Flash Report /

Kenya: Lower M-Pesa transaction charges positive for SAFCOM; negative for banks

  • Rates lowered to zero for M-Pesa transactions below 1000 and bank-to-wallet transfer; transaction limit doubled

  • Net positive for Safaricom – will increase volume of M-Pesa transactions, offsetting negative impact of lower charges

  • Negative for banks in the short term, but we retain our Buys; potential loss of income minimal in the long term

Tracy Kivunyu
Tracy Kivunyu

Equity Research Analyst, Telecoms

Faith Mwangi
Faith Mwangi

Equity Research Analyst, Financials (East Africa)

Tellimer Research
16 March 2020
Published byTellimer Research

After discussions with the Central Bank of Kenya, Safaricom has announced that it will waive off fees for person-to-person (P2P) M-Pesa transactions below KES1000 (US$10). This follows President Uhuru Kenyatta asking the public to prioritise electronic transactions and mobile payment operators to consider reducing the charges for such transactions, bracing for the impact of coronavirus (COVID-19) in Kenya.

Safaricom has doubled the daily transfer limit to KES300,000 (in two batches of KES150,000) from KES140,000. Customers will also be able to hold up to KES300,000 in their M-Pesa wallets, which is a threefold increase from the previous limit of KES100,000. Meanwhile, the central bank has also directed payment service providers (PSPs) and commercial banks to eliminate charges for transfers between mobile money wallets and bank accounts. 

These emergency measures will apply from midnight, 16 March 2020 until 30 June 2020.

Impact on Safaricom – Net positive

Calculating the average transaction value per active M-Pesa customer per month, as at FY 19 (Table 1), we find that a majority of M-Pesa P2P transactions per day are under KES1,000.

Table 1: M-Pesa transactions

Transaction value per month (KES)Contribution to M-Pesa revenue (%)




P2P transfers



New Business



Source: Tellimer Research

Although eliminating the charges for transaction below KES1,000 as well as ‘bank-to-M-Pesa’ fees seem negative at first glance, we think the higher transfer limit will increase the volume of transactions, hence offsetting the negative impact of lower charges. Prioritising cashless transactions will also increase the share of electronic payments in the overall money circulation by bringing in industries that were predominantly cash-based, such as the transport sector.

Moreover, the fee waiver may lead to a recovery in mobile payments transaction value. Data from the Central Bank of Kenya indicate that mobile payments transaction value only grew by 1% yoy to KES372bn, while the number of transactions dropped 3% yoy to 150 million in January 2020, the slowest since August 2017 (election period) when the transaction value declined by 4% yoy. This came despite registered accounts growing sharply by 47%.

We note, however, that the benefits could also be quickly offset by the exponential spread of COVID-19 in Kenya (two new cases were confirmed on Sunday, with the first case reported last Friday). We reiterate our Buy recommendation on Safaricom.

Impact on Kenya banks – Negative until Q2 20

Bank-to-mobile money wallet transactions account for the majority of mobile banking transactions (>50%) in Kenya. These typically take place via Safaricom’s M-Pesa. Mobile banking contributes to revenue by way of fees and commission income. As at 2018, fees and commission income accounted for 18.5% of total income for the banks that we cover with average non-interest revenue to total income at 31.3%.

The move is negative for banks at least until Q2 20. Among the banks that we cover, the most impacted banks are KCB, NCBA and Co-op Bank – these banks have a strong relationship with Safaricom’s M-Pesa and could see their non-interest revenue growth slow down in Q2 20. However, of the three banks, KCB and NCBA have further advanced lending products that can support revenue and hence, would fare better than Co-op Bank.

The impact would be minimal on Equity Bank for the following reasons: (i) most of the transactions from its mobile banking arm, Equitel, is done through bank accounts rather than mobile payments; (ii) its mobile money payments are already free as these are processed from the bank account; (iii) most of the bank’s transactions are business-to-business (B2B).

Having said that, Kenyan banks have been continually growing their lending business to move their dependence away from Safaricom. Over the last two years, strong revenue growth from mobile banking in Kenya has been driven by lending products, which we expect to continue performing with more than 70% of loan applications now done on mobile platforms. We expect this to soften, but not eliminate, the impact of losing the bank-to-M-Pesa fee income in the medium term. We are pleased with the increased transaction limit, which would allow for increased transaction volume and hope that this measure will remain in place even after the central bank’s stated period.