Mobile banking opens new doors, mixing business with leisure

A financial sector study by FinAccess National Survey 2013, released a month ago, shows why banks are falling over one another to go mobile. Photo/FILE

What you need to know:

  • Declining revenue from the agency model, costly branch network, and rising uptake of technology push lenders to launch platforms where customers can save and borrow from their handsets in order to sustain huge income margins

You will soon be able to visit popular social media site Facebook to chat with friends and, while there, do your banking. Facebook banking will soon be a reality. This is just one of the lengths that commercial banks are willing to go to win their next customer.

Riding on increased Internet and mobile phone penetration in Kenya, banks are innovating financial applications to take the industry by storm.

“Information and communication technology continued to play a leading role in the success and progression of the banking industry,” the Central Bank of Kenya says in its annual supervisory report.

A financial sector study by FinAccess National Survey 2013, released a month ago, shows why banks are falling over one another to go mobile.

In a country of 19.4 million adults, the study says, 11.5 million are using mobile phone financial services, more than double the number of adults who use banks (5.4 million).

“There is a very huge number of technology-savvy Kenyans and it is the best way to increase interaction with potential customers,” says Mr Johnson Nderi of ABC Capital.

The legroom for more users in mobile money is still high, with March 2013 Communications Commission of Kenya (CCK) statistics showing that the country’s mobile phone users stood at 29.8 million.

The number of people using the Internet, on the other hand, increased to 16.2 million by December last year — a 11.6 per cent jump from 14.5 million users recorded in September 2012.

The growth deferential between mobile and conventional banking is an equally compelling case for the retail banker to turn to technology.

FinAccess noted that while the use of mobile phone financial services has grown to 62 per cent of the population this year, the use of banks stands at 29.2 per cent, less than half of the people using handsets.


Nowhere else is the threat facing bankers as well reflected as what is happening in saccos. The number of people using saccos had contracted to 9.1 per cent this year from 13.5 per cent recorded in 2009.

The microlenders are victims of the perception that they are late and often slow adopters of technology.

More important to the technology push is the fact that 56.4 per cent of the adult population is under 35 years, with most of them hooked to technology.

Analysts observe that technology-driven expansion is proving an easier and cheaper option due to the readily available infrastructure as opposed to setting up conventional bank halls.

Mr Nderi says the savings in costs can be transferred to other areas of investment to help spur lenders’ capital base.

A partnership between Commercial Bank of Africa (CBA) and Safaricom’s M-Pesa which launched M-Shwari, for example, saw the bank record the fastest upswing in deposit accounts to five million from 34,000 in a record three months.

As of October, the sharp rise in M-Shwari account holders turned CBA into Kenya’s second largest retail lender after Equity Bank, which had seven million accounts, the latest indicator to the potential that lies in technology-aided banking.

The model allows M-Pesa users to open a virtual CBA account into which they can save and borrow. CBA said it transacts up to 30,000 loans a day.

Banks are leaving nothing to chance as they seek to access the huge volumes of cash transacted through mobile money transfer services by scouting for partnerships.

And the latest Central Bank of Kenya (CBK) data showing that mobile payments grew by 21.8 per cent to Sh1.2 trillion at the end of August, compared with Sh987.2 billion during a similar period last year, could just rejuvenate the search for more agreements.

“There is no doubt that banks want to access the huge money transacted through the various mobile money transfer services which, if they do, can greatly increase revenue,” notes Mr Moses Njuguna of Sterling Capital.

Central Bank governor Njuguna Ndung’u said alternative service delivery channels by banks which have been greatly informed by the advent of mobile financial services is pushing up financial inclusion in the country.

“The financial system is now offering an increased and more diverse range of financial services to more Kenyans,” he said.

This reality has shifted the customer acquisition battle from retail expansion to a race by commercial banks to introduce mobile and Internet banking platforms.

Recently, Kenya Commercial Bank introduced M-benki, a service that allows mobile phone subscribers to open savings accounts with the lender from their handsets.

