The "cash is king" mentality in Kenya, which has retarded the use of credit cards, is slowly being discarded as Kenyans embrace the mobile phone form of payment.
Mobile phone payment systems in the East African nation are becoming popular with both consumers and traders as people seek modes of payments that enhance efficiency and safety.
Most businesses are integrating their systems to mobile phone operators' platforms to tap more customers.
The need to adopt mobile phone commerce results from the increased use of mobile phones and, more importantly, the introduction of money transfer services by various telecommunication companies, such as M-pesa (Safaricom), Zap (Airtel), Orange Money (Orange) and Yu Cash (Yu).
According to Kenya's Communication Commission, about 13 million Kenyans use money transfer services.
The number has grown steadily in recent years as competition increased and each mobile phone company in the country launched money transfer services.
Kenyans are using the services to pay utility bills, mainly electricity and water, purchase goods in supermarkets, and pay for bus tickets, insurance premiums and loans.
"I have a loan with Kenya Women Finance Trust. (Its microfinance service) has a system which allows us to repay our loans using mobile money transfer services," said Grace Nyambito.
Nyambito, a trader who operates a grocery business at an estate in Nairobi, said she wired the money every Tuesday morning.
"I send through my mobile phone 13 U.S. dollars every week. This is the agreed figure but one can send whatever amount of money they want," said Nyambito, who was advanced a loan of 555 dollars.
Initially, she used to wait until their group meetings every Thursday so she could pay the microfinance institution representative in cash.
"I would collect the money and keep it until the day comes so that I can take it. This came with several challenges since sometimes a need would rise and I would spend it," she said.
Nyambito said she found the mode of payment safer and efficient. "It has limited my chances of defaulting in repaying my loan since I send the money as soon as I find it," she said.
Jared Nguri, who completed his college education one and half years ago, also uses mobile phone payment to service his university loan.
"I send every month to the Higher Education Loans Board between 16 dollars and 27 dollars. I have been doing this for the past one year. This has helped me repay the loan conveniently," Nguri, now a marketer, said.
Recognizing the increased use of mobile phone payment systems, banks in Kenya have rushed to integrate their services to mobile phones.
They have partnered with telecommunication companies to allow their customers to transfer money from their bank accounts to their mobile phones and vice versa.
The services have enabled customers to bank or withdraw their money and spend electronically, thereby boosting mobile commerce.
Last year, the Central Bank of Kenya (CBK) launched Kenya Electronic Payment and Settlement System (KEPSS) in an effort to boost the electronic form of payment, which enables customers to pay and receive large payments on a real-time basis.
"The remitting customer has to furnish the bank with the amount to be remitted, his account number which is to be debited, name of the beneficiary bank, name of the beneficiary customer, account number of the beneficiary customer and sender to receiver information. KEPSS is safe and secure financial infrastructure that is used worldwide," CBK says.
Experts observe the adoption of mobile phone payments in Kenya has helped localize the concept of e-payment, especially among low-income earners. Non-cash payment previously was mainly associated with high-end earners, through credit cards.
They note transition to mobile phone cashless payments is timely for Kenya and other African countries because of the increased usage of mobile phones.
According to the World Bank, penetration of the mobile phone in Africa has increased from 3 percent in 2002 to more than 48 percent today, and is expected to reach 72 percent by 2014.
In a survey on the usage of mobile phone money transfer systems in Kenya, the bank noted the services had demonstrated the importance of building a low-cost transactional platform, which enabled customers to meet a broad range of their payment needs.
"Once a customer is connected to an e-payment system, she can use this capability to store money in a savings account, send and receive money from friends and family, pay bills and monthly insurance premiums, receive pension or social welfare payments, or receive loan disbursements and repay them electronically," the bank says in a 2010 survey.
It added that connection to an e-payment system expanded customers' range of financial possibilities. However, one of the hindrances to greater adoption of mobile payment systems is high charges on transactions.
The charges, depending on the services, range from free, for instance, when paying electricity bills for some service providers, to 1.10 dollars when buying an air ticket.