The Central Bank of Kenya (CBK) now says Huduma Namba will curb fraud, especially in mobile money transfers.
According to CBK, the controversial biometric identification method would be a major component of the country’s digital payment system.
Huduma Namba, according to the bank, would dramatically reduce fraud, particularly in mobile money transfers which have become a haven for criminals due to the payment system’s fast rise over the last decade.
“The expected roll-out of NIIMS, commonly known as Huduma Namba, will provide a key impetus to further deepen the adoption, safety and robustness of digital payments,” CBK said in its newly launched National Payments Strategy (NPS) report for the 2022-2025 period.
Through Executive Order No. 1 (2018), the government launched NIIMS in an effort to develop and maintain a central database for information on individual residents, such as national identity cards and birth certificates, in order to improve service delivery.
The Huduma Bill was introduced to Parliament by National Assembly Majority Leader Amos Kimunya in December.
Huduma Namba will serve as the principal database for Kenyans’ foundational and functional data, from which all other databases containing their personal information will be derived.
In order to deter fraudulent declarations and improve the integrity of data in the system, the Bill proposes a Sh3 million fine or a three-year prison sentence for every Kenyan who enters incorrect information for Huduma Namba.
In 2019, the NIIMS recorded 38 million persons.
The country’s payments landscape has altered dramatically in the previous decade, according to CBK, but there is still room for development in card use, bank person-to-person payments, electronic fund transfers (EFT), and real-time gross settlement (RTGS).
In revisions to the law aimed at catching tax fraudsters, Huduma Namba will also replace the Kenya Revenue Authority (KRA) PIN.
The Huduma Namba Bill modifies the Tax Procedure Act to make biometric identification the primary means of identifying taxpayers.
This means that youngsters who receive the Huduma Namba ID will be automatically listed as taxpayers when they turn 18 and will be compelled to file annual taxes regardless of their financial situation.
It also implies that all adults would be compelled to register with KRA, giving the taxman a broader pool of individuals to work with than the 5.5 million people it currently has.
CBK said the increased use of digital payments is set to increase security risks, necessitating corresponding countermeasures to enhance their safety and reliability.
“However, as more payments shift to online and electronic channels, risks will increase as well. The increased use of online and digital channels also meant increased cases of fraud and scams at a customer level,” it said.
CBK said it will seek to adopt new security features for digital payments to facilitate the birth of well-protected payment channels and infrastructure.
“In the long-term, this will provide support for driving down the cost of payment systems, especially for players who currently invest resources for additional end-user protection (sometimes pushing this cost down to users). Therefore, from a CBK perspective, security will be the backbone of the Kenya’s NPS,” said the regulator.
