Equity Bank and Google's BebaPay beat M-pesa to matatu fares Dennis Mbuvi
At one point, the author of this piece was requested by the bus conductor to pay the fare in cash, rather than use BebaPay (fromerly known as Beba card). At another point, the conductor offered a KSh. 10 discount off KSh. 60 fare if the writer opted to pay by cash rather than BebaPay. At a number of other times, the conductor has claimed that he does not have the near-field communication enabled phone required to process fare via BebaPay, or that the phone was out of charge. In such instances, BebaPay users qualify for a free ride, but the conductor begs for everyone to instead pay by cash.
In all these instances, only one seemed genuine. During the Nairobi Trade Fair, a conductor on a Citi Hoppa bus that came in to carry the many passengers attending the fair said that he did not have the phone with him, as the bus was doing a “squad”. Squad in that matatu industry is used to refer to a situation when the vehicle’s official driver and conductor subcontract it to another crew, who make a few trips and take their cut.
These is just some of the resistance that BebaPay has faced from matatu conductors, whose role has been traditionally to collect fare from the passengers. BebaPay is a first attempt to bring order into what is a chaotic process.
As an example, buses to Githurai 45, about 16 kilometres from Ronald Ngala street in the CBD where their buses ply from, at a point charged KSh. 150 to the CBD and Ksh. 10 from the CBD. A bus to Matuu, in Yatta, 106 kilometres from Nairobi was charging between Ksh. 150 and Ksh. 200 then. The Githurai buses claimed they were charging the amount due to traffic arising from road construction then.
Fares on most other city routes double or even triple when it rains. At such times, passengers have to wait for more than an hour to get a matatu. Additionaly, passengers have to scramble for matatus.
Due to a variety of factors, such as traffic conditions, seasonal demand and weather, matatu owners cannot tell how many trips their vehicle ply, how many passengers were carried or how much fares were paid. It would require the matatu owner to employ a supervisor to track all these, and even then, the supervisor may collude with the matatu crew to defraud the owner. Matatus also tend to drop and pick many passengers en-route, which might make supervision difficult.
Matatu owners tend to enter into a contract with the crew where they are a paid a certain fee at the end of the day. The matatu crew then use the remaining amount to fuel the vehicle, service and maintain it, carry any repairs, cater for any additional charges such as parking fee, bribes and to pay themselves. A 14 seater matatu will see the owner demanding from KSh. 5,000 every day while a bus may fetch from KSh. 10,000 to even KSh. 20,000. The amount remains so even when the crew are charging above-standard rates.
Taxes for matatus are also payable before hand as the government cannot determine how much revenue is collected by matatus.
The arrangement may not work that well at times. The crew may cut down on maintenance and repairs, leading to quick wear of the vehicle. While the crew may seem to be making a lot of money, a lot of these is lost by not being banked and instead spent on unplanned expenses like alcohol. The rest may be lost to extortion through bribes to police officers and gangs that control matatu routes. Matatus are also popular car jacking targets partly due to the accumulated fare collections at the end of the day.
For passengers, it presents a problem with the fare variation, with the matatu crew overcharging at times. There is also a problem associated with loose change. At one point the author was in a “Forward Traveller” Kayole matatu that made him alight at the next stop because they did not have KSh. 500 change. At another instance, which many commuters will be familiar with, the author forgot his KSh. 250 change in “Benjo” buses plying Kitui. Efforts to trace the money the following day were frustrated by the crew. Matatu crew often remain with passenger’s fare for some time as they look for change. In many circumstances, the change is not returned until the commuter demands for it, with a good number of people forgetting to do so.
There has also been instances where bus conductors have been reported to take off with the day’s collection. Double M buses which play within Nairobi have been reportedly hit a number of times.
James Mwangi, CEO, Equity Bank is looking to offer a solution to all these problems with the BebaPay. The card is a partnership between the bank and Google. The card has been on pilot for about an year, since April or May 2011.
“We are moving away from paying cash, and even PIN based to NFC. The umbrella Matatu Owners’ Association(MOA) with 20,000 members in Nairobi having signed up and also the bus companies (Citi Hoppa). This means that we will make transport all over Kenya cashless. We have also signed that with Kenya Railways. No stealing from matatu owners, its a whole transformation. Matatus may no longer need to pay tax in advance. Now that all this is going through bank accounts, they can go to Kenya Revenue Authority and asked to be taxed for revenue earned, like anybody else, ”, Mwangi told the author in an exclusive interview in December 2012.
The card, coupled with Equity’s partnership to provide NFC based payments with MasterCard’s PayPass technology is also a ploy to eat in to M-Pesa’s stranglehold on small payments and cash transfer. The banker, who holds more than half of the bank accounts in Kenya has in the past expressed his discomfort with Safaricom’s control of the SIM card and their locking out of other players from mobile phone users. The roll out of such products that transform the flow of money in the country is aimed at giving the bank the strengths and convenience of M-Pesa.
“That again is inbuilt in the phone, we are now independent of the telecoms. So the challenge of competing with each other is almost coming to an end,” he says. “We have convinced the touts and owners, we expected a challenge there with the touts but now everybody is on board. Children going to school no longer need to carry cash,” he says.
Consumers incur no charge for acquisition or usage of the card during the pilot. To acquire the card, they however need a Google account and will be needed to make a first deposit of KSh. 250 towards usage of the card. Up to Ksh. 10,000 can be deposited on the card. If a card remains unused for six months, it becomes inactive and the money is transferred back to the owner’s mobile phone.
“Where M-Pesa could not be able to reach because of their minimal transaction fee, where we couldn’t get the small payment transactions because payment charges were high, this has been removed,” Mwangi adds.
A long pilot period enabled the bank to manage the change associated with the change from a cash process. The owners also had to be convinced, as they are used to receiving cash at the end of the day and spending it. Now the cash goes to the bank account. Beba also had to get approval from the Central Bank as the bank is regulated, unlike telecom operators.
The first batch of cards were green and had no Equity logo on them as they arrived before the signing of agreements. The service is operational on one of the major bus companies in Nairobi, Citi Hoppa, on almost all it’s routes. MOA Compliant buses have also rolled out the card on some of their routes.
Beba is now looking to sign other organised matatu operators in the country, and also to publicise their card to drive adoption.
Even before the launch, there is already a competitor. Megarider is offering the same solution. The trade-name has been associated with Kenya Bus Services (KBS) who are among Nairobi's biggest bus companies. KBS has also been conspicuously missing from the pilot. The impact of this early fragmentation on the industry remains to be seen .