily basis in Kenya, the regulator claims it wants to guard against fraud.
The country’s Treasury Cabinet Secretary is quoted as saying digital payments came with increased risk of fraud and cybercrime and could lead to losses in potential government revenue, customer deposits, and a dip in market confidence.
Supported by some robust regulations and the huge success of Safaricom’s M-Pesa, digital payments in Kenya has been growing in leaps and bounds. The threat of COVID-19 and the waiver on mobile money fees only seems to have increased mobile money transactions.
Between January and November 2019, Kenyans made up to $47 billion worth of mobile money transactions. This feat is all the more impressive considering its population of 56 million.
Safaricom’s M-Pesa controls 98% of Kenya’s mobile money market. Airtel Money and other mobile money providers account for just 1.2%.
Regulation and growth: With such a deepened digital payments ecosystem, a fair question would be, what kind of regulations fostered such immense growth? Well, there have been several.
From the Kenya Electronic Payment and Settlement System (KEPSS), to the NPS ACT of 2011, Kenya has quite a number of regulations that guard its mobile payments space. For the most part, we could deem these regulations successful.
The government wants tighter control over digital payments, giving it the ability to influence factors such as pricing and tariff regulations. In a nutshell, it believes these services should be cheaper and more affordable for customers.
It is also tightening its telecom influence and is trying to push for more competition in the space.
This move seems like too much regulatory oversight, considering the space’s recent success. Tighter control on pricing means Kenya’s apex bank can determine how much these companies charge for their services.
Safaricom might have to watch its back, considering that the government already wants M-Pesa split from the Safaricom brand, all in a bid to improve competition. No matter what happens, this space is worth keeping an eye on.
This presents yet another government move to control the country’s financial sector. In other parts of the globe, it can get a lot tougher and more ambitious.
Even India is in the process of passing a Bill to ban bitcoin and other private cryptocurrencies, the second time in two years.
Following the ban, the country wants to introduce a framework for an official digital currency, possibly a digital version of the fiat currency, that will be issued by the Reserve Bank of India (RBI). This is supposed to give the impression that the country is not planning to stifle but promote the technology and the uses. Well…
It appears the RBI has been a strong critic of cryptocurrency since it started gaining traction in India. But with this move, is it not defeating the idea of cryptocurrencies given the technology it is built on, blockchain? I mean, with RBI involved, you can’t even keep transactions anonymous much less ascertain of its volatility.
In 2018, when the RBI tried to ban banks and financial institutions from accepting cryptos because it knew it would stifle transactions, concerned stakeholders dragged them to court and won, making crypto attain its current legal status in the country. Now, here comes the second blow, this time coming from the table of the Ministry of Finance instead of the central bank.
But, then, there’s the constant call to regulate instead of a ban. How hard is it to regulate these currencies compared to issuing an outright ban? Anyway, if this bill falls through, India is on its way to returning to the status quo.
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