Big shift as small traders swap M-Pesa payment options
A man walks past a Lipa Na M-Pesa counter at a supermarket in Nairobi. A subtle shift is happening in Kenya as many small traders quit Safaricom’s Lipa Na M-Pesa Buy-Goods payment option spooked by multiple charges on the services, which eat into their incomes.
A subtle shift is happening in Kenya as many small traders quit Safaricom’s Lipa Na M-Pesa Buy-Goods payment option spooked by multiple charges on the services, which eat into their incomes.
Most business people are now solely operating the ‘Lipa Na Mpesa, Paybill’ service, which attracts a single charge as they try to accommodate the growing number of customers paying using mobile phones, while at the same cutting costs they incur for transactions.
A spot check among shop owners, especially small outlets selling a wide range of products, revealed that many traders have opted out of the ‘Buy Goods’ service after counting the losses their enterprises make when customers pay through the platform.
Most of the small businesses that operated the service have replaced it with payments through Paybill where cash go straight to a bank account when customers pay, which attracts a single charge when business owners withdraw funds.
“After making calculations, I realised I was losing about Sh417 daily due to the deductions, which sum up to over Sh12,000 monthly. I could not afford that since it was affecting the business’ incomes,” a trader in Nairobi told Smart Business. The trader says Safaricom has been charging them when a customer makes a payment by deducting 0.25 per cent for any transaction above Sh200, which small businesses decry to be too much.
The trader is among many that the Smart Business has established have recently fled Safaricom’s Lipa Na M-Pesa Buy Goods service option, in favour of Paybill services where customers pay funds from M-Pesa directly to the bank.
Safaricom charges businesses 0.25 per cent of payments made through the Buy Goods service, with businesses deducted Sh2.5 for any transaction worth Sh1,000 and Sh3.82 for a transaction worth Sh1,500.
This means that for a trader who sells goods worth Sh1,000 and payments made through M-Pesa, the highest they can make after withdrawing the money is Sh969.5, after the Sh2.5 deducted when a customer pays and the Sh28 withdrawal transaction fees at M-Pesa agents. Smart Business could not confirm how the company charges businesses to transfer money from the Till account to M-Pesa personal account.
Transactions below Sh200 are, however, reported not to be charged.
Lowering prices
During the release of Safaricom’s half-year results on Friday last week, the telco’s CEO, Peter Ndegwa, said the company had not reviewed pricing for its business customers but said there were plans to lower prices for both types of customers. “The intention over time is to continue reviewing our pricing so that it is lower for both our business and consumer customers,” Mr Ndegwa said.
He did not specifically address the concern of the company’s enterprise customers.
On its website, Safaricom, however, on the Lipa Na M-Pesa Biashara Till Terms & Conditions, particularly on the service fees states that “The Service shall be subject to the charges and minimum/maximum transaction values appointed by Safaricom from time to time. Safaricom may by notice from time to time vary the charges and minimum/maximum transaction values.”
In its 2022 Sustainability report, the company recognised that it lost 11 per cent of its enterprise customers, who raised concerns about the transparency of its pricing and heavy costs.
The report, Safaricom’s own, showed that at least 30 per cent of the smallest businesses in the economy – those employing below 10 workers- exercised a mass exodus from its services in the financial year to March 2022, running away from expensive services and what they termed opaqueness in Safaricom’s pricing.
At least 100,000 businesses employing up to 50 workers fled the organizations protesting the concerns.
“We realised that many newly onboarded customers were churning after the first month because they did not understand the bill and did not clearly understand the escalation matrix. Accordingly, we introduced an FTTB (Fibre to the Business) ‘kindergarten’ programme which included SMS communication and calls to customers from our telesales teams,” Safaricom’s 2022 sustainability report stated.
The report added that among the concerns the enterprise customers raised were “around value for money in how Safaricom’s products and propositions are structured and accurate and easy-to-understand bills delivered on time.”
Small enterprises are proving to be a headache for the telecommunications firm, with their single mode of expressing dissatisfaction being to take off, a move likely to challenge the company to introduce a better way to engage them, to avoid losing customers that make up over 90 per cent of Kenya’s economy.
Hard-pressed for cash and always looking at all possible ways to cut costs with the economy currently unforgiving due to the high inflation since last year, the small businesses have also proved to be impatient with service providers who are slow to act on their concerns.
But Safaricom in the Sustainability report, released last month, acknowledged that it was acting on the businesses’ concerns, after witnessing them leave in huge numbers.
“Value for money is another key customer issue. Accordingly, we rationalised prices across key products to ensure that they meet customers’ needs. We have also crafted solutions that address specific segments instead of a one-size-fits-all,” the telco stated.
Safaricom had by press time not responded to requests by Smart Business for clarity on the matter.
