The Kenyan government through the transport and infrastructure ministry introduced new rules requiring public service vehicles (PSVs) to implement and operate cashless payment systems by July 2014. PSVs would install electronic payment devices and passengers would pay for their fares using smart cards (Source).

A cashless payment system for PSVs in Kenya has some benefits.

1. PSV owners at the moment have no way of knowing how much money the drivers and conductors, who operate their vehicles, collect in a day as they receive the money directly from passengers. Because of this, the owners just ask for a flat amount with the rest being shared between the PSV staff. Implementation of the cashless system would mean that the full passengers fares would go directly to the owners.

2. Currently, Kenya’s public transportation industry is chaotic at best. The government and the Matatu Owners Association (MOA) have tried to bring some sort of order in the industry without much success. With the cash from the industry going through a formal banking system, the government can set up regulations to force PSV owners to formalize their operations. This will enable the government to collect more taxes from the industry through income tax from both owners and staff (PAYE).

3. Passengers are constantly overcharged especially during peak hours, when there’s a lot of traffic and when it rains. The PSV staff usually do this without the knowledge of the owners and they pocket the excess cash. A cashless payment system would kill this because passengers would pay normal fare regardless of the time of day or prevailing weather conditions.

4. Getting change in PSVs is sometimes a problem. Some PSV passengers have also complained that conductors purposely forget to give them their change which forces commuters to always have exact change. A cashless payment system would remove this problem from the equation.

The cashless public payment systems are clearly beneficial especially to owners and passengers. But will removing the cash element for a fully cashless payment system work? I don’t think so. Here’s why.

1. The Legal tender angle

Legal tender is defined as ‘coins or banknotes that must be accepted if offered in payment of a debt’. So by this definition, the cashless only payment system cannot be implemented because it would mean denying Kenyans their right to settles their debts through cash.

2. Enforcement

Enforcement to ensure that the over 20,000 PSVs in Kenya have implemented the cashless payment system and are using it would be a daunting task for the government.

3. Adoption by PSV staff

When the Beba Card , the first transport payment card in Kenya, was first launched in 2012 the major impediment to its success was the PSV staff. They resisted its implementation because it threatened their revenue stream. Beba card was later relaunched as Beba Pay but this problem still remains.

With the implementation of the cashless system, the same issue might crop up where the PSV staff only use it in instances where they can’t avoid and then resort to cash the rest of the time.

4. Interoperability of the various payment systems

In a situation where different PSVs operate different payment systems, it will create a problem for passengers who use different PSVs when moving from one place to another. This will force them to have different smart cards from the various vendors which is quite a bother.

Way forward

In my opinion, the cashless only public transport payment system is not workable. However, a hybrid system where the cashless system is encouraged and incetivized while still allowing cash to be used would work.

 - By James Wamathai
- Twitter Handle: @uqweli