Banks stretch hours as mobile competition bites

By David Mugabe and Carol Natukunda 

 

You have an emergency late in the night. Your bank is miles away from your residence, so you can’t access any money.  Ah, someone offers to send you  money through mobile money and you get it right away, because there are telecom shops scattered  all over the suburbs and operating 24/7. 

 

“They (banks) either have to work 24 hours or they will run out of business,” says a source in one of the telecoms.

 

Thanks to technology, banking is now a phone tap away and it is business unusual for traditional banks who have had to adjust from added time of business operations to finding new ways of delivering service and products.

 

A random survey by Business Vision shows that banks such as Diamond Trust and Standared Chartered have branches open on Sundays, while dfcu Bank closes as late after 7:00pm on weekdays. On Saturdays, most banks close at 3:00pm compared to noon a few years ago. 

 

Several banks have also scrapped or reduced fees on over the counter transactions, while bank staff have pinned notices encouraging clients to use ATMs more. 

 

Centenary Bank, for instance, has sales people who walk up to customers queuing in the banking hall asking them to register for CenteMobile-the 24/7 full banking service that allows customers to perform financial transactions and access banking information using their mobile phones anytime and anywhere.

 

Behind this strong growth are the changing trends in customer experience, as well as the growth of smart devices enabling online banking.

 

Raheel Ahmed, the Standard Chartered regional head of consumer banking, disclosed recently that over the counter transactions have fallen by over 20% in the first half of the year - an indication of how online banking services are quickly picking up. The growth is driven mainly by customer experience becoming largely digital and also very demanding.

 

Raheem conceded that the mobile telecom sector is showing banking the way. This will mean banking will move away from the traditional brick and mortar presence to online and more widespread small agency presence. This is also in line with the Central Bank’s long-term strategy. 

 

Some banks have provided information to Google Maps so that all their ATMs are mapped and clients can locate the closest ATMs using Google maps. This is another indication of the growth of online use. However, Uganda’s banking penetration remains around 15%.

 

Joseph Omoria, a part time lecturer of accounts and banking at Kyambogo University, says banks may be losing potential customers. 

 

“People are tired of the bureaucracy of being asked for signatures and IDs, the ATM being swallowed up or the money running out of the machine, and so on.

 

They would rather go to a mobile money operator who only requires the cell number of the person he is sending money to without all the rigid bureaucracy,” Omoria says, adding that in the end, banks are going to lose out on the number of clients who are saving in a bank.

 

“The truth is that people need their money there and then. The ATM is miles away. Are banks going to put up ATMs at every corner of every suburb? 

 

Are they going to harmonise have a client of a different bank doing transactions in any bank, just like Warid customer is able to send mobile money to someone on a different network?” he wonders.

 

Mobile money entered Uganda in 2009 and in five years, it has turned out as the greatest enabler of financial transactions in the last decades. 

 

There are now more people registered on mobile money in three years than Ugandans with bank accounts in over five decades, even if banks have many more products to offer. Although mobile money services are affected by network instabilities, more customers are signing up for the service. 

 

Recent information from the Central Bank indicates that the number of users of the mobile money transfer system grew from 2.9 million in 2011 to 8.9 million at the close of 2012, effectively passing the 4.9 million bank accounts as at December 2012.

 

On the other hand, the number of mobile money transactions increased from 87.5 million in 2011 to 242 million at the end of 2012. The value of the transactions grew from sh3.8 trillion to sh11.7 trillion.

 

Charles Ocici, the executive director of the Enterprise Uganda, says mobile banking is faster and a lot more flexible for most business transactions.

 

However, Ocici doubts traditional banking will be wiped out. “Obviously mobile banking has attracted too many operators, including very tiny ones.

 

If you wanted to send sh1m today, you would have to move from one dealer to another, because it seems like it is not favourable for huge volumes of money,” he says.

 

There are now more people registered on mobile money in three years than Ugandans with bank accounts in over five decades, even if banks have many more products to offer. Although mobile money services are affected by network instabilities, more customers are signing up for the service. 

 

Recent information from the Central Bank indicates that the number of users of the mobile money transfer system grew from 2.9 million in 2011 to 8.9 million at the close of 2012, effectively passing the 4.9 million bank accounts as at December 2012.

 

On the other hand, the number of mobile money transactions increased from 87.5 million in 2011 to 242 million at the end of 2012. The value of the transactions grew from sh3.8 trillion to sh11.7 trillion.

 

Charles Ocici, the executive director of the Enterprise Uganda, says mobile banking is faster and a lot more flexible for most business transactions.

 

However, Ocici doubts traditional banking will be wiped out.

 

“Obviously mobile banking has attracted too many operators, including very tiny ones. If you wanted to send sh1m today, you would have to move from one dealer to another, because it seems like it is not favourable for huge volumes of money,” he says.

 

Online and mobile banking’s ability to enable utility payments has pushed banks to post short mobile messages informing customers on how they can pay their URA, NSSF, Umeme and water bills at the bank’s branches – another indication of the versatility of this service.

 

Challenges

The biggest challenge has been the process of sim card registration associated with the lack of a national identity card. But Airtel Uganda communications manager Fiona Wall says they have developed an elaborate know your customer (KYC), which involves a question guide that is helping them cope with the lack of a national identity card.

 

“The other challenge is with the users who make errors when they want to reverse transactions or reset passwords. There is need for more vigilance on the user side. They should call the receiver before sending because it would cost you a lot more if you lost that money,” said Wall.

The other is the security risks associated with new technology. There has been massive fraud, although on the side of telecom operators. But even though subscribers have not been directly hit, the situation somewhat created a reluctance on user uptake of the product, according to observers.

 

Future

The Government launched the national identity card project a few weeks ago. If rolled out countrywide, it will curtail the falsification of documents which creates security risk.

 

With growing penetration and more product offering, mobile money will provide financial inclusion for almost half of the population (18 million) were they all to register for the service. 

 

This will even be strengthened by the compulsory SIM card registration that is set to end soon, paving way for more financial inclusion.