Kenya’s cashless payments revolution is in full swing, with small and medium-sized enterprises (SMEs) at the center of this transformation. Digital payment systems, led by mobile money and card transactions, have significantly reshaped the country’s business landscape. According to Visa’s recent report, Value of Acceptance: Understanding the Digital Payment Landscape in Kenya, a substantial 84% of SMEs recognize the importance of digital payment technologies for growth. However, despite this momentum, 39% of SMEs still hesitate to embrace cashless transactions fully. This reluctance stems from four key concerns: perceived complexity, security fears, cost of gadgets, and transaction fees.
1. Perceived Complexity of Payment Systems
For many SME owners, especially those operating small, informal businesses, digital payment systems appear daunting. The transition from handling physical cash to using electronic transactions can feel overwhelming, particularly for those with limited exposure to digital tools. Some SMEs struggle to navigate mobile payment apps, point-of-sale (POS) machines, and online banking platforms, leading to fears of transaction errors and reconciliation challenges. Without adequate education and training, many business owners prefer to stick with cash, which they perceive as straightforward and reliable.
2. Security Concerns
Security remains a major deterrent for SMEs considering cashless payments. While digital transactions offer security advantages over cash, concerns about fraud, hacking, and unauthorized access persist. The Visa report highlights that 97% of SMEs accepting digital payments still worry about cash-related security issues, demonstrating that security remains a universal concern. Additionally, some SMEs fear exposing their financial data to cyber threats, identity theft, or phishing scams, leading them to avoid digital platforms altogether. Strengthening cybersecurity measures and increasing awareness of secure digital practices can help address these fears.
3. Cost of Gadgets and Infrastructure
The initial investment in digital payment infrastructure poses another challenge. Many SMEs, especially micro-businesses, operate on tight budgets and find the cost of acquiring point-of-sale (POS) devices, smartphones, or internet-enabled gadgets prohibitive. While mobile money solutions like M-Pesa have reduced dependence on physical devices, some SMEs still need additional tools to facilitate seamless transactions. Without affordable and accessible options, these businesses hesitate to invest in digital payment solutions.
4. Cost of Transactions
Transaction fees associated with digital payments deter many SMEs from fully adopting cashless methods. Businesses often operate with thin profit margins, and additional charges for every sale made via mobile money or card payments can significantly impact profitability. While digital payments offer convenience and security, many SMEs perceive cash as a cost-free option that allows them to maximize their earnings. Addressing this concern through lower transaction fees or offering incentives for digital adoption could encourage more businesses to embrace cashless payments.
The Road Ahead: Overcoming the Barriers
Despite these challenges, Kenya’s digital payment ecosystem continues to grow, with 40% of SMEs having adopted cashless payments in the past two years. The benefits of digital transactions—including increased efficiency, access to a broader customer base, and financial inclusion—outweigh the perceived drawbacks in the long run. To bridge the gap, stakeholders must prioritize:
- Education and Training – Simplifying digital payment platforms and providing training for SMEs to boost confidence in their use.
- Enhanced Security Measures – Strengthening cybersecurity protocols and educating businesses on fraud prevention.
- Affordable Infrastructure – Making digital payment devices and internet access more accessible and cost-effective.
- Reduced Transaction Fees – Introducing lower-cost digital payment options or government incentives to ease the financial burden on SMEs.
As Kenya progresses towards a cashless economy, addressing these concerns will be crucial in ensuring that all SMEs can participate in and benefit from the digital payment revolution. The future is digital, and with the right support, Kenya’s SMEs can fully embrace this transformation.
