M-Pesa faces roadblock in cashless fare plan

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Matatu Owners Association boss Simon Kimutai (left) displays a gadget that issues receipts.

In Summary

  • Regulator demands receipts be issued to commuters after making payments.
  • This is likely to give rival firms whose systems can generate physical receipts a head start in the race for a piece of the more than Sh2 billion annual revenues that will be generated for processing fare payments for PSV operators.
  • Safaricom had in December registered more than 1,300 matatus and taxis on its Lipa na M-Pesa platform ahead of the July 1 deadline for paying fare using cash.

Safaricom’s move to use M-Pesa to offer cashless fare payment faces a hurdle for failure to issue physical receipts.

Regulations guiding the rollout of the cashless fare system demand that commuters be issued with receipts after using their prepaid cards.

Safaricom had in December registered more than 1,300 matatus and taxis on its Lipa na M-Pesa platform ahead of the July 1 deadline for paying fare using cash.

“Our regulations demand commuters to be provided with physical receipts and M-Pesa currently offers electronic receipts,” Francis Meja, the director-general of the National Transport and Safety Authority (NTSA), told the Business Daily in an interview.

This hiccup is likely to give rival firms whose systems can generate physical receipts a head start in the race for a piece of the more than Sh2 billion annual revenues that will be generated for processing fare payments for PSV operators.

Safaricom on Friday said it was upgrading the Lipa na M-Pesa platform to allow it send a message to a terminal that will produce a receipt.

“We are enhancing our Lipa na M-Pesa service to ensure compliance with the new regulations especially for short distance travel since customers paying for long distance travel on our platform already have access to physical receipts,” Nzioka Waita, Safaricom’s corporate affairs director, said in an e-mail response.

Equity Bank has launched a cashless payment product dubbed Beba Pay in partnership with Google while Hong Kong firm TaptoPay has partnered with KCB Group and Mastercard with their pre-paid plastic called Abiria Card.

Beba Pay and TaptoPay generate receipts after each transaction. However, all the operators will need approval from the Central Bank of Kenya.

Safaricom launched Lipa na M-Pesa to enable cashless merchant payments and further drive its quest to reduce reliance on the voice business, which now accounts for about 59.6 per cent of its sales.

M-Pesa revenues stood at Sh26.5 billion in the year to June, up from Sh21.8 billion last year and Sh11.7 billion in 2011. The mobile phone operator has ambitions to turn M-Pesa into Kenya’s primary payment platform.

But its popularity has strained the platform on which the service now runs, causing occasional shutdowns and requiring routine upgrades to its capacity, now at 250 transactions per second.

China’s Huawei has been building a second-generation platform to increase capacity to 600 transactions a second. Safaricom is betting on its subscriber base for a larger share of the cashless fare market.

“It is important to point out that M-Pesa with its 19 million plus customers has been a key proponent of the cash lite agenda in Kenya and it will continue to be a major player in this space,” said Mr Waita.

The cashless fare system is expected to curb erratic increases in fares and enable Kenya Revenue Authority collect taxes from the industry.

The country has more than 22,000 licensed PSV operators, according to the traffic licensing board. Official data shows the public transport industry generated Sh218 billion in revenues last year, up from Sh205 billion in 2012 and Sh155 billion in 2009.

Bus owners, on the other hand, will be able to track earnings online through a dashboard, making it easier to analyse their businesses as well as weed out cartels and bribery.

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