ATM charges across region to drop to $0.8

The cost of ATM transactions will fall from $2.5 as charged by international card schemes to as low as less than $1 per transaction. TEA GRAPHIC | NATION MEDIA GROUP 

By James Anyanzwa, The EastAfrican

In Summary

• The fee charged on automated teller machine (ATM) withdrawals from different banks across regional borders will drop from $2.5 to $0.8 per transaction by the end of the year as the inter-operability of card switches project goes live in Kenya, Uganda, Rwanda and Tanzania.
• Under the project, customers will incur minimum foreign exchange losses associated with cross-border payments as regional central banks take over the responsibility of determining and setting conversion rates.
• Rwanda, Uganda and Tanzania have already linked their card switches to their RTGS systems. Kenswitch is working with Central Bank of Kenya to ensure the linkage is completed by August.

The cost of cross-border banking transactions in East Africa is set to go down by more than half as regional policy makers conclude procedures for an interconnected financial switch for electronic banking services in the bloc.

The fee charged on automated teller machine (ATM) withdrawals from different banks across regional borders will drop from $2.5 to $0.8 per transaction by the end of the year as the inter-operability of card switches project goes live in Kenya, Uganda, Rwanda and Tanzania.

Burundi, which does not own a payment card switch, is expected to join the system thereafter.

“The idea is to reduce the cost of doing business, where the cost of ATM transactions will fall from $2.5 as charged by international card schemes to as low as less than $1 per transaction,” said George Wainaina, managing director of Kenswitch, a Kenya-based shared financial switch that manages a consortium of 37 commercial banks and 1,947 ATMs.

Under the project, customers will incur minimum foreign exchange losses associated with cross-border payments as regional central banks take over the responsibility of determining and setting conversion rates.

For instance, a Kenyan resident with a Kenya Commercial Bank-branded ATM card travelling to Tanzania will be able to withdraw money from Akiba Commercial Bank of Tanzania at $0.8 per transaction and at an exchange rate set by the Bank of Tanzania.

“The exchange rates will be set by the regional central banks and customers will only incur minimum forex losses,” said Mr Wainaina.

“We want to have an integrated financial sector by 2018. The banks are going to be interconnected through an integrated switch,” an official from Kenya’s Ministry of East Africa Affairs, Commerce and Tourism said.

The EAC financial integrations project seeks to connect Kenswitch to similar switches in the region, including Umoja Switch of Tanzania, Intel-Switch (Uganda) and R-Switch (Rwanda). This will allow different banks across the region to identify payments cards of other banks in the region.

The card switches will then be hooked to the real time gross settlement (RTGS) systems of their respective central banks.

Rwanda, Uganda and Tanzania have already linked their card switches to their RTGS systems. Kenswitch is working with Central Bank of Kenya to ensure the linkage is completed by August.

“From a technical point of view, we have already interconnected the card switches across the region with the exception of Burundi, which still does not have a payment card switch of its own,” said Mr Wainaina.

Fast tracking

“We have also done transaction tests and manual settlements. We will go live before the end of this year, but we will do it on a controlled basis before we roll it out to the rest of the customers.”

The initial phase of the project will focus on ATMs before expanding the rollout to other business payments solutions such as points of sale and interbank transfers.