Kenya is experiencing a subtle shift as many small business owners leave Safaricom's Lipa Na M-Pesa Buy-Goods payment option out of fear that they would be hit with excessive fees that will eat into their profits.

The majority of company owners are currently only offering the "Lipa Na Mpesa, Paybill" option, which carries a single fee, in an effort to accommodate the increasing number of consumers who pay with their mobile devices while also reducing the costs associated with transactions.

After calculating the losses their businesses suffer when customers pay through the platform, a spot check among store owners, particularly those of small establishments selling a variety of goods, revealed that many traders have chosen to forego the "Buy Goods" service.

The majority of small businesses that used to offer the service have switched to using Paybill, where customer payments are made directly into business owners' bank accounts and incur a single fee.

Businesses are deducted Sh2.5 for any transaction costing $1,000 and Sh3.82 for a transaction worth Sh1,500 when using the Buy Goods service, which is offered by Safaricom.

This means that the maximum profit a trader may get after withdrawing money is Sh969.5, after the Sh2.5 that is removed when a consumer pays and the Sh28 that is charged for withdrawal transaction fees at M-Pesa agents. How the corporation charges businesses to transfer money from the Till account to an M-Pesa personal account was unknown to Smart Business.

However, it is believed that transactions under Sh200 are not taxed.

The CEO of Safaricom, Peter Ndegwa, stated that the company has not examined pricing for its business clients but that there were plans to cut costs for both categories of consumers during the publication of Safaricom's half-year results on Friday of last week. The goal, according to Mr. Ndegwa, is to continually assess our price so that it is lower for both commercial and consumer customers.

He did not precisely address the issue raised by the firm's business clients.

On its website, Safaricom, however, on the Lipa Na M-Pesa Biashara Till Terms & Conditions, particularly on the service fees states that 

“The Service shall be subject to the charges and minimum/maximum transaction values appointed by Safaricom from time to time. Safaricom may by notice from time to time vary the charges and minimum/maximum transaction values.”

The company acknowledged in its 2022 Sustainability report that it lost 11% of its enterprise clients as a result of complaints about the pricing transparency and high costs.

The report, which was produced by Safaricom, revealed that, in the financial year ending in March 2022, at least 30% of the country's smallest businesses—those with fewer than 10 employees—undertook a mass exodus from its services to avoid paying high prices and what they perceived as opaque pricing practices.

At least 100,000 companies with up to 50 employees left the organizations raising the issues.

“We realised that many newly onboarded customers were churning after the first month because they did not understand the bill and did not clearly understand the escalation matrix. Accordingly, we introduced an FTTB (Fibre to the Business) ‘kindergarten’ programme which included SMS communication and calls to customers from our telesales teams,” Safaricom’s 2022 sustainability report stated.

According to the research, one of the issues identified by business customers was "value for money in how Safaricom's products and propositions are packaged and accurate and easy-to-understand invoices issued on time."

Small businesses are proving to be a headache for the telecommunications company because they only have one way to voice their displeasure: by walking away. This will likely force the company to come up with a better way to engage them in order to keep the customers who account for over 90% of Kenya's economy.

Due to their financial constraints and constant search for cost-cutting measures, small businesses have shown themselves to be impatient with service providers who take a long time to address their concerns. This is especially true in the unforgiving economic climate brought on by the high inflation rate since last year.

Safaricom acknowledged that it was responding to the concerns of the businesses in the Sustainability report, which was published last month, after seeing them leave in significant numbers.

“Value for money is another key customer issue. Accordingly, we rationalised prices across key products to ensure that they meet customers’ needs. We have also crafted solutions that address specific segments instead of a one-size-fits-all,” the telco stated.


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