Compulsory Digital Matatu Fares Take Shape After New Directive

Digital matatu fares may soon become the norm after a new directive from the country’s leading underwriter in the public transport sector. 

Directline, which provides insurance coverage for 77% of the Public Service Vehicles (PSVs) plying Kenyan roads, indicated that all matatus had to use a digital fare management system from 1st of February 2024 - as a requirement for their claims to be paid. 

The company indicated that the digital manifest would help in the verification of claims in the event a matatu is involved in an accident. 

The digital system will be provided by Directline with no indication on whether matatu owners would pay for it or it separately or as part of their third-party policy payments. 

“All public service vehicles to be insured by the company will be required to register with a Cashless Passenger Manifest system. The company will provide the technology for the consolidation of the same. This will be put in operation through digital fare payment.

“To this effect, from 1st February, 2024, the company will ONLY issue policies to PSV vehicles that have a registered digital payment method from any of the payment gateways e.g. Mpesa Till, available in the country,” the insurance underwriter noted in a public statement released on Wednesday, January 24. 

Directline dominates underwriting in the matatu sector which has attracted relatively few other insurance companies. Sanlam Insurance has the second-largest market share with about 8% market share. Other underwriters in the sector include GA Insurance and Amaco. Xplico had a 7.5% share of the market but its license was revoked in December 2023 and placed under statutory management. 

The digital fare management system has been implemented in most long-distance public transport companies. However, its uptake in the short-commute public transport vehicles remains low, with some matatus flatly declining non-cash payments. 

Past efforts to digitize payments in the matatu sector have failed after strong opposition from matatu owners and operators. 

In 2014, the government initiated a plan requiring all matatus to collect fares through cashless systems, but the plan was later dropped despite strong support from the then Matatu Owners Association Chairman Simon Kimutai. 

The government had hoped that the digital payment systems would help bring order into the chaotic sector that is estimated to make Ksh368 billion annually but remains undertaxed due to limitations in tracing income.

A number of institutions including KCB, Equity (in partnership with Google), Cooperative Bank, Kenya Bus Service, among others have in the last decade introduced various digital matatu fare cards that have had little success. 

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