Blow to physical banks as more customers go digital

ATM machine

The report shows lack of proper banking documentation and long distances to the nearest bank branch played a role in the non-use of bank accounts.

Photo credit: Pool

What you need to know:

  • Formal banking system facilitated more by mobile technology.
  • Use of traditional accounts has declined to 23.8 per cent over the last two years.

The use of traditional bank accounts has declined to 23.8 per cent over the last two years as customers took up more convenient digital options.

The 2021 FinAccess Household Survey report released yesterday shows the overall use of traditional bank accounts has reduced from 29.6 per cent in 2019 as mobile banking rose to 34.4 per cent from 25.3 per cent, with more people shifting to technology for transactions.

Access to banking services rose to 44.1 per cent from 40.8 per cent in 2019, with more people getting into the formal banking system made faster and easier by mobile banking. 

“Usage of mobile banking increased across all demographics analysed. The use of the traditional banking, however, declined, except those in the age bracket of above 55 years,” the report says.

The number of households that attributed the non-use of bank accounts to lack of money to save rose to 56.3 per cent in 2021 from 35.1 per cent, underlining the difficulties posed by the Covid-19 crisis. 

Those that attributed the same to lack of a job or regular income also rose to 35.3 per cent from 21.6 per cent, while 23 per cent, up from 19.3 per cent, said they could not maintain a bank account

The report, which sampled 30,600 households, also shows lack of proper banking documentation and long distances to the nearest bank branch played a role in the non-use of bank accounts.

Meanwhile, more females (14.4 per cent) than men (11.8 per cent) have not used a bank account in the last 12 months, while 15.1 per cent of rural households that responded had not used a bank account compared to 11 per cent of urban households.

The report also shows increased usage of mobile money, which hugely complements mobile banking, on daily and weekly bases compared to 2019, despite a decline in monthly usage.

“This may be attributed to the role of mobile money in addressing the cash needs of households, government policy on cashless transactions to curb the spread of the Covid-19 pandemic and waiver of transaction fees on mobile money,” it says.

Physical banks and mobile banking apps were the main channels used to access and use banking services in 2021 across all demographics at 40.1 and 36.1 per cent respectively.

At the same time, 12.9 per cent of households had not visited a bank over the previous year, 30.3 per cent used ATMs, 25 per cent used bank agents, while 2.2 per cent used online banking.

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