KCB chief executive Martin Oduor-Otieno. He said the bank will double its agents to 6,000 by the end of 2012. Photo/File
Kenya Commercial Bank (KCB) plans to roll out its mobile banking service in Tanzania and Uganda by the end of September. The service is in pilot phase in both these countries where a few bank employees and invited parties are trying it out.
The bank is also in talks with utility providers — electricity and water services — in both Tanzania and Uganda to allow customers pay their bills through the mobile banking platform.
The service was first rolled out in Rwanda in the first quarter of this year, followed by Kenya in May.
Jean Bosco Iyacu the acting head of retail banking in KCB Rwanda said over 30 per cent of their customers are enjoying the product despite the initial resistance.
“There is still some resistance from customers; many cellphone users are still either reluctant about using the mobile payment platforms being proposed by their banks or telecom companies,” he said, adding that they are now putting more effort into creating awareness.
Mobile money
Five years since the rollout of Kenya’s revolutionary mobile transfer service, M-Pesa by Safaricom, regional banks are now starting to take mobile phones as an important distribution channel.
Equity Bank, a regional bank with Kenyan routes is also expected to launch a competing service soon.
Though middle-sized banks in the region offer some form of Internet and mobile banking, KCB’s launch is significant because this will be the first time a bank of its size with nearly two million customers (a tenth of mobile money users in Kenya) that has attempted to take this route.
There are significant opportunities, as well as infrastructure and security risks, but if KCB succeeds in growing its mobile banking offering to a big scale, this could reshape the future of national payment systems in the region by marrying financial services and technology more closely than it was thought possible.
Mobile banking has not been a big hit elsewhere in the world with the exception of Thailand. This will boost the ability of the bank to distribute products cheaply, run the back office and enhance capabilities for cross-selling products.
KCB’s mobile banking service, mobibank, allows a customer to transfer money from their bank account to their mobile phones and vice versa.
KCB’s customers can also transfer money from their bank account to another bank account, be it a KCB or another bank.
The bank said money can be sent to any phone using basic text messaging technology or sophisticated iPhone, iPad or Android apps, whether it is on an Australian or Zambia network carrier.
The only catch is that to withdraw one has to go to a KCB branch or an agent, who are only found in East Africa.
But KCB, Kenya’s largest bank by assets worth Ksh350 billion ($4.1 billion), has the ambition to expand across the continent. Entry to DRC Congo beckons after the bank started its operation in Burundi early this year.
Martin Oduor Otieno, KCB’s CEO said they will have doubled their agents to 6,000 by the end of 2012.
Agency banking is where small outlets, usually run by individuals, are licensed to provide banking services such as deposits and withdrawals.
The burden of constructing branches, usually costing about Ksh25 million ($297, 620), is removed from the bank because small business — from hardware stores, cyber cafes and the corner shop can and are acting as agents.
By having a presence all over the region and across the continent, through bank agents, contracts with mobile phone carriers and utility providers, KCB is throwing down the gauntlet to telecommunication companies and other banks on money transfer services.
In fact, it presents a good picture on the evolution of money and the revolution of mobile payments and where things are going.
Customer convenience
“We are not doing this because we want to compete with Safaricom. We are looking at our customer base and want to bring convenience to them,” said Mr Oduor-Otieno.
“We expect, as happens with any innovation, you are in the market today and somebody picks up your product. At the moment I suspect that all the 43 banks (Kenyan) are trying to bring this technology in place. I expect in the next six months there will be a lot of work by other people be it banks or telecommunications companies.”
Telecommunications companies in East Africa have been at the forefront of mobile phone transfer services.
M-Pesa, the money transfer service by Kenya’s Safaricom started in March 2007, has been a case study globally on the transfer of cash.
Safaricom had 39,400 M-Pesa agents by the end of March 2012 this was four times the 9,748 banking agents at December 2011 giving the telecommunications company a huge advantage.
“Mpesa’s principal advantage is its ubiquity. It is a product that is deeply embedded in more than 75 per cent of adult Kenyans’ lives,” said Bob Collymore Safaricom CEO.
M-Pesa’s revenues rose 43 per cent to Ksh16.9 billion ($201 million) in the full year ended March 2012 compared with the same period a year ago. The number of customers’ accounts rose 6 per cent to 14.9 million at the end of March 2012.
This is hugely significant because M-Pesa now has the same number of deposit accounts in the Kenyan banking system. This means M-Pesa can sit on a huge volume of deposits, depriving the banking system of cheap sources of funds.
Secondly, it places M-Pesa at a huge advantage in the next round of mobile money payments or money transfer services.
While more and more customers now use M-Pesa as a money transfer service and to pay for their bills — utilities, salaries, and other bulk purchases — smaller day to day transactions, like buying groceries, need cash.
