WHO WILL BE THE WINNER IN CASHLESS PAYMENT FOR PUBLIC TRANSPORT SECTOR?
Telecoms and financial institutions are likely to be at the centre of the new transition to a cashless payments. Regulations by the Cabinet Secretary for Transport and Infrastructure will see all public service vehicles required to use an electronic payment system starting 1st July 2014. Equity Bank and Google BebaPay prepaid plastic card launched in 1Q13 has made some inroad in payments but no data is currently publicly available on the number of users and volumes. Safaricom has registered over 1,300 public transport vehicles and taxis in its Lipa na M-Pesa platform. Either way, cash payments are still the predominant mode of payment for public transport. There are currently over 22,000 public transport vehicles and around 1.5m journies daily in Kenya by our estimate implying a wide gap to achieve full penetration. Cash payments pose a number of challenges to authorities with tax compliance, corruption and money laundering ranking high in concerns. The Economic Survey 2013 values Kenya's road passenger transport business at KES 205 bn. The new rules on cashless payments will pit financial companies and telecoms which will bid to dominate the payments made in the sector. In China, China UnionPay and China Telecom, the largest players in their respective markets agreed to a comprehensive cooperation agreement with the aim to conducting an all-round cooperation in the financial payment and communication service areas, jointly expand the bankcard application in the communication and e-commerce fields and elevate the service level of the financial payment which is based on the communication network. Particularly, the partnership between the two big companies is expected to create a synergy in the mobile payment domain and co-promote the development of the mobile payment industry. We believe that this will be what will happen in Kenya where financial institutions will use the wide reach of telecommunications companies to reach the consumer. Whereas the urban public transport regulations now only require paper ticketing, we see an evolution where a personal smart chip card will eventually become a standard. (KNBS, Business Daily, Standard Investment Bank)