Mobile phone banking is turning tables on automated teller machines (ATMs). But this once revolutionary technology is not going down without a fight.
Customers are still dancing to the tune of ATMs but not as much as in the 1990s when agency, internet and mobile banking were almost unimaginable.
Started out as a place for checking bank balances, mobile phone platform can almost now do everything that banking halls do, including loan application and disbursement—much faster.
And lenders are responding to this customer-led disruption. For instance, Co-operative Bank of Kenya, which in 2015 became the first to station agents inside branches, has been stepping up its digital offerings as customers seek convenience.
The lender rolled out e-credit product, which among other services, offers salary advances—called e-flexi.
This has eliminated the need for any paper work or going to branches for this service, which last year alone disbursed Sh58 billion. The e-credit loan book crossed Sh139 billion in March.
“Kenya’s high mobile subscription and a younger population means the demand for digital services will continue to rise as customers seek convenience and flexibility in their transacting lifecycle,” projects the lender.
And now it is almost unimaginable for banking business to exist without investing in digital capabilities.
Mobile banking is now shaping the kind of skill sets in the financial sector, the size of physical branches to set up and where, as well as how to enrich ATMs so as to remain relevant.
Top banks such as KCB, Equity, Co-op, NCBA, Standard Chartered, Stanbic and Absa have led in this transformation to carefully strike a balance between digital platforms and the legacy ones.
Banks cut the number of ATMs to an eight-year low of 2,381 in August, according to the latest Central Bank of Kenya (CBK) data.
While customers are increasingly embracing other more refined forms of convenience banking such as transacting on mobile phones, they can’t just fully move on from ATMs- their first escape route from long banking queues. Now mobile banking is disrupting the scene, forcing banks to cut the number of ATMs in the country.
This is the lowest ATM count since July 2013 when the country had 2,377 machines, and the reduction reflects the growing popularity of agents, internet and mobile banking among customers as they search for convenience.
But banks are not going to phase out ATMs and branches just yet. Instead, they are seeking an optimal balance between the various channels of transactions.
For James Mwangi, the Equity Bank chief executive, banking has stopped being a place customers go to. It is now what they do on their phones.
“Self-service platforms have pushed freedom and choice to customers. They choose when and where to bank,” said Mr Mwangi. In the late 1990s when Lingala music was more popular and brick and mortar banking the order of the day, Barclays Bank of Kenya (now Absa) found a way to make customers sing and dance along to the tune of ATM technology—then a big thing for the sector.
Their animated TV commercial that introduced ATMs through a robot dancing to Lingala was sensational to both the young and the old. In the end, customers got hooked to the convenience that came with ATMs.
So powerful was the innovation that small businesses such as those selling milk and cooking oil now ride on the name with outlets trading under names such as milk ATM. The cash dispensing machines that are common in urban centres are slowly losing popularity as the digitisation of financial services in the banking sector continues to gain momentum.
ATMs have stood the test of time, just like physical branches, despite digital banking space having grown at an accelerating pace in recent years.
Kenyan banks have had to adopt multiple cost-effective delivery channels in offering financial services to ensure efficiency and maintain their market shares.
This has meant retaining and enriching the capabilities of ATMs, a channel that was once exclusively used as an alternative to branch services.
For instance, it is now possible to withdraw money from ATMs using channels such as M-Pesa, enabling cardless transactions Some banks have even rolled out smart ATMs that allow customers to talk to a live remote teller.
The video teller machines augment in-person teller services, allowing customers to speak to a remote live teller and seek their assistance to complete transactions.
Other banks have introduced cash recycler ATMs that allow customers to deposit cash or cheques and withdraw cash beyond normal operating hours.
For lenders what serves the customer conveniently and at a less painful cost for both will ultimately carry the day.