• CBK plans a 57% cut in transfer fees by 2028, aligning with Safaricom’s M-Pesa 2.0 super-app rollout.
• Lower fees aim to boost savings, but may squeeze 90,000 agents and reshape rural access.
• Women stand to save KES 1.2 billion yearly, while rivals and the Treasury prepare for shifts in revenue and competition.

The Central Bank of Kenya (CBK) has released a consultation paper proposing a 57 percent reduction in the average fee for person-to-person transfers, lowering the cost from KES 23 (approximately USD 0.15) to about KES 10 (approximately USD 0.07) by 2028. The move comes just six weeks after Safaricom launched “M-Pesa 2.0,” a redesigned super-app aimed at migrating users from USSD channels to smartphones, where they can access micro-savings, buy-now-pay-later services, and in-app insurance.

Both moves share a common goal. The regulator is seeking to lower the cost of basic transfers, while the company is preparing for higher transaction volumes that can be monetised through credit, savings products, and data analytics. The shift from tariff-based revenue to velocity-driven growth is central to Safaricom’s new model.

Penetration levels underline this transition. By the third quarter of 2024/25, there were 45.3 million mobile money subscriptions in Kenya, equivalent to 86.6% of the adult population. Yet 9.9 per cent of adults, or around 2.2 million people, remain financially excluded, according to the 2024 FinAccess Household Survey. This group is concentrated among rural youth and continues to use M-Pesa only for cash-in/cash-out services, generating little data.

For Safaricom, the barrier is the fee. A transfer of KES 500 (USD 3.33) currently costs KES 23 (USD 0.15), or 4.6 per cent of the value. The CBK’s proposal aims to bring the effective rate below 3 percent, which international behavioral studies identify as the threshold where dormant users begin to retain balances and test savings products. Nairobi-based fintech companies project that this adjustment could create 3 million new savers within two years, increasing the float pool by KES 18 billion (USD 120 million). This amount would compensate for the direct reduction in fee income.

The reduction also places pressure on Kenya’s agent network. The country has 300,000 mobile-money agents, of whom 42 per cent already operate at break-even, according to CBK supervisory returns. A 57 percent cut in fees implies a similar decline in the commission pool. Even if Safaricom absorbs part of the loss, rural agents stand to forfeit around KES 4,500 (USD 30) per month, equivalent to the cost of maintaining a small outlet. Analysts at FSD Kenya estimate that 90,000 agents could close, mainly in sparsely populated regions. This could limit access for unbanked users, especially in rural areas.

The proposal has significant implications for women, who conduct 63 per cent of all transfers below KES 1,500 (USD 10). These transactions often involve two separate fees: one to receive remittances from urban spouses and another to forward money to relatives in rural areas. A KES 13 (USD 0.09) reduction per transaction, multiplied by a median frequency of 5.2 per month and 7.8 million female wallets, would free KES 1.2 billion (USD 8 million) annually for household consumption. Consumer-goods lender Copia reports that female customers increase micro-insurance uptake by 28 percent when transfer fees fall below 2 percent. Safaricom has already embedded such products in its super-app under the “Linda Pesa” option.

Competition is intensifying. Neobank Tanda has introduced zero-fee transfers, financed by a 9 percent annual yield on wallet balances, while rivals such as Fingo and KYE offer 8 percent returns with additional loyalty rewards. These institutions are seeking to capture M-Pesa’s float before Safaricom launches its own interest-bearing wallet. Should the 1–3 per cent ceiling be formalised in the 2025 Finance Act, the market could witness a savings-rate war similar to the bank-pricing competition of 2012.

The fiscal consequences must also be closely monitored. Mobile-money excise duty yields KES 24 billion (USD 160 million) annually, approximately 0.3 percent of GDP, collected at a rate of 20 percent of the fee pool. A 57 percent reduction in this pool would eliminate KES 9 billion (USD 60 million) in revenue, equivalent to half a year of funding for the affordable housing voucher scheme. The Treasury is considering shifting from ad valorem taxation to a flat levy of KES 2 (USD 0.01) per transaction. Such a measure would secure revenue but transfer the burden onto low-value transactions, affecting the very groups targeted by financial inclusion policies.

The proposed fee cap, therefore, carries implications for Safaricom’s business model, the viability of Kenya’s agent network, gender-related consumption patterns, competition among neobanks, and the fiscal position of the state. Its success will depend on whether reduced transaction costs can unlock sufficient velocity to compensate for losses in tariffs and tax revenue, while sustaining access to cash-in/cash-out services in rural areas.

Hikmatu Bilali Edited by Idriss Linge