Digitisation, business and payments in the time of COVID

September 30th, 2021

The Central Bank of Kenya recently released its Kenya National Payment System Vision and Strategy, which outlines the role of digital payments in Kenya’s journey towards becoming a cash-lite economy. Whilst the COVID-19 pandemic and the resulting economic slowdown have had an undeniably devastating impact on the country, one area that has thrived is digital payments. In this blog we will explore the use of mobile money by businesses, the impact COVID-19 has had and the lessons that can be learned. We’ll first look at the impact on retail mobile payments transfers, when mobile money is used to pay a business account for goods or services and then look at Business to Business (B2B) transfers and mobile money and bank services interact for business users.


Increasing the availability and usage of digital merchant payments will be a key driver in Kenya’s journey towards becoming a cash-lite economy.

Whilst public data isn’t available for all service providers, data from Safaricom’s Results Booklet shows that in between March 2020 and March 2021 there was a 43% increase in the number of active Lipa na M-PESA agents and a 75% increase in the number of merchant tills. This shows not only that many more businesses are accepting digital payments for the first time but also that those businesses already using digital payments are acquiring new tills, presumably to keep up with increased customer demand.

Number of One Month Active Lipa na M-PESA Merchant tills ('000)

In March 2021, Lipa na M-PESA registered a 30% year on year increase in the value of payments. This represents significant growth at a time of economic stress when households were reducing their overall spending. In the third quarter of 2020 the gross domestic product (GDP) generated by wholesale and retail trade, where the majority of these merchant tills are likely being used, decreased by 2.5% from the same period in the previous year. This is means that digital payments not only took a bigger share of the payment market but they took a larger share of a shrinking market.

To put this increase into perspective, between July and Sept 2020, at least Ksh 229.1 billion passed through Lipa na M-PESA merchants alone. This was more than the total value of currency outside of banks, Ksh 218 billion, in Sept 2020. This is the equivalent of every shilling, not in a bank, being used to purchase goods or services through a Lipa na M-PESA merchant at least once during that 3 month period. This was the first time this milestone has been reached.

Value of Lipa na M-PESA (Billion Ksh)


From a financial inclusion standpoint, absolute value flowing through digital payment systems are important but so are the people using these services. In order to demonstrate a contribution to an inclusive digital economy we must look for indicators that digital payment services are being used by the less wealthy. Although far from perfect, a proxy indicator for this is the average value of payments being made. The average value of Lipa na M-PESA transactions fell by 25% to Ksh 1,415 between April 2020 and April 2021.

This decrease in the average value was likely driven by a several factors including:

  • removal of charges for merchant payments under Ksh 1,000 between March and December 2020, encouraging people to pay digitally rather than in cash for lower value transactions
  • increased availability of merchants in the market, providing customers more opportunity to pay digitally
  • increased desire to avoid close contact with other people, which would increase risk of infection from COVID-19 and a consequent move towards digital payment to avoid handling money, which could act as a disease vector

Whilst the data on decrease in average value tells us several things, including that digital payments are mostly used to pay for higher value items, it also leaves a number of significant questions to be answered. These include:

  • Did the pandemic cause people who were not using digital payment services to start using them or did it cause existing users to increase and deepen their use?
  • Was the drop in average transaction value caused by an increase in usage by lower income users with a lower average spend or by a decrease in the average spend by existing users?

The answers to these questions have significant implications for an economy that is trying to reduce the use of cash. These insights will have particular importance in ensuring that a more digital economy is also a more equitable society. Answering these questions would require significant cooperation from the mobile money providers to make the relevant data available for analysis.


Key facts and figures for Lipa na M-PESA March 2020 – April 2021

·         Number of active merchants increased by 43% year on year

·         Value of transactions increased 30%

·         Average value of transactions fell 25% year on year

·         Despite removal of fees for transactions under Ksh 1,000 revenue increased 24% year on year

The unprecedented growth in number of merchants and value of digital payments is likely to have been driven primarily by an increased public demand for digital payments due to lockdowns, travel restrictions, a desire to minimise person to person contact and an increased affordability due to the removal of fees for payments under KSh 1,000. However other changes in the market may have facilitated and possibly contributed to this growth. Along with increased customer demand for digital payment options, barriers to registering merchant accounts were lowered when, in mid 2020, Safaricom launched a service allowing businesses to apply for a Lipa na M-PESA till online, streamlining applications and removing the need to physically visit an office.

In June 2020, Safaricom launched the Lipa na M-PESA merchant app ‘M-PESA for business’. Aimed at small businesses the app allows users to access real time statements, track their business performance, withdraw funds to non business M-PESA account, bank account or through an agent and importantly send money to other M-PESA customers to pay for supplies, make payments or pay wages. In the first three months after launch the app had more than 100,000 downloads from Google Play store, roughly 45% of the number of merchant tills. In a time where many businesses were severely constrained by a reduction in demand, tools to support small businesses to better manage their finances may have provided an additional incentive for new businesses to become merchants and for existing merchants to stay within the Safaricom ecosystem.

