The future is said to be digital or cashless. So can one live and transact without using paper currency? Nairobi is as good a place as any to try in 2016. And while it’s largely doable, but not quite entirely possible, to get around using a mix of cards (credit/debit) and mobile money (i.e. M-Pesa), it also brings up a lot of interesting findings.
- Cash is still king: Cash gives you the flexibility to buy for anything, any time from any vendors. It is the fastest way to pay, and there are still places that only take cash e.g. landlords, matatus, and a Chinese restaurant – no card or no M-Pesa accepted.
- Cards are easier to pay with than M-Pesa: By having chip & PIN, there’s no need to even show an ID card. And it takes 4 presses to pay for a transaction while it takes about 25 presses to do an M-Pesa transaction, and even more if you have to draw cash from your phone from another bank account. M-Pesa is not convenient if you’re in a rush, and with so many menus and buttons to press, it’s also easier to make mistakes and send money to the wrong business account. You have to be active and pay attention and also confirm with a staff member, showing them your phone screen, before you commit. Even then, they look at the message generated on your phone and trust that it’s genuine, as they often don’t have access to the business phone where the message confirmation is sent.
- M-Pesa needs a reboot: It needs NFC up to a limit – say for purchases of less than Kshs 1,000 ($10) – so you just tap and go. Lipa Na M-Pesa signs are all over, but it some shop staff are not aware of if the payment is to be processed through ‘Paybill’ or ‘Buy Goods’ (two dedicated business payment options inside a phone M-Pesa menu), and some even give the owners M-Pesa number, which makes for a costlier transaction for the business.
- Cards Usage is limited: They are generally not accepted for purchases of less than Kshs 1,000 ($10). At some petrol stations, they are not accepted at night, as a fraud prevention precaution.
- Paying by card or phone builds business relationships: I got to pay for a week’s worth of newspapers, by M-Pesa. The newspaper vendor gave me free newspapers and I sent him M-Pesa midweek. So in the first part of the week, he was giving me credit, and in the second part, he owed me newspapers. I now know his full name after buying a newspaper from him for 3 years, and only knowing one of his names. I also didn’t know that Java restaurants take M-Pesa, but I’ve been paying for coffee by phone and got pinged by SMS to participate in their customer service surveys – with a possible invitation to coffee tasting event sometime in the future.
- Paying by card or phone sucks liquidity from an economy: The transport is very challenging, and I think the celebrated launch of Equity Bank and Google’s Beba Pay failed because of other issues. Digital payments meant that owners jumped to the first in the queue in getting cash, from where they currently are – last! The fares paid by passengers during the day are shared between drivers, conductors, route managers, and policemen, and going digital takes away this easy daily cash; DigItal payments mean formality and more tax collection for the government, but these will be an extra burden for employees.
- You become less generous when you go cashless: I give tips several times a day, and that is just not possible without cash. When you pay cash, you can leave a portion of your change as a tip that you hand to the waiter at Java, This is not just for restaurant waiters, but also for people who check your tyre pressure at the petrol station and watchmen who guard your car at night when you park at a public places. Also, Kenya doesn’t have a tipping culture or mechanism like the USA does, and when you can direct a portion of your card payment to a tip for the waiter.
- With cards you go into debt, but with M-Pesa, you run out of ‘cash’ quicker: Which is better? Note, if you run out of M-Pesa. You have a few options. One is to link your bank account to M-Pesa so you can load up your phone. Another option is to take a loan from M-Shwari. Approval takes a few minutes and you can borrow almost $150 (Kshs 15,000) that you have to pay back in 30 days with a 7.5% fee. Besides the costs, you can only take one loan at a time before you have to pay it back. So your temptation is to take more than you need, just in case you have another emergency and won’t be able to draw that
- There’s no real difference between card and mobile: In fact, they are merging. Uber has shown this – the phone navigates, and is preloaded with the card, which pays.
These findings are from about a week and a half I spent, going cashless, and trying not to use any cash. This was for every day buys like meals, parking, groceries, utilities, and newspapers.
This was inspired by a conversation with Lucy Mbabazi who’s a card payment proponent and also by a previous experiment done at KopoKopo (who had an intern try to go 60 days using M-Pesa, in lieu of cash – but I can’t find a link to their post).