Increased use of mobile money in Kenya has created a ripe environment for the use of near field communication (NFC) technology and other forms of mobile wallets which could be more widely accepted as payment systems compared to traditional ones such as credit cards.
Adoption of the alternative payment systems could not only further slow the growth of the use of credit cards but could also see the creation of a new market for NFC-enabled devices including point of sale terminals and mobile phones in the country.
Consulting firm Deloitte, in a research note that summarises expected trends in the technology, media and telecommunications industries globally this year, points to the success of mobile banking and payments in emerging markets where many people have cell phones but few have credit cards or bank accounts as an opportunity for the growth the alternative payment systems.
"It is possible that NFC devices could do well in similar markets particularly in major cities which are more likely to have NFC-enabled point of sale terminals. It is expected that 700 million people in emerging markets will be using mobile money services by the end of 2015 and many of those could be NFC-enabled," notes the consulting firm.
Near field communication, which works well for small value payments allows users to wave an enabled device against a payment device.
International financial service firm Citigroup, in a global plastic money and payments sector outlook report for 2012, says that Kenya has the highest number of individuals in Africa using mobile money, placing it among the countries that are ripe for the development of a mobile wallets and NFC-enabled payment systems.
The financial services firm also notes that the growth of mobile wallets and the payment system is expected to be faster in emerging markets than in the world's largest economy - the United States of America - where plastic money is widely used.
"Currently about 40 million mobile money users exist in Africa - the lion's share of this is attributable to the over 20 million users of Safaricom's M-Pesa offering in Kenya," notes Citigroup in their report.
According to the financial services firm, other countries in Africa whose environment is ripe include Nigeria, which has approximately 90 million mobile subscribers and where the banking regulator gave final approval to 11 companies to commence mobile money services across the country late last year.
Citigroup also says that South Africa's payment system industry is also expected to change following NFC trials currently being tested by Absa Bank, which could potentially roll out 40 million users and last year's acquisition of Fundamo a South African mobile payments firm by Visa International.
Consulting firm Deloitte predicts that devices equipped with NFC capabilities will likely grow by more than 100 per cent to 200 million this year and in 2013, there may be as many as 300 million NFC smartphones, tablets and e-readers globally compared to 2010 when less than 50 million devices were sold, most in emerging markets.
While the use of credit cards is wide in the western countries including the United States, its growth has been very slow in Kenya where the value of mobile phone based transactions has surpassed payments made using plastic money.
Data from the Central Bank of Kenya (CBK) shows that at the end of last year, the number of credit cards in circulation grew by only 9,020 or eight per cent to 122,212 credit cards compared to 2010 where the number of cards had grown by only 4,736 or four per cent to 113,192.
But in a report released in November last year, CBK said that Sh732 billion and Sh473 billion was paid or transferred through mobile phones in 2010 and 2009 respectively compared to a total of Sh560 billion and Sh421 billion that was transacted through plastic money for the two years.
Kenya's banking regulator said that for retail payment systems, mobile money transfers are now the most widely used mode of payment in Kenya followed by the use of plastic cards.
At the beginning of this month, the Communications Commission of Kenya (CCK) released an industry report showing 1.02 million new sign-ups for money services out of a total of 1.2 million newmobile subscriptions in the third quarter of 2011.
"The continued growth is an indication of subscribers' preference to mobile money transfer, which could be attributed to accessibility and affordability even to low-income earners who form the bulk of the unbanked population," said the CCK latest industry report.