The Paradox of Failure

The multibillion industry that is the ‘matatu’ industry in Kenya has seen and generated its fair share of trouble over the years. The industry generates Kshs. 2 billion in annual revenues but it is estimated that it is worth Kshs. 6 billion. Kshs. 4 billion is lost to corruption and inefficiencies associated with the cash only non-automated payment system.  

In a bid to streamline the industry for the players and rake in the lost revenue, the Kenyan government through the transport and the infrastructure ministry introduced new rules requiring public service vehicles (PSVs) to implement and operate cashless payment systems by July 2014. 

The general feeling was that this was going to be a major success, if the comparison to MPESA was anything to go by. MPESA was developed 7 years ago by Vodafone and launched commercially by its Kenyan affiliate Safaricom.  It is a small value (all transactions are capped at $500) electronic payment and store of value system accessible from mobile phones. Once registered, users can send and receive money as well as pay for goods and services. Its uptake is that of a runaway success. The service has 19 million registered users, 12.7 million are active. Over six million transactions are completed daily on the service. To put this in perspective, this is more than Western Union transacts globally in the same period of time. Currently, it generates 20% of Safaricom revenues and it is a figure which has been rising steadily.

Since the directive from the government the cash less payment systems have already been put into place, with different players coming into the fore. However, the uptake has been slow and disappointing with cash still remaining the major mode of payment in PSVs. 

On paper, it is seen as a major win for PSV owners, passengers and the government. Currently the industry is chaotic at best and this has been predicted to be a huge move towards establishing order. The Kenyan public transport system is very different from the mobile financial sector where MPESA dominates. Implementation of cashless payment systems threatens existing profit structures. 

A PSV owner buys a Matatu and sub-contracts a crew i.e. a driver and a tout. The owner expects a certain amount for instance Kshs. 10,000 at the end of the day depending on the agreement. The rest of the profits generated are used by the crew to pay themselves and cater for fuel, food and maintenance. Cashless systems bypass the crew and payments are deposited to the owner’s bank account. The owner can then pay the crew a salary and keep the profits. 

The system would also go a long way in curbing corruption. The corrupt traffic police are said to rake in huge amounts daily from bribes. This contributes to traffic accidents as vehicles which aren’t roadworthy continue to operate after parting with some cash. 

The ‘Matatu’ crews also hike fares without any prior notice to passengers especially during rush hours and the rainy season. A cashless system is characterised by a fixed amount which the crew are not capable of manipulating. 

Since the introduction of the systems the crews have been in a sabotage mode coming up with excuses on why the cards cannot be used. These include claiming that the NFC enabled smartphone doesn’t have power or it is broken. Others are even willing to forgo some profits by offering a discount to the passengers willing to pay in cash. 

The uptake by passengers has also been slow. This cannot be attributed to a general problem of adopting new technologies since Kenyans have in the past adopted MPESA and made it the most successful mobile payment system globally.  The numerous players offering the cashless payment systems need to streamline them so that a passenger does not need to possess more than one card in order to commute. 

As it is evidently the Matatu crews who are in control of how the system is used, it is up to the players to come up with different ways to incentivize them. Until then, cash still remains the king.


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