Will digital surveillance revive mattress banking?

Just two months into his presidency, William Ruto noted there are only 7 million people with Kenya Revenue Authority (KRA) pin numbers, in the same economy where Safaricom’s M-PESA has 30 million registered customers transacting billions daily.

Here lay a low-hanging fruit for a government trying to mobilize more revenues with mobile money digital traceability and a offering paper trail of all the funds the policymakers felt were being transacted outside the knowledge of the taxman. 

It is perhaps out of this prodding that in January, the Kenya Kwanza administration unveiled a plan to tie up mobile money transfer systems with the taxman’s transaction surveillance platform in a bold move wired to bolster the collection of the targeted Kes4 trillion in revenue for the fiscal year 2023/24.

Already, KRA had set up live updates on transactions in the betting sector, an industry that has for years been fraught with unending accusations and counterclaims of tax evasion by the players, thereby setting the stage for mobile money tracking.

Further, KRA has from March started receiving real-time data on Value Added Tax from individuals, traders, and firms in an ambitious undertaking to boost VAT collections to 7.5 percent of the Gross Domestic Product or Kes150 billion from the current collection of just 4 percent. The new system is currently being piloted by 201 taxpayers.

With the move on individuals, the taxman risks sending the digital money paper trail cold as an eerie disquiet gains traction in Kenya among mobile money users who read ill motives on the KRA’s endgame in monitoring their transactions in real-time. 

Members of the public, as well as traders, have the ominous feeling that the government has gone too far, and to a good extent making clear its intentions of pushing the economy back to using cash and the old days of stashing wads of cash under the mattress.

“KRA should go slow on monitoring M-PESA transactions. A foreman or a shamba boy who received cash from their employer on behalf of others might seem rich on M-PESA but struggling in real life,” observes Eng Geoffrey on Twitter @engGeoffreykim adding, “If KRA focuses on landlords, then they can be assured of raising one extra Kes1 trillion easily.”

Read also: Cash is still King for the bouncing bellies of Camp Toyoyo

“KRA will be monitoring and taxing all your mobile money transactions including M-PESA. I think mattress banking is the way to go,” noted Dant® @DantizerCFC.

Could the taxman’s move to surveil an individual’s trail of money be the cue that sees cash make a comeback?

Kenya has been a trailblazer with digital forms of payment increasingly supplanting paper and coins and leading the world in going cashless, new types of crime notwithstanding.

This shift has however been overstated hiding layers of repeated transactions and anyone with an M-PESA statement quickly realizes that their riches is actually money being moved around from their own bank accounts, to M-PESA; and a bit of money received from family and friends offloaded at agent’s merchant tills.

But for policymakers in the government, the multibillion transactions are seeing a great payoff, a chance to tax the money every time it moves charging 20 percent as excise.

But for the government that has not seen enough, the visibility of mobile money transactions offer is enviable and has been giving financial companies rich data that can predict our behavior helping them make lending and advertising decisions.

For the government, an intimate knowledge of where Kenyans spend their money, offered a new tool to end to tax evasion, bringing Kenyans operating in the informal sector under the tax base.

Critics, however, see the surveillance of digital financial footprints as an end to privacy and are uncomfortable with the government watching our every move, something that may spell an imminent return to a cash economy.

“With the new proposal by the Kenya Revenue Authority (KRA) monitoring our transactions, it only means that we are now going back to the cash economy,” Samuel Inchwara, a Nairobi-based tech worker told techcabal.

“Kenyans will find a way around this KRA idea of monitoring your phone. They will minimize M-PESA transactions. They will be buying Bamba 5, they will okoa jahazi even if they have money,” tweeted мυℓємϐє иατιοи ƒαϲτѕ @wafulakhayota.

The move by KRA to get hold of the huge data repository appears in sync with a global trend where transaction data is fast getting into the hands of big organizations such as Facebook parent firm, Meta Platforms Inc, which spooked watchdogs when it mooted its second attempt to launch its own currency last year. 

Launched in Kenya in 2007 as a peer-to-peer cash‑transfer service, M-PESA now offers payments, credit, international remittances, and business analysis across other countries in Africa such as the Democratic Republic of Congo, Egypt, Ghana, Lesotho, Mozambique, and Tanzania serving over 50 million customers.

The use of M-PESA has also to a great extent encouraged the steady rise in use of mobile banking platforms, an avenue that is most preferred by 67.8 percent of bank customers according to the 2022 customer satisfaction survey by the Kenya Bankers Association.

[email protected]

Oh hi there 👋
It’s nice to meet you.

Sign up to receive awesome content in your inbox, every month.

We don’t spam! Read our privacy policy for more info.