Digital currency exploits will find going tough against M-Pesa

Tuesday, March 29th, 2022 07:15 | By
Central Bank of Kenya Governor Dr Patrick Njoroge. PHOTO/COURTESY

Central Bank of Kenya (CBK) will have to pump billions into investments in digital currency for it to actively compete with M-Pesa which has already set up an acceptable and functional infrastructure, experts warn.

Investment bankers EFG Hermes said despite massive investments by Safaricom, it is transaction fees that will play a key role in driving the uptake of the proposed Central Bank Digital Currency (CBDC).

Mwathi Kilonzo, Head of Equities Kenya at EFG Hermes told Business Hub that Safaricom got where it is due to the ability to innovate, adding that competition with new currencies will then be on how they will impact transaction fees.

He said the telco has over 250,000 investor agents who ensure the service is accessible to a large proportion of the population.

“If you have to base this, then you have to build a distribution platform equivalent to that to compete effectively,” Kilonzo said on the sidelines of an investor’s forum in Nairobi last week.

He noted that over time, the cost of transacting, especially peer-to-peer transfers, will come under a lot of pressure, whether it’s just to offer more value to customers or also as a result of new competitors such as Central Bank digital currencies.

“It’s very early days, obviously mostly it has been in the pilot stage, but so far it’s not been successful in most settings like China where it has not gained very significant traction over the one year it has been in operation,” Kilonzo added.

Central Bank has maintained that it is not in a hurry to roll out a digital currency, citing challenges coming with the CBDCs as the reason why the country is still consulting.

The regulator has been exploring ways to adopt digital currencies to increase financial inclusion among populations but the analysts maintain that M-Pesa still has a competitive advantage in terms of the captive market and the distribution aspect of it as well.

Digital currency uptake in the African countries has remained low and EFG Hermes projects this to continue.

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