PesaBit #003 : Why the Matatu Cashless payment initiative failed

bebapay-googleafrica-tweetA little more than a year ago, Equity Bank and Google partnered to offer Nairobi commuters NFC based prepaid cards and simultaneously equipped matatu touts with android phones accepting NFC payments. No issuing, acquiring and transactions fees were involved; matatu owners now had an auditable tool to aggregate daily collections straight into their bank accounts. In light of Kenya’s fast tech based economy, on paper and high up in the boardrooms, this was ostensibly a brilliant idea.

Today, the online business daily ran a title “Family bank joins quest for cashless fare license”. The Kenyan Government has been keen to formalize the 218 Billion ($ 2.44 billion) public transport industry – matatus (collectively, vans and buses). Despite its obvious far reaching implications on curbing corruption, inefficiency, regulation and taxation– the move hit a snag and I wonder if Family Bank have an alternative to where its predecessors – Equity Bank and Google fell short.

Niti Bhan and Ken Griffith shared great insights on the failure to launch of this noble campaign here and here. Today, I still have my prepaid NFC card with 400/= that I can’t use. Incidentally, this is counter-intuitive to successful design of products and services in informal markets such as matatu industry. According to Niti, the nature Equity Bank NFC based prepaid card is restrictive to flexibility in cash management behavior exhibited by *informal economy participants. In a nutshell, *[they] like to be in control over how and when (time) they spend money. Cash is King in informal economies for this quality – flexible cash management.

Flexibility* in time and money is the characteristic that distinguishes the informal economy from the formal for those who manage on irregular income streams from a variety of sources. This is why the prepaid business model is adopted by 96% of all mobile phone users on the African continent.

It follows that matatu drivers and touts seemingly exhibit this characteristic in managing their unpredictable cash incomes. Behavior does not change overnight and to impose a drastic shift from a day to day cash management psyche to monthly budgeted salary was a bad idea.

Public transport payments are murky for good reason. Revenues generated feed a long chain of beneficiaries besides the matatu owners. Drivers and touts siphon off ‘commissions’, corrupt law enforcement thrive on TKK (bribes) and crucially, an expansive network of middlemen on ground at drop off/pick up points add to the unofficial labor force numbers. Ultimately, they all depend on skimming unrecorded cash payments. It’s no surprise therefore, that the obvious winners, tax authorities, government agencies and matatu owners are anxious to see this through. Banks, the masterminds that they are *cough* have calculated the possible 2.5 billion KES payments market – assuming a paltry 1% fees.  Family, KCB, Cooperative and Equity Bank are examples.

What of the people that really make this ecosystem tick? What is in it for them? The drivers, touts, middlemen and commuters.

Ken and Niti both agree that the drivers, touts and ghost labor force were not factored in the design process of this service product Re: Equity/Google NFC card. According to Ken, although this intuitive tech payment is noble, imposing solutions on a free market is counter-intuitive.


  1. […] (matatu epayments) & cashing out of the card is not an inherent feature. I wrote about it here. Interestingly it has found use in non-commute payments, like some restaurants which accept BebaPay […]

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