Virtual shilling welcome
What you need to know:
- Mobile cash services in Kenya are unaffordable to many poor households and CBDC could offer the much-needed reprieve.
- Although the CBDC is likely to eat into the lunch of mobile money payment service providers, it offers them an opportunity to innovate further.
The planned digital shilling by the Central Bank of Kenya (CBK) bodes well for improving financial inclusion in this country. The apex bank says its version of the Central Bank Digital Currency (CBDC) will be focused on affordable mobile phone financial services.
This makes economic sense as many Kenyans cannot afford the high transaction charges that deny them a chance to enjoy the gains of the convenience of technology. For instance, it costs Sh10-300 to withdrawal between Sh50 and Sh150,000 on Safaricom’s M-Pesa mobile money service and Sh6-105 to transfer similar amounts to registered users on the platform.
On Airtel Money, withdrawal charges range from Sh9 to Sh270 for amounts between Sh50 and Sh150,000 while transfer charges to other networks are Sh6-105 for the same amount.
Telkom’s T-Kash platform charges Sh10 to Sh295 for withdrawals of Sh50 to Sh150,000 and Sh5 and Sh100 to send a similar amount of money to one’s fellow registered users.
Mobile cash services in Kenya are unaffordable to many poor households and CBDC could offer the much-needed reprieve.
A CBK-backed digital shilling carries a lot of benefits — such as elimination of needless third-party intermediaries who drive up transaction costs. Studies show that application of retail CBDC to mobile money can foster greater interoperability, improve payment efficiency and lower payment risks.
Although the CBDC is likely to eat into the lunch of mobile money payment service providers, it offers them an opportunity to innovate further. Other than just cling onto cash transfer and payment revenues, they can open other earning options through concepts such as advertising.
The virtual currency is, hence, welcome.
