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Firm to Roll Out Smart Cards for the Mass Market
Kenya has remained a cash based economy despite the best efforts of banks to encourage the use of plastic money.
Kaps Limited, which is best known for its automated parking management systems, is determined to change this with the introduction of smart card technology.
Its cards will be targeted at the mass market for everyday payments such as fares on public transport vehicles, parking fees, shopping, buying airtime, payment of utilities, renting DVDs and even replacing pocket money given to students in boarding schools.
"You will find that even where consumers have debit or credit cards, they still need cash to make every day purchases like milk and bread at the kiosk and pay for parking or bus fare. Consumers get inconvenienced when the parking attendant or bus conductor does not have change for a large note. Our aim is to remove this hassle by offering consumers a pre-paid card loaded with cash which they can use to make such payments," says Samuel Kahiga, managing director of Kaps Limited.
Unlike debit and credit cards which need to be swiped through a point of sale terminal and consumers are required to produce identification because of the high incidence of fraud, the smart cards will use contact-less technology making it easier to process payments.
Each card will contain a chip which will store information about the user and a smart card reader will be able to decipher it merely by placing the card close to it.
The card is designed for micro payments so the amount that can be loaded on them will be capped at Sh10,000.
"We will take a very small percentage of each transaction as fees and so will make money on volumes. Our aim is to make the smart card useable even in the smallest kiosk," said Mr Kahiga.
Other than the convenience of making payments, Mr Kahiga says consumers will be able to keep track of their every day expenses - a major problem that leads to overspending in many homes.
Keep track
By simply logging onto the Kaps website using a secret personal identification number, card users will be able to get a statement of all their expenses in a given period.
This is in addition to the receipt that they will get after each transaction.
"Parents with children in boarding school can give their children the card instead of cash and using the same system can keep track of what their children are spending their pocket money on," he says.
Owners of public transport vehicles will also benefit.
"Matatu owners lose 30 per cent of their daily revenues to police bribes, gangs at the terminus and the matatu crew. Fares paid using the smart cards will solve this problem by eliminating use of cash," says Mr Kahiga.
The company will work with a commercial bank which will act as a settlement bank.
Once consumers load their cards with cash, the money will go to a float account held at the bank and from there it will be transferred to merchants (retailers, bus companies and so on) once consumers buy goods and services using the card.
"The Central Bank of Kenya has given us the green light to roll out the service and the settlement bank will be National Bank of Kenya," he says.
The pilot of the service will start in August with parking at Nakumatt Lifesyle in Nairobi before being rolled out to the other sites where Kaps runs automated parking systems.
From there it will be expanded to the mass transit system.
The total cost of the smart card payment system would be in the range of Sh300 million if the company were to import it but Kaps has opted to develop the software locally and get the smart card readers custom made for it in Taiwan.
This will bring the cost down to a fifth, around Sh60 million.
The company which currently has 350 employees will finance the new service from its revenues and if additional finance is needed, the settlement bank will chip in.
Kaps, a member of the Top 100 SMEs Club expects the highest growth in its revenues to come from the new service.
Currently, parking management and revenue collection systems contributes 60 per cent of the company's revenues which stood at Sh600 million last year.
The rest comes from integrated security systems and people counting at retail outlets.
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Smart cards have proliferated across the world mainly as a form of electronic payment for public transportation.
One of the best examples is the Hong Kong Octopus card which is used on eight separate transport systems including buses, rail, trams and ferries.
The Octopus card has millions of users and can also be used in shops, restaurants, car parks and has actually become an all-purpose identification system where it is used as an access control mechanism at certain office buildings, apartment blocks and schools.
In developed countries smart cards have evolved to the point where they don't necessarily have to be a card.
A variety of devices can house a smart card chip including watches and mobile phone covers.