Banks and telcos have to partner for improved financial inclusion

banking and mobile money services

Signage indicating agency banking and mobile money services in a Nyeri shop. More customers are opting for digital banking.

Photo credit: File | Nation Media Group

The financial services sector plays a central role in facilitating economic development with one of the greatest areas of opportunity perhaps the collaboration between banks and mobile telephony service providers.

The banking industry has operated in Kenya for over a century and evolved over time to meet and respond to market demands and dynamics. Indeed, we have come a long way as an industry from when “mobile banking” was carried out via motor vehicles in the 1970s to today, when it is fully digital.

Over the past two decades, more players have entered the financial services space, with banks collaborating towards advancing financial inclusion and creating value for society. As a result, banking is radically different from what it was at the turn of the millennium: More convenient, thanks to innovative platforms such as M-Pesa by Safaricom.

Of all the services delivered by the industry, mobile money has, perhaps, had the most transformative contribution to the financial services industry. The financial services sector has leveraged mobile telephony to expand customer touchpoints and increase efficiency. Through strategic partnerships between financial service providers and mobile network operators and fintechs, digital transactions, particularly mobile banking, thrives.

Global health crisis

In a recent study, Kenya Bankers Association (KBA) found that more customers are opting for digital banking, especially as we adopt digital models due to the global health crisis. Mobile banking and internet banking use has also increased — including with clients with disabilities, whom the industry is working to better support in an innovative PWD digital accessibility project by KBA, FSD-Kenya, inAble and seven banks.

In a FinAccess study by FSD together with Central Bank of Kenya (CBK) and Kenya National Bureau of Statistics (KNBS), formal financial inclusion was 82.9 per cent in 2019, a big jump from just 26.7 per cent in 2006. It also found that the gender gap had narrowed.

Catalysed growth

A key driver for our country’s tremendous improvement in financial inclusion has been collaboration between banks, mobile network operators and fintechs. This collaboration — both intra- and inter-sector — has catalysed the growth of mobile money.

During this pandemic, we have seen e-commerce flourish at an exponential rate, riding on increased penetration of the internet and proliferation of mobile payments. This has made it easier for entrepreneurs to promote their merchandise and access markets, including globally. Digital financial services, including mobile banking, have an impact on not just individuals and businesses, but also on the financial sector and the economy.

CBK statistics show the volume and value of mobile money transactions has grown exponentially over the years — from just 5.5 million transactions valued at Sh16.3 billion conducted on mobile money in 2007 to 1.83 billion transactions worth Sh3.34 trillion in 2019, fuelled by collaboration, partnership and an enabling regulatory environment.

Indeed, we’re fortunate to operate in a market where both the government and regulators support financial sector innovation. Most recently, KBA introduced a regional first: PesaLink , a 24/7 bank-to-bank instant payment platform. Offered by the KBA subsidiary Integrated Payments Services Ltd (IPSL), it relies on mobile access and connectivity and is leveraging on partnerships to scale.

The banking industry’s vision is to inspire future collaborative innovations so that we can build a more efficient and affordable interoperable ecosystem that includes not just banks, telcos and fintechs, but also all other service providers in the vast payments space.

The challenge for all players within the financial services sector and payments space is to see how to leverage on the Covid-19 experience to create value for Kenyans.

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