Recent data from the Central Bank of Kenya (CBK reveals a notable shift in Kenya's financial landscape as cash handled by mobile money agents experienced a decline for the first time since the introduction of mobile payments nearly 17 years ago.

In the 11 months leading up to November 2023, cash transactions stood at Sh7.165 trillion, marking a 0.5 per cent decrease from the same period in 2022 when it reached Sh7.2 trillion.

This unprecedented decline disrupts a trend of continuous year-on-year growth that mobile payments have maintained for over 15 years.

Since the launch of the M-Pesa service by Safaricom in April 2007, mobile transactions have seen aggressive growth, with subscriptions reaching 38.1 million in the first quarter of the financial year 2023/24, according to the Communications Authority of Kenya (CA).

"Mobile money subscriptions stood at 38.1 million, translating to a penetration rate of 75.2 per cent, which was an increase of 0.1 percentage points from the last quarter’s penetration rate," stated CA in its latest quarterly statistical bulletin.

The surge in mobile payments' popularity has been fueled by the service's convenience, resulting in agents handling approximately 60 per cent of Kenya's Gross Domestic Product.

However, this decline in transactions highlights a potential economic squeeze facing households and businesses.

Mobile money is deeply ingrained in Kenyan daily life, with citizens relying on it for sending money and covering day-to-day expenses.

The widespread use of mobile payments has positioned it as a reliable barometer for assessing the overall economic health of the nation.

Kenyans have grappled with the challenges of a high cost of living, marked by steep increases in essential commodities such as food, fuel, and electricity.

The Central Bank of Kenya's decision to maintain high interest rates further contributes to the strain on citizens' financial resources.

Recognizing the success of mobile payments as a lucrative revenue stream, the government implemented measures to capitalize on its popularity.

Through the Finance Act of 2023, the excise duty on mobile money transactions was increased from 12 per cent to 15 per cent, raising transaction costs for users.

Additionally, mobile service providers, including Safaricom, Airtel Kenya, and Telkom Kenya, were permitted to raise their daily transaction limits from Sh300,000 to Sh500,000, in a move that could impact the dynamics of mobile money usage.

As Kenya navigates these shifts in its mobile money landscape, the decline in transactions underscores broader economic challenges and prompts a reevaluation of the role and impact of mobile payments on the nation's financial well-being.