KCB targets three million accounts in 12 months as it seeks to cut reliance on interest income by riding on mobile money transfer, in which Kenya is a global leader.

Analysts argue that this is the last frontier that banks are going to maximise on to sustain the huge profits they have been raking in and those that embrace this will benefit hugely.

“The trend is literally out of necessity by banks to survive lest they lose their market share to more flexible players, including informal models like shylocks,” said Mr Njuguna.

Central Bank figures, however, show poor growth in agency banking, a service launched in 2010 in a bid to take banking services closer to customers.

In 2010, about 21,816 agents facilitated over 69.2 million transactions valued at Sh366.8 billion. But in June 2013, while 13 banks had been authorised and had contracted 19,649 active agents, they facilitated 58.6 million transactions valued at Sh310.5 billion. 

CCK says the uptake of mobile money expanded, with subscriptions increasing by 10.1 per cent to 23.2 million transactions in the quarter ending September this year.

Take Family Bank’s virtual banking model dubbed PESAMOB, for instance. It allows convenient access to cash any time from 115 ATMs and 1,000 agents countrywide, besides being able to withdraw money from M-Pesa shops.

Targeting over five million deposit accounts in nine months, the service allows customers to open bank accounts with the lender without even visiting its branches.

“PESAMOB gives one the freedom to access loans, transact, and save cash without making a physical visit to the banking hall,” said Family Bank chief executive Peter Munyiri.

According to Mr Nderi, it is a win-win scenario for both the lender and the customer as far as security and convenience are concerned.


The innovation saves the consumer the trouble of obtaining and carrying their ATM cards which, if stolen, will deny them access to their cash account.

Transactions are faster as one does not have to wait in a long queue to be served over the counter.

“It makes it hard for techno-savvy fraudsters to duplicate a client’s bank details as is the case with ATM cards,” he said.

African Banking Corporation has also introduced a virtual banking platform, riding on increased smartphone penetration.

The bank’s Internet banking allows customer’s access to their bank accounts through an easy-to-use mobile app available on Android phones. 

Earlier this year, the bank rolled out ABC Bank M-Transfer, a free global money wiring service in which anyone can send or receive cash online from over 80 countries worldwide. It is open to both account holders and non-account holders.

As investment clubs emerge as an important avenue of wealth creation in Kenya, banks are also looking to rope them into the mobile banking craze with bespoke products.

Bank of Africa-Kenya has a service that allows members of investment groups to transact on their mobile phones through Safaricom, making deposits, requesting loans, and checking their chama’s savings balance.

Old Mutual, on its part, runs I-invest, a unit trust which targets both individuals and investment groups and is primarily operated from mobile phones without visiting the institution, except when closing the account.



The advent of mobile money and the central role the service has played in deepening financial inclusion in Kenya cannot be overstated.

The service was introduced in the Kenyan telecom business less than a decade ago as a value-addition tool but has evolved into an integral part of the lives of Kenyans, triggering a revolution in the running of local financial institutions.

Initially, mobile money services M-Pesa, yuCash, Airtel money, and Orange money had only three functions: customers could withdraw and deposit cash, send and receive money, or purchase prepaid airtime.

Today, mobile subscribers can perform almost any financial transaction through their mobile phones. One can send and receive money locally and even internationally, run his or her bank account, pay bills, shop online, open savings accounts, borrow cash, and do much more.

“One of the reasons mobile money has attracted considerable attention is the expectation that it can provide affordable financial services to previously excluded populations,” reads a research paper by Georgetown University in the US.

Developments in the mobile money sub-sector have piled pressure on traditional banks, forcing their top brass back to the boardroom to draft fresh growth strategies.

“For the vast majority — 76 per cent — of the rural population, the nearest financial service provider is a mobile money agent,” says the FinAccess National Survey 2013 released by the Central Bank of Kenya in October.

Today, almost all financial institutions in the country — such as commercial banks, pension schemes, insurance firms, microfinance institutions, and saccos — have integrated their systems with mobile money platforms.   

— Charles Wokabi