Kenya Bankers Association Chief Executive Officer Raimond Molenje has warned that rising costs on digital payments are discouraging the use of formal financial systems and pushing more Kenyans into informal cash-based transactions, which could ultimately hurt government revenue collection.

Speaking on a local station late on Tuesday, May 26, 2026, Molenje said that additional charges imposed on digital platforms, including taxes on payment companies and point-of-sale machines, are increasing the cost of doing business and being passed on to consumers.

“We are adding more costs to digital payments, and that drives Kenyans who are using the platforms into informality,” he said.

He explained that when transaction costs rise, businesses are forced to transfer the burden to consumers, making digital payments less attractive compared to cash-based alternatives.

“It’s taxation on the companies or even the machines where you insert your card. It’s a cost to the business, and that cost has to be transferred to the ultimate consumer,” Molenje stated.

Concerns over tax base erosion

Molenje warned that while the intention of taxing digital transactions may be to raise revenue, the long-term effect could be the opposite, as reduced usage of formal channels limits the government’s ability to track economic activity.

“The loser here is majorly the government because we are able to collect more taxes through formal visibility of the transactions and through channels,” he said.

He noted that digital systems provide critical visibility that enables tax authorities to capture value-added tax (VAT), excise duty, and other levies more efficiently at different points of the economic cycle.

Call for zero-cost transactions

The analyst further proposed that digital transactions should be made as affordable as possible to encourage wider adoption and improve transparency in the economy.

“Our plea is that transactions ought to be actually zero cost to be able to ensure people transact more, and you have more visibility,” he said.

He argued that higher transaction volumes in formal systems would ultimately benefit the government by expanding the tax base rather than shrinking it.

Molenje added that sustainable revenue collection depends on supporting economic activity rather than increasing transaction costs that discourage participation in formal financial systems.

“It is at the tail end of the spend that is where you can be able to collect VAT, excise duty, and all other taxes,” he said.