Safaricom and commercial banks are seeking a deal with the Central Bank of Kenya (CBK) to avoid a unilateral regulatory extension of free M-Pesa and mobile banking transactions amid the spike in Covid-19 cases in the country.
The telecommunications firm and the banks are pushing for the CBK to involve them should the regulator decide to extend the tenure of free transactions beyond end of December.
The CBK announced the removal of charges on M-Pesa transactions of up to Sh1,000 from March 16 until June 30, a period when bank-to-mobile phone transactions would also be free.
The regulator later made a unilateral decision to extend the relief measures until December 31, drawing protests from Safaricom and banks who have lost billions of shillings on the free service.
The relief measures on mobile phone payments were introduced to encourage cashless payments on mobile phones as part of efforts to contain the spread of the coronavirus.
Safaricom’s chief executive, Peter Ndegwa, said the telco was in advanced talks with the CBK over the resumption charges on low-value M-Pesa transactions.
“We are not ready at this stage to announce when the free cash transfers end as we are still in engagements with the CBK,” said Mr Ndegwa.
Safaricom reckons that the free M-Pesa transfer cost it Sh9 billion in the six months to June, which saw the firm report a six percent drop in net profit to Sh33.07 billion—the first fall in nine years.
At Sh9 billion, the estimated revenue loss is equivalent to 25 percent of the Sh35.88 billion Safaricom made from the M-Pesa platform in the six months to September and 7.2 percent of total revenue in the same period.
Banks and Safaricom are fretful that CBK could extend the free service amid the spike in Covid-19 cases and fatalities.
Kenya has reported 66,723 confirmed cases of the Covid-19 from 41,546 on October 12, reflecting a 60.6 percent growth. Fatalities have increased to 1,203 from 777 a month ago, representing a 54.83 percent jump.
Local health officials have been warning of a second wave of the pandemic akin to what is happening in Europe where several countries have reinstated lockdowns or partial lockdowns to try to stem infections.
KCB Group CEO Joshua Oigara said the bank was in talks with the CBK to impose a cap on the free transfers if the reliefs were extended beyond December.
Presently, banks do not charge customers for moving money between their mobile wallets and bank accounts irrespective of the amount.
“We are having engagements with the CBK at the moment. We are optimistic that maybe some transactions will go back to where we were before and maybe others continue under the current waiver,” said Mr Oigara.
“We are not naïve that maybe some transactions will not finally go back to where they were before March 2020. The timings will also depend on how the pandemic evolves.”
KCB, which reported a 43.1 percent drop in net profits for the nine months to September, says that it has so far lost Sh1.5 billion from the free service.
Before the financial relief measures were introduced, most bank-to-M-Pesa transactions attracted fees ranging from Sh30 to Sh197.
Soon after the CBK announced the extension of the relief measures to the end of the year, Safaricom lobbied the regulator to make changes that would limit the revenue loss.
This came after the telco noticed that customers were splitting high-value M-Pesa transfers into multiple transactions to avoid paying any fees.
“What has happened a lot in those transactions below Sh1,000 is that people are starting to split transactions. If they want to send Sh60,000 they split it into 60 transactions. And believe it or not, people actually do that,” Safaricom chairman Michael Joseph said July in a conference call with investors in his previous role as acting chief executive.