There is a big likelihood that you are reading this article from your mobile phone. Our phones have become an extension of us. We cannot do life without them. To increase our convenience, we have fitted every possible service on the phone, such that we can do most of our daily tasks on the go.
A big part of this convenience is money. There are more than 30 million M-Pesa users in the country. Note that although M-Pesa is the dominant mobile money service, there are other mobile money services, such as Airtel Money and Vooma.
It is rare nowadays to walk into a shop and not find a Lipa na M-Pesa sign. This shows that most businesses embrace mobile money transactions. Not to mention, nowadays, no one sends money home through the post office. It is all done over the phone.
Regarding mobile money usage, there are two types of people. Everyone uses mobile money services at some point or another, but there are cash believers and digital money believers.
Cash believers are individuals who cannot stay without cash. Mostly, these tend to be the older generation who grew up with physical money. As much as they use mobile money services, they still prefer cash transactions rather than mobile money transactions.
However, some shy from predominantly depending on mobile money transactions because of the transfer charges involved. The charges may seem small, but they add up. We shall investigate this claim below.
Nevertheless, there are mobile money believers. Individuals who do not carry cash. All their money is stored digitally. I am one of the digital believers. I joke casually. If my phone were stolen, I wouldn’t have the means to get home. I pray this never happens, though.
I am comfortable doing all my transactions online. However, since I am on the journey of discovering myself financially, I cannot help but question whether this is a good assumption to have when it comes to my money. Am I getting value for my money, or am I just flashing money down the drain in the name of convenience?
When thinking about transfer charges, different types of transactions are common. These include:
Starting March 2020 through to the end of 2022, bank-to-M-Pesa charges were waived to cushion people from the pressures of the pandemic, but those charges were reinstated starting January 2023.
Bank to M-Pesa transfer charges range from Ksh0 to Ksh84 for transactions up to Ksh150,000. Mpesa charges cap at Ksh108 for transfers to M-Pesa users, Pochi la Biashara, other registered mobile money users, and business till to customers. Transfers to unregistered users and withdrawals from agents cap at Ksh318 and Ksh309, respectively.
On the other hand, Airtel-to-Airtel transactions are free. Transfer to other networks max charges are Ksh150, and withdrawal charges max at Ksh300. For both M-Pesa and Airtel money, the maximum amount transferable is Ksh250,000.
If you earn between Ksh50,000 and Ksh100,000 and primarily transacted through mobile money, how much would that typically cost you monthly?
If you decided to withdraw all the money at once, it would cost M-Pesa users Ksh318 and Airtel Money users Ksh300. Hence, in the past 10 months, it would cost Ksh3,180 and Ksh3,000 for M-Pesa and Airtel Money users, respectively.
However, if one transacted through Mpesa throughout the month. How would this reflect? Here is a simple hypothetical budget.
The budget will highlight hypothetical expenditure for someone earning between Ksh50,000 and Ksh100,000. I will only highlight two major charges: Mpesa charges, which will cover transfers to Mpesa users, and Pochi la Biashara and Airtel Money transfers to other networks since Airtel to Airtel transfers are free.
As you can see, transacting entirely on a mobile phone is almost 70% more costly than withdrawing all the money. However, there is a lot of nuance to this conclusion.
For instance, when calculating how much transport transfer charges are, you can get them to zero or very close. If you are commuting within Nairobi, most of Nairobi's fares are less than Ksh100; hence, you can crisscross the town paying exclusively from your phone and not incur any charges since transfers of amounts below Ksh100 are free.
You can also do this with food, where half the food budget is spent on groceries, which you can buy multiple times at less than Ksh100.
Nonetheless, hypothetically, you can reduce your transaction costs to between Ksh400 and Ksh500, which will still be higher than withdrawing all the money. But you will not have to sacrifice all the convenience of mobile money transfer.
In the first 10 months of the year, looking at our simplistic numbers, mobile money charges have cost you between Ksh4,000 and Ksh5,000.