Kenya is a prime example of how far cashless economies need to go, especially for tourism. The country's successes will need to be measured against the challenges.
The Covid-19 pandemic reinforced the value of digital payments in keeping economies running, particularly the tourism sector. Since the beginning of the crisis, many governments strongly discouraged the use of cash, favoring digital transactions instead.
Apart from minimizing the risk of contact during the pandemic, the system can enhance a destination’s tourism experience as well as offer competitive advantages when it comes to marketing the destinations, they argued.
But Kenya illustrates some of the challenges. Even while the country is ahead of the pack when it comes to digital payments in Africa, the acceptance of this mode of payment in the tourism sector is still low. Only 15 percent of Kenyans use digital payments as a means of transaction, according to Visa Kenya.
Even the use of M-PESA, which is one of the popular digital modes of transactions, is also low, accounting for just 13 percent of transactions while the other modes of cashless transactions like Visa take 2 percent.
Potential fraud is a huge deterrent for many tourists.
John Musau, the general manager of Tamarind Tree Hotel in Nairobi, shifted to a cashless system during the pandemic. The system has been good and the hotel has benefited because it minimizes fraud with the entire money heading straight to the bank or M-PESA till.
Yet one of the greatest fears that Masau observes with customers is those of identity theft with a cashless system.
“The recent incidences of online fraud and the risk of hacking have made people prefer using cash instead of the digital systems like Visa cards. This is despite the fact that most people are well informed on digital transaction use” he said.
The second reason why other enlightened customers would decline using the digital payment methods is the fact that they overspend when they have it.
“While this system means convenience and cash at hand for most of the clients, it also means impulse buying for some who are not disciplined with their finances. To curb this habit, some may opt not to use the digital cash system and this means slow uptake in the end,” said Masau.
Still, he is hopeful that the positives will eventually outweigh the negatives.
“We are in a better position to control our cash since it’s banked directly. This avoids the situation where cashiers have to physically take money to bank and also reduces the hire of cash in transit vehicles to transport our cash to the bank,” he observed.
Musau added that while switching to digital means accessing clients who no longer carry cash, there are still a lot more who prefer using cash.
“The only disadvantage of switching to this system is that you might lose that traditional customer who carries cash to pay bills. Some prefer it because there are no digital glitches and also it helps them plan on their money,” Musau said.
Mike Mwangi, the general manager at Nairobi’s Tribe Hotel, also has the same sentiments regarding the cashless system. One of their biggest benefits was sanitation during the pandemic.
“The cashless system offers flexibility to our clients. It minimizes contact and during the pandemic, it was vital in ensuring hygiene,” he said.
The Kenyan parks too, have not been left behind when it comes to transforming to the cashless system.
Parks officials say the cashless system has ensured that the customers are served in less than five minutes which adheres to their charter. This consequently increases customer satisfaction thanks to efficient services. It also minimizes long queues ensuring that visitors access the facilities within the shortest time possible and it’s also convenient for international tourists when it comes to Visa or Mastercard use.
Other players who have announced the shift to the cashless system include Kenya’s national carrier, Kenya Airways, which has extended the system to other airports like the Moi International Airport in Mombasa and the Kisumu International Airport. The airline sought to introduce this system as a means of eliminating person to person contact during the pandemic thus increasing their safety.
“The implementation of a cashless system helps to support the customer shift and preference to cashless transaction and will ease cash collection and reconciliation issues at the airports ensuring efficient services to customers,” said Julius Thairu, the chief commercial and customer experience officer for Kenya Airways.
Operating in more than 200 countries, Visa is the global payment leader with more than 55 million merchant locations in the world. There are also 3.5 billion cards being used by its clients out there globally. But even with these numbers, it is still in search of more partners especially in the tourism industry to open up the country. Historically, Visa Kenya dealt with banks when it comes to accessing its clients. But they have made a partnership with Safaricom’s M-PESA to create the M-PESA GlobalPay VISA Virtual card which is tailored to meet the increasing needs of Kenyans using global apps and shopping websites for entertainment, retail, business and even when travelling abroad.
“Visa is committed to expanding the payments ecosystem across Africa by opening up the global marketplace for every single consumer. This partnership with Safaricom is an important step in helping to achieve this,” says Corrine Mbiaketcha, vice president and general manager for East Africa at Visa.
The virtual card will enable 30 million M-PESA users to make cashless payments at Visa’s global network of merchants. Users can activate the virtual card through the M-PESA mobile app or by USSD. Previously, M-PESA users could only make mobile money payments within M-PESA’s network of nearly 400,000 merchants.
With the introduction of M-PESA in 2007, Kenya has become a global pioneer in mobile payments that has changed the dynamics of its economy. The M-PESA technology has since been exported to more than half a dozen countries in Africa, Asia and Eastern Europe and has become a case study at business schools across the world, and mobile money is now the predominant mode of payment for small-scale transactions in Kenya. Most advanced economies are yet to catch up with Kenya on mobile money usage.
“We are thrilled to collaborate with (mobile network operator) Safaricom, especially in this era where we are seeing an accelerated switch from traditional cash towards digital spending. By leveraging our vast global network and experience as well as Safaricom’s local know-how and large subscriber base, we are charting a new path for digital payments. We remain optimistic that this partnership will go a long way in opening the global e-commerce market to Kenya’s significant unbanked and under banked population,” said Mbiaketcha.
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