Interestingly, even with the removal of charges for transactions under Ksh 1,000 and the subsequent reduction in the average transaction value, the increase in the volume of transactions meant that the revenue generated by Lipa na M-PESA increased 24% year on year, between April 2020 and March 2021 compared to the same period in 2019. This demonstrates the potential for service providers to the reduce or remove fees for lower value transactions to stimulate increased access and usage of merchant services, leading to growth in the overall market that more than balances out lost revenue from reduced fees.


Business to business (B2B) transactions are transfers between business accounts (Pay Bill, Buy Goods & Services- Till Numbers accounts) and another business account. B2B transfers exclude payments made by transferring money from one personal mobile account to another personal mobile account (P2P), even if the purpose of the transfer is commercial rather than personal. In reality, this B2B is largely understood as meaning transfers between commercial businesses and bank accounts.

According to data published by the Communications Authority of Kenya, the value of business to business (B2B) transfers between October and December 2020 rose to over 1.7 trillion KSHS, almost double the pre-pandemic value. B2B transfers are a hugely important part of the mobile money ecosystem and during 2020 accounted for 39% of the total value transferred through mobile money networks. This does not include payments from customers to businesses or merchant payments, which were examined above. For comparison, the transaction type with the second highest percentage of funds transferred is person to person (P2P) transfers, which account for 25% with a value of 868 billion Ksh.

A large portion of this growth is likely due to the significant growth in the number of businesses opening merchant accounts. Safaricom alone reported a 43% increase in the number of merchant tills between the end of March 2020 and end of April 2021. Another likely driver for this increase was the removal of fees for the transfer of funds between mobile money wallets and bank accounts. Combined with the increased transaction limits for business accounts, this removal of fees effectively turned the mobile money agent network into a fee free extension of the banking system. It allowed businesses to deposit cash into their mobile wallets via mobile money agents and deposit this directly into their bank accounts or to withdraw funds from their bank accounts into their mobile wallets for free without having to visit a bank branch or agent.

Unfortunately, B2B figures include movement of funds in both directions and it is not possible to disaggregate the money moving from the mobile money accounts of commercial businesses into bank accounts from funds moving from bank accounts to the mobile money accounts of commercial businesses. This is not the case for personal wallets where customer to business (C2B) and business to customer (B2C) are disaggregated. This makes it impossible for us to say with certainty what impact the pandemic had on the how businesses combined the use of mobile money products and bank accounts to manage their finances. Looking at data from the CAK comparing the value of cash deposits and B2B transfers it would be appear that a large proportion of the transactions were businesses depositing money into their bank accounts via the mobile money agent network but without more detailed data it’s not possible to distinguish the business and individual users and say for sure.

Comparison of value of mobile money cash deposits and B2B transfers during the pandemic

Whilst it is widely assumed that B2B transfers are largely between a business’ mobile money account and its own bank account, it is also possible that the increased demand for digital retail payments is having an impact further up the supply chain. The digitisation of supply chains and wholesale supplier payments will be a crucial step in the evolution of a cash lite economy. The financial sector needs to know if a pandemic driven increased demand for digital retail payments has had a knock on impact on payments further up the supply chain. It needs to be able to answer questions like:

  • Are retailers more likely to pay suppliers digitally once they accept digital payments themselves?
  • Are businesses transferring funds purely between their own mobile money and bank accounts or are they using these tools to pay suppliers for goods and services and workers for labour into their bank accounts?
  • With products which allow businesses to transfer funds from one business account to another, is this being used to make supplier payments by mobile money that previously would have gone through bank accounts?

Whilst the B2B classification was a useful one in the early days of digital payments it may now be obscuring the realities of a increasingly digital economy.



Whilst there are some interesting insights on the impact of the pandemic on both retail payments and how businesses engage with financial products, we are ultimately left with as many questions as answers. A digital, cash lite payments system, is one that produces vastly more data than a cash heavy one, it provides new opportunities to understand market behaviour and choices that can be used to better promote, regulate and design for an increasingly digital economy. Understanding the relationships between banks, mobile money agent networks, cash, consumers, retail businesses and broader supply chains will support the development of a comprehensive and inclusive digital economy and understanding can only be achieved through a comprehensive review of the data needed to understand a digital economy.


The first year of the pandemic has spurred a virtuous cycle of more demand for, and increased access to, digital payment services. This has involved a considerable investment in the onboarding of merchants which has increased the availability and usefulness of mobile money as a payment option. This investment is likely to see benefits in the long term as well as the short term as user adoption, acceptance and trust of mobile money for merchant payments is likely to increase with both availability and use. Combined with the deeper integration between mobile money based payment and transfer products and the banking sector, we could be seeing an inflection point where mobile money can start to challenge cash in the payment space. However these long term gains are not secure yet and issues around fee structures and price sensitivity are likely to also play a role in the long term ubiquity of mobile money payments in Kenya.



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