BIKO: Financial mobile innovation the next frontier for banking in Kenya

PHOTO | FILE A woman withdraws money at an MPesa shop in Nyeri on April 16, 2013. The service is being used for salary remittance, loan disbursement, refunds to customers among other services. Financial experts say financial mobile innovation could be the next frontier for banking in Kenya.  NATION MEDIA GROUP

In Summary

• Mobile banking is set to make handling of finances cheaper, faster and customer friendly. The reports released by the Communications Commission of Kenya in the first quarter of 2012/2013, shows that Kenya’s mobile penetration is at 77.2 per cent; with a market share of 30.4 million mobile subscribers by September last year and that 32.4 per cent of the population accesses the internet via the mobile phone.
• Kenya Commercial Bank’s latest product that enables a mobile phone user to open a bank account without visiting the bank and Barclays’s product that synchronises mobile and internet for a new form of banking and convenience.
• This form of innovation has in turn changed the face of customer care. Customer care has been taken to a whole new level as one only needs to know how to use their phone and is not exposed to the torturous process of filling numerous documents, most of which they don’t understand their purpose, with their signatures.

By Steve Biko
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The recent wave of mobile firms fighting for clients by introducing new and cheaper tariffs, innovative products and services and ensuring stability of the networks has now extended to the banking sector as banks are competing for customers by introducing mobile banking and other related innovative mobile financial services.

Mobile banking is set to make handling of finances cheaper, faster and customer friendly. The reports released by the Communications Commission of Kenya in the first quarter of 2012/2013, shows that Kenya’s mobile penetration is at 77.2 per cent; with a market share of 30.4 million mobile subscribers by September last year and that 32.4 per cent of the population accesses the internet via the mobile phone.

This kind of data clearly shows that new solutions will offer avenues to push forward the access frontier in Kenya in the banking industry.

BANKING SOLUTIONS

This effort will bring more Kenyans into banking solutions. Mobile banking is set to take the bank to the customer and not vice versa. Banks are taking advantage of this room for expansion in order to increase their customer base and subsequently their revenue.

Analysts argue that this is the last frontier that banks are going to maximise to sustain the huge profits they have been enjoying and that those that embrace this and run with it, will benefit hugely in many spheres of the banking world.

Mobile banking is cheaper as one is charged only the transaction fee. There are no banking charges or minimum deposits. The amount to remain in one’s account is purely one’s choice. Some of the innovative products that have seen banks embrace mobiles are; Safaricom partnering with PesaPoint to enable money transactions without the use of an ATM card.

The other is the Kenya Commercial Bank’s latest product that enables a mobile phone user to open a bank account without visiting the bank and Barclays’s product that synchronises mobile and internet for a new form of banking and convenience.

ADVANTAGES OF MOBILE BANKING

This invention saves the consumer the trouble of obtaining and walking with their ATM cards which if stolen will deny them access to their cash account.

Transactions are faster as one does not have to wait in a long queue to be served by cashiers, one literary walks with their accounts everywhere and has the choice of withdrawing at the nearest ATM or MPesa agent.

Security is enhanced as forgers cannot take advantage of cheques or ATMs which are not used in the mobile banking process.

This innovation has seen the growth of better mobile financial applications that have taken the banking industry by storm. Of notable repute is the M-Shwari product that has saw Kenyans bank over Sh3 billion within the first three months of launching the product, which is a partnership between Safaricom and Commercial Bank of Africa.

This single product has seen the number of the unbanked population go up from 15 million to almost 27 million in three months.

This form of innovation has in turn changed the face of customer care. Customer care has been taken to a whole new level as one only needs to know how to use their phone and is not exposed to the torturous process of filling numerous documents, most of which they don’t understand their purpose, with their signatures.

With the phone being able to access the internet, the client only needs a social media platform to interact with their bank, transfer fund to or from the account using M-Pesa and that is it.

This new technology is something that the banking industry had not foreseen - based on their reaction. Some banks have quickly adopted and embraced the technology by introducing mobile banking services that allow clients to check their bank balances but the cash transfer service is something that has caught the bankers unawares.

Banks operate under the Central Bank of Kenya Act and currently there is no law that allows telecommunication companies to offer money services. Licensing the mobile phone money transfer services under the Banking Act may stifle services due to the rigorous requirements.

NEW BILL TO BE INTRODUCED IN PARLIAMENT

The CBK is looking at regulating them under the National Payments Systems Bill to protect public interest which will go to Parliament for debate.

Most critics say that mobile banking will lead to massive workforce reduction and unemployment opportunities since experts like cashiers will become redundant. This is not true mainly because this service will contribute to economic expansion for Kenyans, especially the small and medium enterprises.

By accessing financial services easily and affordably, Kenyans will be better equipped to support their enterprises. The success of the Small and Medium Enterprise sector undoubtedly lies at the heart of the realisation of Vision 2030.