According to recent reports telecommunications giant; Safaricom, is considering reducing the transaction fees for its M-Pesa mobile money service. The decision is in a bid to maintain the present high rates of M-Pesa use since the removal of transaction fees for sums of 1,000 Kenyan Shillings and below.
According to the Chief Executive Officer of Safaricom; Peter Ndegwa, the telecommunications company might begin to offer lower transaction fees as an incentive for customers who began using its mobile money service; M-Pesa due to the payment guidelines brought on as a result of the ongoing Coronavirus pandemic and those who increased their transactions due to said payment guidelines introduced back in March 2020, in an effort to reduce the spread of the virus.
On the 16th of March 2020 the Central Bank of Kenya (CBK) announced the removal of M-Pesa charges for all transactions of 1,000 Kenyan Shillings and below. The decision was further extended to last until the 31st of December 2020 and also led to bank to mobile phone transactions becoming free.
As stated earlier the payment guidelines or measures were introduced to prevent the spread of the Coronavirus, and boost the use of cashless transactions. The measures led to an increase in M-Pesa transactions (a 32.9 percent increase), to 9.04 trillion Kenyan Shillings. It also added 3.2 million one month active customers to its service.
That usage and customer growth is what has led to Safaricom considering lower transaction costs.
Speaking on the lower transaction costs being considered the company’s Chief Executive Officer (CEO); Peter Ndegwa said, “We are considering but we would want to see how consumers respond to volumes before we make a significant judgment on that.”
He added that, “It is something we are looking at and we intend to reduce our transaction costs over time. How quickly we do that is something we want to judge but certainly we haven’t made a decision yet at this stage.”
In the six (6) months that ended in September 2020, the volumes of M-Pesa transactions grew by 14.9 percent to 5.12 billion Kenyan Shillings.
On the flip side, it is Safaricom’s belief that the removal of M-Pesa transaction costs had led to it losing 9 billion Kenyan Shillings in the six (6) month period that ended in September 2020. The same six (6) month period also saw the company experience a 6 percent drop (33.07 billion Kenyan Shillings) in net profit for the first time in 9 years.
Safaricom’s estimated revenue drop of 9 billion Kenyan Shillings, is 25 percent of the 35.88 billion Kenyan Shillings it made from its mobile money service; M-Pesa in the six (6) period that ended in September. The 35.88 billion Kenyan Shillings is 7.2 percent of its total revenue for the same six (6) period.
Telecommunications companies like Safaricom and Banks as well, are worried that the Central Bank of Kenya (CBK) might extend the free transactions due to the ongoing Coronavirus pandemic.
Said establishments are pushing for the Central Bank of Kenya (CBK) to involve them if it decided to extend the period for free transactions beyond the current period of 31st of December 2020.
Telecommunications giant; Safaricom usually charges its users anything from 10 Kenyan Shillings to 28 Kenyans Shillings for withdrawals from 50 Kenyan Shillings to 1,000 Kenyan Shillings.
Withdrawal fees for amounts of 2,500 Kenyan Shillings to up to 150,000 Kenyan Shillings, start from 50 Kenyan Shillings to 300 Kenyan Shillings.
Safaricom has made it known that it is fully aware of how its consumers will respond when the free transaction costs, are removed.
As at the time of putting this article together, the Republic of Kenya had 79,322 confirmed Coronavirus cases up from the 49,721 recorded cases on the 25th of October 2020. This shows that the cases for the Coronavirus pandemic have increased by 59.5 percent. Coronavirus fatalities also increased by 57.1 percent to 1,417 from 902.
Public health officials have issued warning that a second wave of the Coronavirus like what is currently happening in Europe where a number of countries have established fresh lockdowns to curb the spread, might occur in Kenya as well.
This is the second time telecommunications giant; Safaricom, will be talking about dropping the transaction costs for its really popular M-Pesa service which has 26.79 million active users.
In 2019 Safaricom revealed that the 2.15 billion Kenyan Shillings acquisition of M-Pesa via a joint venture with Vodacom, would give the company full and absolute control of the brand, help it reduce fees and also save billions of Kenyan Shillings that would have otherwise gone towards the payment of royalties.
Safaricom in the past paid 2 percent of its yearly revenue from M-Pesa revenue, to Vodafone. Vodacom on the other hand, has been paying 5 percent in IP (Intellectual Property) fees.
Safaricom’s Chief Executive Officer (CEO); Peter Ndegwa also revealed that the telecommunications company might consider separating M-Pesa from its main business, as it intends to evolve more into being a financial service provider as well. In his words, “In terms of whether we intend to spin off M-Pesa as a separate business, from a structural perspective, that is something we will continue to review as Safaricom evolves so that we have an optimal corporate structure.”
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