Why Kenyan banks are chasing scholar pocket cash

On January 23, in the course of the centenary celebrations at Mang’u Excessive Faculty, one among Kenya’s oldest nationwide faculties, about 50 kilometres from Nairobi, three banking cubicles drew regular visitors from college students and oldsters. Representatives from Co-operative Financial institution of Kenya, Fairness Financial institution and KCB Group had been issuing pay as you go playing cards pitched as a contemporary method for folks to handle pocket cash.

I handed by way of every sales space the place desk brokers defined the mechanics and pricing. Co-operative’s CoopPay card prices KES 350 ($2.17), Fairness’s scholar pay as you go card prices KES 500 ($3.88), and KCB’s equal prices KES 600 ($4.65). 

The merchandise look related on the floor, but the presence of three rival banks in a single college compound pointed to a deeper query: why are lenders investing a lot effort in scholar pocket cash, and what does it say concerning the enterprise logic behind these playing cards?

The easy reply is that faculties and different establishments are the first progress frontier. Banks are concentrating on the roughly 15 million college students within the Kenyan schooling system.

This week’s Backend examines how the product works, how banks generate income from it, and whether or not pay as you go playing cards clear up an actual drawback or just open a brand new battleground for buyer acquisition.

Product evaluation: a managed model of digital money

On the core, the coed pay as you go card is easy. Dad and mom load cash onto the cardboard by way of channels similar to M-PESA paybills, cellular apps or financial institution brokers. College students spend solely what has been loaded. Not like a debit card, there is no such thing as a direct hyperlink to a present account and no overdraft threat.

A Co-operative Financial institution agent described the product as a safer various to carrying money. A misplaced card could be blocked, balances could be tracked, and oldsters obtain transaction notifications. In boarding college environments the place college students might carry pocket cash for a complete time period, this management turns into the principle promoting level.

From a product design perspective, the pay as you go card solves three particular issues. It limits overspending, reduces loss threat, and permits distant top-ups with out requiring mother and father to journey to high school. It additionally introduces college students to card funds sooner than earlier generations, who relied nearly solely on notes and cash.

But the product’s simplicity hides a pressure. For college students, the cardboard can really feel much less like freedom and extra like monitored spending, however it additionally teaches them about cash administration from an early age. 

Small transactions, long-term worth 

The speedy income from these playing cards is modest. Banks earn issuance charges, substitute costs and small transaction margins. The larger play lies elsewhere.

Pay as you go playing cards act as a pipeline into future banking relationships. A dad or mum onboarding a baby immediately might translate into financial savings accounts, scholar loans, wage accounts and lending merchandise years later. In a aggressive market the place digital wallets dominate every day funds, banks are on the lookout for new entry factors into buyer journeys.

This technique displays a shift in acquisition economics. Conventional account-opening campaigns entail excessive advertising prices and unsure loyalty. Faculties, against this, supply concentrated teams of households already ready to interact with monetary merchandise tied to every day wants.

The pricing variations among the many banks counsel assorted positioning. Co-operative’s decrease payment at KES 350 ($2.71) indicators a push for scale. Fairness and KCB’s increased pricing hints at model positioning and broader service ecosystems moderately than pure price competitors.

Playing cards towards money versus cellular cash

Kenya’s fee panorama is formed by cellular cash. For years, mother and father have despatched pocket cash immediately by way of cellphone transfers, making the pay as you go card appear to be a late arrival.

Only one.5% of Kenyans use Level-of-Sale (POS) or card-swapping machines for normal transactions. Within the card world, debit playing cards are the giants. The Central Financial institution of Kenya’s (CBK) knowledge reveals that card funds dropped to KES 521.3 billion ($4.4 billion) within the 12 months to June 2025, down from KES 594.2 billion ($4.6 billion) to June 2024, because the variety of energetic playing cards additionally declined.

In the identical interval, cellular cash transactions rose from 2.4 billion to 2.8 billion, whilst whole worth slipped barely to KES 8.4 trillion ($65.1 billion), suggesting a shift towards smaller, extra frequent digital funds.

So, why introduce playing cards now?

Playing cards develop the place cellular wallets face limits. They work at card terminals, enable on-line funds, and combine into world fee networks. Banks are betting that as faculties and retailers digitise additional, playing cards will complement moderately than change cellular cash.

The actual rival is behavior. Some mother and father nonetheless give money to their kids as a result of it’s accepted all over the place and trusted by college students. Cellular wallets require no bodily card or issuance payment, however college students are usually not allowed to have cell phones in Kenyan faculties. The success of pay as you go playing cards is determined by whether or not banks could make the expertise simpler and safer than present choices.

At Mang’u, the cubicles themselves felt like a response to this problem. Banks are usually not ready for patrons to stroll into branches, so they’re going on to the locations the place spending patterns start.

Friction determines outcomes

The consumer expertise sits on the centre of adoption threat.

Dad and mom care about velocity and reliability. On this case, a  Cooperative Financial institution agent advised me that the playing cards are processed inside a day and delivered to college students in faculties. The sign-up course of is simple, requiring a dad or mum to offer the coed’s identify, college, admission quantity and start certificates quantity.

I requested an Fairness Financial institution agent whether or not a dad or mum receives an alert after a top-up is made, and the agent stated they do, supplied the dad or mum has opted in for SMS notifications, which price KES 2 ($0.016) per message. 

Lengthy-term adoption will rely on how reliably the system works in on a regular basis use moderately than on promotional messaging. Even minor failures at checkout or delays in stability updates can rapidly push college students and oldsters again to money.

There may be additionally a cultural layer as a result of pocket cash has lengthy been a non-public negotiation between dad or mum and youngster. Playing cards formalise that relationship with mounted limits and monitoring, which some households might embrace whereas others resist.

Faculties as distribution channels

From a scaling perspective, faculties are superb environments. They combination hundreds of potential customers, create recurring spending cycles, and allow banks to market immediately to oldsters throughout occasions like centenary celebrations.

If adoption grows, the playing cards might evolve into broader scholar monetary ecosystems. Id verification, college funds, transport and even digital studying instruments might hyperlink into the identical card infrastructure.

The problem lies in variety since not all faculties have digital fee terminals. Not all mother and father maintain financial institution accounts. A product designed for large faculties might battle to increase into much less related areas with out important funding.

Challenges lie in belief, price and behavioural inertia 

Issuance charges, even small ones, might discourage uptake when cellular transfers, say, to a instructor to allow them to move the money to a scholar, really feel cheaper and simpler. 

Safety considerations can rapidly erode belief, and dropping a card might inconvenience college students who depend on it for every day spending. 

Money additionally stays acquainted and requires no setup. For banks, the principle threat is that with no clear every day worth, pay as you go playing cards might stay a distinct segment product used primarily throughout college phrases.

The scene at Mang’u Excessive Faculty supplied a glimpse of a bigger shift in Kenyan banking, because the centenary occasion appeared a channel to seize future prospects in the meanwhile they start managing their cash independently.

The product itself isn’t groundbreaking expertise. Nonetheless, its significance lies in positioning. Banks try to insert themselves right into a lifecycle as soon as dominated by money and, extra just lately, cellular wallets.

If banks ship reliability and clear worth, they might flip college spending right into a pipeline for long-term progress. In the event that they fail to outperform present habits, the playing cards might stay a facet experiment.