Banks save Sh6.3bn after shutting down branches

KCB Mama Ngina Street Branch, Nairobi.

File | Nation Media Group

By  James Kariuki

What you need to know:

• Central Bank of Kenya data shows that banks paid Sh5 billion in rent last year down from Sh11.3 billion in 2018 as lenders
• The rise of mobile banking has allowed lenders to reach customers directly reducing the need for physical locations in a move that has also led to massive job losses among clerical staff.

Banks saved Sh6.3 billion last year in rental charges as the lenders shut down branches, closed automated teller machines (ATM) and moved away from expensive real estate spaces in commercial areas to their own premises in a move to save on costs.

Central Bank of Kenya data shows that banks paid Sh5 billion in rent last year down from Sh11.3 billion in 2018 as lenders

During the period under review, the number of ATMs decreased by 2.77 percent to 2,459 in December 2019 from 2,529 in December 2018 as customers increasingly turn to agency, internet and mobile banking.

The number of bank branches also decreased from 1,505 in 2018 to 1,490 in 2019, which translated to a decrease of 15 branches. Nairobi County registered the highest decrease in the number of branches by 8 branches.

“The decrease in physical bank branches was mainly attributed to the adoption of alternative delivery channels such as mobile phone banking, internet banking and agency banking,” CBK said.

The rise of mobile banking has allowed lenders to reach customers directly reducing the need for physical locations in a move that has also led to massive job losses among clerical staff.

Increasing efficiency

Over the last five years, banks have shed 6574 clerical jobs from a high of 18,539 in 2014 as the move towards digital banking over mobile phones allowed lenders to employ technology to eliminate mundane tasks, managing costs and increasing efficiency.

Basic services like account opening, over the counter services and sales are moving onto digital platforms which not only provide money transfer but also credit and savings, payments for goods and services as well as e-commerce through linkages with various financial and non– financial institutions.

The value of value of mobile phone based transactions increased 4 percent from Sh367.77 billion in 2018 to Sh382.93 billion in 2019.

 Experts say banks will continue to reduce brick-and-mortar branches as digital banking gathers momentum driven by mobile phone penetration.