Proposed digital currency to tame transaction costs

From The East African

Kenya is exploring a digital currency regime that is being touted as a game changer for the digital money payments space, with consumers reaping the full benefits of faster and cheaper transactions.

A cross-section of economists interviewed by The East African shared the view that the proposed regime is vital for faster and cheaper payments, including cross-border payments, with expected tougher competition from existing mobile money payment platforms, which would reduce transaction costs.

The Central Bank Digital Currency (CBDC) is intended to serve as legal tender.

“The digital currency will be a game changer in many ways. The quick wins will be the lower transaction fees and the ability to move small amounts of money where most Kenyans are.

“This will make financial services accessible to even more Kenyans,” said Ken Gichinga, chief economist at Mentoria Economics.

“The central bank will also benefit as it will be spared the printing costs associated with physical currency and there will be many other innovations that will be possible because of digital currency.

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innovative strength

“The challenge for the current payment system is to be more innovative, but they will continue to coexist.”

Mr. Gichinga says that the digital currency will put more pressure on the existing players in the market to be more innovative and competitive in terms of pricing.

dr Samuel Nyandemo, a senior lecturer at the University of Nairobi’s School of Economics, said the CBDC will force other competitors to be more innovative and perhaps revise tariffs.

“A major focus is placed on affordable mobile financial services by cutting out intermediaries, creating fierce competition with other digital currency providers such as M-Pesa, Airtel Money and T-Kash.”

“But the Kenyan economy is ripe for digital currencies.”

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