Co-op Bank cuts Sh1.2bn stationery costs by half in shift to paperless system

Co-operative Bank of Kenya cut its stationery and printing costs by half last year following a shift to paperless banking. The lender said it spent Sh660 million in printing and stationery last year, down from Sh1.2 billion a year earlier.

The reduction is an indicator of happenings in the banking sector with other lenders such as Family Bank and Equity also in the paperless banking with hopes of slashing operating expenses.

“We have phased out paper deposit slips and automated over 68 previously manual activities including establishing e-loans. We are also requesting our customers to switch to digital banking statements,” said the bank’s chief executive Gideon Muriuki on Friday.

Banks are relying more on technological innovations to cut costs and improve security, a situation that is increasingly cutting out traditional suppliers.

High operational cost have been cited as key contributors to high interest spreads in the country.

Commercial lenders have also automated credit processes through mobile-based lending thereby cutting stationery costs.

“We used to print eight page long offer letters for even small amounts. Paper is one of the largest expenses in a bank,” said Equity Bank’s chief executive James Mwangi early this month during an investor briefing.

He said the bank was experiencing a drop in stationery costs due to shift to mobile transactions by most of its clients. The bank has also gone for paperless banking with customers not required to fill any document for most over the counter transactions.

READ: Equity Bank reports drop in staff costs as 660 workers exit

Equity is currently disbursing 81 per cent of its loan applications through its mobile platform, Equitel. 

Barclay’s customers in some branches have touch screens on their side of the counter where they sign for authentication that they are the account holders to eliminate the need for physical paper.

Some of the lenders have also squeezed more functions on their forms: for example cash transactions, cheque deposits, bankers cheque requisition and foreign currency trading instructions are on one form.

Most lenders do not break down costs incurred on stationery in their annual reports making it difficult to trace the impact of the changes made.

Agency banking, which allows banks to contract some of its services such as cash transactions to retail outlets such as shops and hard-ware stores, has also reduced the use of paper. The agents use POS machines to swipe their cards.

Beside cash deposits, other processes being pushed to the paperless system are electronic funds transfer and real-time gross settlement transactions. Cost cutting has become a major income driver in banking sector as it matures and competition heightens.

Bank customers are however yet to feel the benefits of the cost cutting exercise with interest margins remaining wide.

Central Bank of Kenya has been pushing the lenders to lower the cost of loans as new initiatives are introduced in the sector improving their efficiency.

“Our interest margins are at 10 per cent which are only found in countries that have undergone huge shocks,” said CBK governor Patrick Njoroge last week.