Mobile money transfer and transactions have greatly changed the way business is done in Kenya now. Point if sale payments, micro loans repayment and other forms of purchases are now easily done through mobile money accounts. These include, bill settlement and even rent. But as CGAP poses, What is keeping Kenya from becoming more “Cash Lite”? What would move more customers and merchants to more cash-lite payment behavior?

Cash payment options are also inextricably linked with cash flow management.  The move towards a cash-less economy must consider not just retail transactions, they say, but also the high frequency transactions consumers do amongst themselves.  To some extent, these transactions, often in the form of borrowing and repayment are already electronic, as customers report that they use mobile money “to repay debts” with other individuals and to pay bills.

[caption id="attachment_27016" align="alignnone" width="645"] How Customers access cash (Source: CGAP)[/caption]

Behavioural implications for the shift to cash-lite

Consumers were nearly equally divided on whether digitizing their financial lives would help them stick to a budget.  Some feel that they manage their money better by “seeing and touching what they have.”  Further research should focus on understanding the differences between these two mindsets; whether the digital buckets do indeed improve money management; and what it would take to introduce a “digitized” mindset.

Arguments also cut the other way, suggesting that electronic money is very liquid and therefore difficult to keep from spending.  Recent research suggests that many M-PESA users deem money stored in M-PESA too liquid for effective saving.   We also observe the sentiment that parting with electronic money is less real than departing with cash.  This is not unique to M-PESA, and is perhaps implied as well in certain exuberant electronic money usage patterns in developed countries.

System (un)Reliability

Retail merchants lose out in two ways of cash transactions as they recognize safety issues of having too much cash, yet bemoan the effort and time it takes them to bank cash.  However, they also are not yet ready to encourage cash-lite payments, they are concerned about payment system reliability, both in their transactions with customers and with suppliers.  Several retail merchants said they do not encourage their customers to use mobile money out of fears that customers will reverse the payment after the transaction.

Inventory is restocked frequently—for nearly one-third of merchants, restocking happens every day.  About a quarter restock once a month.  Payment to suppliers for stock would then be a significant place to start thinking about promoting cash less transactions, but retail merchants report that their suppliers most often want to be paid in cash (and usually do not offer non-cash payment options).  Their suppliers are concerned about the reliability of the M-PESA system due to periodic system outages.  Customers and retail merchants report that M-PESA’s system is regularly (at least once a week) down for hours at a time, and sometimes remains down for a few consecutive days.

Read: The Mobile Money Apocalpse, what will happen?

Kenya, despite being the mobile money capital of the developing world, is still far from a cashless economy, they argue.   In order to bring Kenya into a more digitized environment, the cost of transactions need to decline, services need to be more reliable and the right messaging needs to herald the possibilities.   The entry points, motivations and pathways to clear these blockages are there, waiting for the right entrepreneurial mind to take them into the next frontier.