Kenya’s economy held back by lack of online payment authorisation systems

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The Kenyan Government is putting its country forward as a place that is open for business. It is moving to privatise both Telkom Kenya and divest itself of Safaricom. It has moved with considerable speed to put in place its own fibre project TEAMS. But parts of the private sector are having difficulty keeping up with the idea of Kenya having an open, modern economy.

Although there are a couple of new entrants in the country’s banking sector, it is largely dominated by international banks whose managements defer to head office on innovation. This is going to cause the country a problem if it wants to continue to remain competitive. It needs to be able to offer its visitors the ability to pay for flights, hotels and safaris online. If you book a Kenyan hotel, you still cannot pay online for the booking.

Sadly things have only moved on a little since Kenya Airways launched its very successful online payment system using a South African bank. Although many banks can issue credit cards, only a limited number can authorise transactions and they have not shown any interest in setting up the “back-end” payment authorisation systems required for online transactions.

Speaking at last week’s e-tourism conference in Mombasa, Kenya’s Tourist Trust Fund CEO Dr Dan Kagagi said that the industry and Government were lobbying

the banking sector to allow online payments. Whereas once the credit card companies were the obstacle, the point of “no change” has moved to being the banks. According to Kagagi: "Already a number of credit card companies are willing to work with us to ensure that online payments become a reality."

Tourism and Wildlife Assistant minister, Raphael Muriungi, speaking at the same conference urged the industry to utilise online technologies:"We are all learning of the rapid and unprecedented changes that ICT is creating in global tourism and have realised if all players fail to embrace the web and new technologies then we stand to lose our ability to communicate and do business in a changing market," he said. Perhaps his comments should have been directed at the banking sector that are now proving to be the obstacle to change.

The banks fear fraud but this seems a rather lame excuse as in the first instance most of the potential buyers will be tourists coming from developed countries where fraud rates are considerably lower. Close to 70 per cent of travellers regard the Internet as their primary and in many cases only source of information on tourism. About 100 million travellers now use the web to book holidays and travel thus making it vital for Kenyan tourism to be visible on the Internet. Kenya undoubtedly competes with South Africa for visitors, particularly in the wildlife safari sector, and there is no difficulty booking and paying online for a wide range of products in South Africa.

Despite being repositories of citizens’ money, the banks have been remarkably slow to react to the signs that there is an emergent middle class. It is projected that by June 2007 there will be around 100,000 credit card users. It sounds small but it is considerably more than in many other African countries. In addition, there are more than 1 million debit cards that can only be used if the card holder has cash in his or her own account. Surely the latter can provide a fairly low-risk way of introducing online payment for Kenyan citizens.

When TEAMS and the other international fibre connections arrive at Mombasa, the price of international bandwidth will go down. This should be one of the building blocks for creating new services and applications that users can begin to start to use. Another building block must surely be the ability to authorise online transactions and Kenya’s banking sector needs to wake up to the changes that are happening in the country. However, this is not purely a Kenyan problem as there are other countries on the continent like Ghana where a similar lack of online payment authorisation is holding back the development of local global businesses.