The growth of online shopping in Kenya has seen electronic payment emerge as the most suitable form of making payment for goods purchased online. This article looks into Electronic Payment System in Kenya.
Electronic Payment System in Kenya
Naturally, humans experience transitional changes in every facet; in the area of technology, it is the desire of every nation to be counted among the ‘developed.’
At the moment, Kenya is fast becoming a cashless society with its transactional system, as initiated by the de-monetization policy in the country. The government of Kenya has deemed it fit to include Kenya in the spectrum of being a wholly cashless society.
What’s a cashless society?
A cashless society simply refers to the withdrawal of status of a legal tender from coins or paper and limiting or removing their circulation from a country; making such a system completely electronic in the payment for goods and services. Such policy as initiated by the Kenyan government could likely make currency notes and coins a thing of the past.
To encourage the move towards a cashless system in Kenya, the government of Kenya has attached several benefits to this particular system, including giving good discounts and giveaways on online transactions.
But, to a typical small business owner, the questions that trail such innovative developments are:
Will the advent of online transactions provide the appropriate benefits for me in my business? Or will such digital transactions only give stress and additional charges to my business? Will all these benefits be good enough to counter the effect of identity theft and other challenges associated with a cashless system?
Below, we take a look at the benefits and challenges of an Electronic payment system, especially as it concerns the nation of Kenya.
Benefits of an Electronic Payment System in the Kenyan Economy
Good Discounts: Most shops in Kenya encourage users to make their payments online by providing exclusive discounts for those who make their payments through mobile wallets and credit cards. A clear example of this Jumia.co.ke which provides about ($5) discount for any product purchased via Credit Card on their mobile App.
Prevention of Theft: The use of integrated chip cards has gained much importance in Kenya and other countries of East Africa. This has drastically reduced incidences of credit or debit card fraud and helped built confidence in electronic payment systems among the people of Kenya.
If perhaps, your card is stolen, it is easy to block credit cards or mobile wallets. Besides all that, there are many more innovations springing up to make credit or debit cards biometric. That is, using the fingers or eyes for the identification of the user, this can be very difficult to impersonate, thereby making it the safest option.
Gives a Good Book-Keeping: A good business man or consumer feels more satisfaction knowing that they can keep track of their spending.
Electronic payment systems also help in filing your income tax returns so that if you are ever scrutinized, you’ll find it quite easy to explain your expenses. Besides helping with tax calculations, it can help when making budgets.
Making Good Budgets: One benefit of electronic payment systems is that all your transactions are documented.Written records from your daily transactions would help you keep tabs on your expenses, and this can help you formulate a feasible budget. Various applications and tools ‘ll help you analyze your daily, weekly, monthly and yearly expenses. Such controlled spending could lead to higher investing and the acquisition of durable assets for your business.
If the same amount of cash used in a year does not flow back into circulation and people continuously use mobile wallets and cards, this will reduce the general circulation of legal tenders (money and coins) in the country’s economy.
And it is generally known, money seen is money spent (consumers have the urge to spend when money is at hand); with debit and credit cards this can be reduced to a bare minimum.
Ease of Doing Business: This is the biggest incentive for going digital in transactions. You no longer need to carry a lot of cash around. That way, you’ll no longer be susceptible to criminals. Also, you get to avoid carrying around your ATM and queuing at withdrawal machines (that takes a lot of your time and effort).
It’s also a safer option, especially if you’re traveling abroad. It is equally useful in making quick transactions. In case of emergencies; you have absolute freedom to transact wherever and whenever you want. You don’t have to be physically present to make a transaction or be present at office hours before your transaction can be confirmed.
Challenges of an Electronic Payment System in the Kenyan Economy
Reckless Spending: This kind of payment system can make consumers or users become critical spenders rather than investors of money. It can increase the number of irrational consumers as they find it hard to control their spending, thus throwing their personal budgets and the overall economy into disarray (especially if there are a significant number of spenders in the economy).
Prone to Impersonation: The biggest risk of cashless transactions is identity theft. There would be an increase in online fraud and personal information hacking. This could be on the rise as more people are introduced to electronic payment systems.
Such a situation can be addressed and resolved only if the government of Kenya puts the appropriate mechanisms in place to prevent such outcomes. Otherwise, people will have no easy retreat or assistance, especially if money is lost online. And presently, there isn’t a stringent legal process to prevent this kind of fraud.
Loss of Gadgets, Payment Cards or Phone: When using electronic payment systems, your phone or integrated chip cards hold all your information. Losing any or all of them can be a big issue.
It not only makes you vulnerable to identity theft, but it also makes you financially hamstrung, such that you are unable to carry out transactions. This can be a setback if you’re at the village or abroad where there are inadequate banking infrastructure and other payment choices or options.
You’ll also have to continuously keep your phone in power because if the battery ever runs out and there’s no means of charging up immediately, one could get stranded for funds.
Due to its tangibility, the popularity of legal tenders (paper money and coins) are likely to linger for a while, especially among the aging or older generations. But, for future generations, it is going to be otherwise because there would be a far higher acceptance of credit and debit cards in making transactions.
Invariably, the acceptance by the growing generation will make the progression to a cashless society easier.