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Kenyan court rules in favour of M-Pesa to Bank transfer charges

Safaricom and Kenyan banks have been allowed to charge for M-Pesa to bank transactions, according to a new court order.

Kenyan court rules in favour of M-Pesa to Bank transfer charges
The M-Pesa mobile payments system was launched in Kenya in 2007 | Credit: Reuters

Kenya High Court has retracted its order that halted the re-introduction of M-Pesa to bank transfer charges. The injunction—issued on December 19, 2022—was expected to last until an existing lawsuit by Moses Wafula, a Kenyan is concluded.

According to the presiding judge, Justice Mugure Thande, it would be improper for the court to intervene whilst the case was awaiting determination before another judge—Justice Anthony Mrima—in the same jurisdiction. "The court declines to extend the orders in view of the fact that parties are yet to be enjoined in the proceedings," Justice Thande, said.

Wafula's lawyer Irine Nafuna told the court that it would be impossible to recoup money collected from mobile money subscribers if the court does not intervene.

"If the banks continue riding on this Mpesa Paybill infrastructure, making money from members of the public, and in the event that this court finds this Mpesa Paybill platform to be in contravention of the Constitution and various statutory provisions, the impact will be higher; more funds from the members of the public would have been lost and it may be a lot more difficult to task the banks to refund such funds collected from the members of the public," Nafuna argued.

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Despite the court order, several major Kenyan banks—including KCB, StanChart, Equity, Stanbic and I&M—continued to charge for M-Pesa transaction fees until CBK directs them not to. Absa bank was the only major bank opting not to charge for transactions, according to local media reports. 

Last week, we reported that Wafula doesn't believe that individuals should be charged for transactions from their mobile money wallets to a business on M-Pesa. Hence, he filed a suit to challenge the reinstatement of the charges on M-Pesa; which was reintroduced three years after the Central Bank of Kenya (CBK) waived it due to the COVID-19 pandemic.

"...the engagement between Safaricom and its Mpesa Paybill clients...is a bipartite business engagement between Safaricom as the M-Pesa pay bill service provider and their M-Pesa pay bill primary clients being the service recipients," Wafula stated.

The case would be mentioned before Justice Anthony Mrima on March 8, 2023, for directions and for an application to join the CBK, the mobile operators and the Competition Authority of Kenya as parties to the case.

A perspective on Mafula's protest against the M-Pesa to Bank transfer charges

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This perspective by Benjamin Dada was first published in BD Insider, Letter 145; USSD in Nigeria, M-Pesa in Kenya, who should pay?

We see what Moses is trying to achieve with his suit, but we do not expect it to hold water.

Mr Wafula is attempting to dictate to a service provider how to run its business. He does this by distinguishing a customer from a beneficiary. In this case, the merchants or banks who make use of the M-Pesa Paybill service is the customer while the individual who pays for goods and services using the Paybill service is a beneficiary of the Paybill service.

What Moses fails to appreciate is the fact that a business, like Safaricom, can have two customers within a business transaction. This lawsuit in Kenya is reminiscent of the USSD troubles between telecom providers in Nigeria and Banks (or OFIs). On one hand, banks and OFIs set up a USSD service (e.g *737#) on a telcos' network while individuals make use of the USSD service to complete transactions.

Who should pay for such service—the individual using the USSD service or the business/bank who uses it to collect payments?

Safaricom's Paybill Tariff model allows the business to determine whether the transaction charge should be split between themselves and their customers (MGAO) or for either party to wholly bear the charge.

In the case of Nigeria, some telcos ask the businesses (in this case, banks) to pre-pay for the service on behalf of their customers or the telco does direct carrier billing to the business' customer.

The decision of the High Court would prove instructive for future models of telco, and bank partnerships to offer services to consumers on a telecom's network.


More on the reintroduced bank to M-Pesa charges

Following the reintroduction of the bank to M-Pesa charges in December 2022, the CBK said the new charges will be significantly lower than those that applied before the waiver in March 2020.

According to the CBK, the revised charges will:

  • be reduced by an average of up to 61%, and mobile money wallet to bank account by an average of up to 47%, that is for maximum charges for transfers from bank accounts to mobile money wallets.
  • Tariffs for pay bills that are used to collect and disburse funds by businesses, companies, and institutions such as schools, utilities, etc, will be reduced by on an average of 50%.
  • The charges levied by banks for bank-to-mobile money transactions will be reduced by an average of 45%.