The Unexpected Resurgence of ATMs in Kenya’s Digital Era

In an era dominated by digital payments and mobile money, the humble Automatic Teller Machine (ATM) is making a surprising comeback in Kenya. The catalyst for this unexpected shift is the Kenyan government’s aggressive taxation measures on mobile money transactions, prompting citizens to revisit traditional cash withdrawal methods.

The Kenya Revenue Authority (KRA) has set its sights on mobile money, proposing a 16 percent value-added tax (VAT) on sales and a 20 percent excise duty on transactions. These measures, part of a larger plan to generate Kes3 trillion in revenue by June 2024, have triggered a ripple effect in the financial landscape.

Retailers are now shying away from mobile money transactions, and consumers, seeking to avoid the additional financial burden, are turning to ATMs for their cash needs. The most recent data from KCB Group’s third-quarter results illustrates this shift, with a 43 percent increase in cash withdrawals from ATMs, amounting to Kes303 billion. Similarly, Equity Bank experienced a surge in the value of ATM withdrawals, reaching Kes287.9 billion.

Even KCB Group CEO Paul Russo expressed his surprise at the resurgence of ATMs, noting, “For a long time, ATMs were on the decline; it was negative. This is an interesting scenario. It is telling you people are moving from somewhere else to take their money and do whatever with their money.”

The rise of mobile money in Kenya, pioneered by M-PESA in 2007, initially aimed to streamline the process of sending and receiving money, especially for those separated from their families. However, the recent taxation measures and transaction charges imposed on mobile money have prompted a reevaluation of its convenience.

Digital payments gained significant traction during the COVID-19 pandemic, driven by health concerns related to physical currency. The Central Bank of Kenya’s decision to make transactions below Kes1000 free further fueled the adoption of mobile money, with up to 113 million transactions worth Kes800 billion monthly by October 2020.

Despite its initial success, the exponential growth of mobile money has attracted the government’s attention as a potential revenue source. President William Ruto highlighted the stark contrast between the 30 million registered M-PESA users and the mere 7 million individuals with KRA pin numbers, raising questions about the taxation of this burgeoning digital economy.

While the government’s move towards taxing digital transactions has accelerated the return to cash, it has also stirred privacy concerns among critics. The surveillance of digital financial footprints is viewed by some as an invasion of privacy, sparking a debate about the delicate balance between tax collection and individual privacy rights.

In this shifting financial landscape, ATMs, once considered outdated, are experiencing an unexpected renaissance. As Kenyans navigate the evolving dynamics of digital payments and taxation, the resurgence of ATMs stands as a testament to the unpredictable nature of economic trends and the enduring importance of traditional financial instruments.


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