Paynet pushes for shared ATMs to lower access fees
Shared point of sale facilities like ATMs could lower costs for banks. Photo/LIZ MUTHONI
Financial institutions have been challenged to start sharing point of sale facilities like automated teller machines (ATMs) to lower their operation costs and reduce charges for their customers.
Most banks and financial institutions use their own infrastructure for ATMs, mobile banking and Point of Sale (POS) transactions like credit card purchases, many of which do not have enough volumes to become profitable and are expensive to maintain, driving up costs for consumers.
Paynet Groups’ chief executive officer in Kenya Bernard Matthewman, speaking at the AITEC Banking and Mobile Money COMESA conference in Nairobi said there were 24 bank switches and credit management systems with multiple mobile banking platforms across the country while the number of transactions could be handled more efficiently through an integrated system.
Access points
Mr Mathewman, whose company runs PesaPoint payment access points, said the overlapping ATM and sale outlets replicated switches and operations teams are expensive, have low volumes and were therefore less profitable.
According to Central Bank of Kenya data, there were 2,052 ATMs at the end of last year compared to 1,078 in 2007.
The average cost of withdrawing money from an ATM is currently Sh30 per transaction while mobile banking and point of sale costs vary across financial institutions and providers.
“There is efficiency to be gained by not replicating infrastructure —you reduce costs and reap greater margins,” Mr Matthewman said. “You are in a much better position to go to places with less economic activity."
He estimated that transaction costs would be 30 per cent less than they are.
Increasing competition in the country’s banking sector has seen the establishment of many different mobile money platforms, many of which are already integrated to telecommunication companies.
Family Bank runs a platform dubbed PesaPap, Barclays has Hello Money, KCB runs one called KCB Connect while others such as Standard Chartered, Consolidated and NIC Bank also have mobile banking platforms.
“As long as we have lots of different platforms the costs will remain high. We have to share infrastructure,” said John Staley, director finance and shared services at Equity Bank, speaking at the same conference.
“Infrastructure sharing has been happening…through it we can offer consumers more and become more efficient” said Snehar Shah, head of Orange Money.
Paynet Groups’ chief executive officer in Kenya said that the Sarit centre area in Westlands currently has about nine offsite and three onsite ATMs from different firms, requiring approximately 54,000 transactions per month to remain viable, adding that the volume generated in the area could be served by about 6 ATMs.
He said Isiolo, which had 2 ATMs in 2006 with an average of 6,000 transactions, now has six with an average of 2,000 transactions per month adding that an offsite and onsite ATMs needs an average of 5,000 and 3,000 transactions per month respectively to remain viable.
“Margins under pressure since costs are too high and the constant need for technology investment is draining,” said Mr Mathewman.
“Competition is increasing and CEO’s are recognising that critical mass and volumes are needed to compete in the retail space. They are realising that they cannot reach competitive scale on their own,” he added.
