Welcome to the Digital Revolution
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The traders told me that the circulation of cash money is rare; therefore, raising a change for 500 shillings is difficult. Before the CoVID-19 pandemic, paying with 500 shillings was no big deal even for the mama mboga at the gate. Now the world is digital.
How the world has changed in only 100 days! It has been long in coming but it here. Data from the Communications Authority of Kenya, CAK, shows that the use of digital money has been rising but appears to have accelerated in the first quarter of this year.
According to CAK, in the quarter ended December 31, 2019, some Kshs 2.82 trillion (US$ 28.2 billion) of all transactions in the economy was digital money. This includes both business transactions and person-to-person transfers.
However, a quarter later, the transactions had risen to Kshs2.84 trillion ($28.4billion), an increase of 0.7 percent or $0.2 billion). CAK has broken down the digital transfers according to activity. According to the CAK analysis, Business to business transacted Kshs860 billion ($8.6 billion); Person to person transfers amounted to Kshs685 billion ($6.85 billion); Businesses transferred to customers Kshs377 billion ($3.77 billion); Customers paid Kshs294 billion ($2.94 billion) in digital money.
Business to business transfers rose to Kshs 878 billion ($8.78 billion), customer to Business Kshs310 billion ($3.1 Billion), Business to Customer transfers declined to Kshs365 billion ($3.65billion) while digital money-saving rose to Ksh 608 billion ($6.08 billion) in the quarter ended in March 2020.
This change a microcosm of the complete transformation of the economy, not just in Kenya but worldwide. It is not just in fintech. Other areas such as education, medicine, trade, and conferencing have gone digital. The world’s former way of doing things is headed out because it is expensive and inefficient.
Digital revolution is here with us. According to a podcast by the IMF Economists, firms and institutions that resorted to IT to remain functional in the wake of movement restrictions have discovered that IT is productive, efficient and cost effective.
A senior executive in a multilateral lending agency agrees. The world of physical interactions, he said, faces extinction. After spending three hours in a webinar, which involved experts across continents, he was convinced that the old way of doing things is gone. In his words, the “digital economy is efficient and cheap.”
Many firms have discovered this and are saving a neat pile of cash in operational expenses- no hotel bookings, reduced travel, no per diems. In the office, small costs such as tea and utilities are gone. “At this rate,” said my friend, “office space could be the next on the chopping board.” He is right. Corporations could also look at saving more by reducing office space and thus rent.
According to a recent IMF Podcast, businesses that have adopted digitalization are doing well. Some have even “increased their sales three times.” In Africa, E-commerce platforms, including Jumia, Kilimall, Konga and LIB Delivery have provided channels “for consumers to buy basic essentials by leveraging their existing technology-enabled logistics systems” says AfDB.
E-commerce is the way to do business. In the US, the E-commerce platform, Amazon, bucked the US trend during the COVID crisis by employing more people while other businesses were downsizing. This is the trend even here in Kenya. Manufacturers, distributors, and retailers had better adapt their business structures to ICT in order to cut costs, increase productivity, and thrive.
Virtual working platforms have recorded a steep rise in demand since the pandemic came calling. According to AfDB, platforms such as Microsoft Teams, have posted a 775% increase in use in countries where social distancing and other confinement measures are in place. So too have Zoom, Skype, and WebEx Meetings. “This is the future of the work environment,” says the bank.
The rapid uptake in these platforms that existed before has enabled e-learning, e- medicine, even e-worship.
Teleworking and video conferencing are not new; they were operating before the pandemic. It only accelerated their uptake. After the initial lethargy, employers and workers have become comfortable with work from home operations. To employers, it is just as productive as working from the office. In addition, it is efficient and cheap to all players; therefore, there is no incentive to return to the former ways.
I addition to cutting travel costs and other operations expenses, there is time-savings as workers no longer need to waste time in traffic jams going to and from work giving them more time for their families, to rest, and for personal errands.
In the financial world, the growth of digital money will reduce security costs relating to money transfers and counterfeiting as digital money cannot be counterfeited.
Welcome to the Fourth Industrial revolution!