OPINION: Boosting card transactions holds key to SME growth

In 2015, Financial Sector Deepening (FSD) Kenya released a study examining the key barriers and opportunities affecting the uptake of credit and debit card transactions in the Kenyan economy.

The study, produced in partnership with Visa and MasterCard, found that while the use of plastic cards had grown substantially over the years, Kenyans had yet to fully adopt the culture of using credit and debit cards, especially compared with other markets around the world.

Some of the identified barriers to wider use included lack of awareness of the full value of cards, misconceptions about cost implications, and mistrust of the system. Respondents cited fear of card fraud and system failures as major concerns.

Today, ten years after that crucial study, the use of debit, credit, and prepaid charge cards in the country still remains largely subdued, particularly in contrast to other fintech solutions such as mobile money and fintech apps.

According to data from the Central Bank of Kenya (CBK), the number of card transactions at ATMs and POS machines stood at 3.6 million in June 2025, a 14 percent drop compared to June of the previous year.

This comes even as service providers continue to launch new offerings and invest in technological infrastructure to improve both the customer and merchant experience.

This raises the question of why card usage remains low and what industry players and regulators can do to boost uptake.

According to the Value of Acceptance report released by Visa earlier this year, more SMEs are gravitating toward digital payments, citing reduced fraud risk and increased transparency, with a high satisfaction rate of 69 percent among SMEs that accept digital payments.

The survey further found that 4 out of 10 SMEs in Kenya already utilize fintech solutions, and a significant majority—68 percent—are planning to invest in new digital payment technologies. Nearly one in four cash-only SMEs indicated plans to acquire POS systems for their businesses.

Kenyan SMEs are aware of the strategic importance of cashless payments in growing their businesses. Increased revenue collection, higher levels of customer satisfaction, and reduced operational risks were all cited by surveyed firms as tangible benefits of going cashless.

More importantly, business leaders acknowledge that digital transactions easily generate records containing valuable data that can be used to monitor and plan product or service offerings, as well as facilitate access to finance through innovative scoring models.

This advantage is particularly strong when it comes to card-based payments. Studies have shown that increased use of card-based payments contributes to economic growth by reducing operational costs, improving business efficiency, and providing strategic data analytics.

One of the challenges facing SMEs today, particularly those largely operating on a cash basis, is record keeping. Poor record keeping makes it difficult for business leaders to track cash flow, which in turn hinders banks from assessing them for financing.

This has prompted service providers to develop new offerings that address these shortcomings and provide SMEs with scalable payment solutions. Recently, Absa Bank Kenya launched the Absa Business Credit Card, tailored to the unique needs of Micro, Small, and Medium Enterprises (MSMEs).

The Absa Business Credit Card provides businesses with the opportunity to optimize cash flows with flexible, interest-free credit options of up to 50 days on payables.

The card also comes with a digital card management dashboard and access to business assistance platforms such as Google Workspace, as well as marketing tools to bolster product and service offerings.

More than just a payment option, the business credit card serves as a smart working capital tool, allowing MSMEs to pay suppliers instantly while selling inventory before repayment.

The wide-scale adoption of such tools has the potential to fuel growth in the sector, particularly at a time when demand for credit and capital mobilization is at an all-time high.

According to the CBK, the value of MSME deposits held by commercial banks has almost doubled in recent years—from Sh577 billion in 2020 to Sh956 billion last year—and now accounts for 16.5 percent of total customer deposits.

The writer is the Head of SME Business at Absa Bank Kenya.