Kenya's CBK to Cap Mobile Money Transfer Fees, Reshaping M-Pesa's Dominance
In a significant shift, the Central Bank of Kenya (CBK) is set to cap mobile money transfer fees, potentially reshaping the market dominated by Safaricom's M-Pesa. This move, expected to reduce average transaction costs, could transform the playing field for competitors like Airtel and Telkom Kenya.
The CBK's decision is a declaration that access to digital financial services is a right, not a luxury. It aims to prevent financial inclusion stagnation and avoid a scenario where Safaricom, with its near monopoly on mobile money transfers, controls multiple financial services. Currently, Safaricom generates nearly Sh63 billion annually from person-to-person transfers.
The fee cap, set to reduce costs from Sh23 to Sh10 by 2028, will likely face scrutiny in Parliament. MPs are expected to embrace the cap as a populist measure but may face questions about M-Pesa's status as a private monopoly and the extent to which fee caps should apply to other services. Meanwhile, Safaricom is likely to diversify into lending and savings, push ecosystem lock-in through bundles, and lobby for 'tiered innovation zones' to mitigate the impact of the cap.
The fee cap could trigger higher transaction volumes, making digital payments habitual and bringing Kenya closer to India's UPI-style model. However, it could also lead operators to find new revenue streams or extract more user data. Airtel and fintechs may face challenges in differentiating themselves once price is no longer a competitive advantage, potentially exposing their weaknesses.
The CBK's mobile money fee cap aims to reassert sovereignty over Kenya's digital financial landscape and promote fairness. The success of this cap will depend on striking the right balance between affordability and incentivizing innovation. As the cap takes effect, Parliament, operators, and consumers will all play crucial roles in shaping Kenya's digital financial future.
