A mobile subscriber withdraws money from an M-Pesa outlet. PHOTO | FILE
What you need to know:
Central Bank data shows that in September, there were 17.6 million card transactions compared to 33.9 million in February 2013.
The shift towards mobile banking from cards is likely to accelerate with the capping of interest rates.
Kenyans have cut the average number of transactions made using bank cards to one per month from three, preferring instead to carry out payments using mobile banking channels.
In its latest banking sector report, Sterling Capital analysts say the shift towards mobile banking from cards is likely to accelerate with the capping of interest rates, which will see lenders push customers to alternative banking channels as a cost saving measure.
Central Bank data shows that in September, there were 17.6 million card transactions compared to 33.9 million in February 2013, when mobile banking took firm root with the launch of Commercial Bank of Africa and Safaricom’s product M-Shwari.
These cards include ATM, prepaid, charge, credit and debit cards. The value transacted also fell from Sh149.3 billion in February 2013 to Sh115.6 billion in September this year.
The number of monthly mobile money transactions has in the meantime more than doubled, having stood at 53.5 million in February 2013 and 130.7 million in September 2016. The value has gone up from Sh141 billion in February 2013 to Sh283.9 billion in September.
“The use of mobile technology to deposit and withdraw cash from bank accounts seems to have eaten into the usage of cards with usage that had previously peaked at approximately three transactions per customer a month in February 2013 — the preceding month to the introduction of M-Shwari — dropping to one card transaction per month. Mobile transactions per customer remain upbeat at approximately four transactions per month,” said Sterling Capital in its latest sub-Saharan Africa banking report.
The customer loan-rate cap and deposit account rate floor introduced in September has shrunk the interest margins for banks, with cost saving likely to be a preferred option for lenders looking to protect their earnings.
“Mobile banking is proving to be the sector’s ‘gold’ with every bank running for it… over two thirds of the commercial banks have embraced mobile banking, which is the cheapest channel of providing banking services,” say the Sterling analysts.
Adoption of M-Shwari has, for instance, helped CBA move from a tier II bank to tier I lender.
The ease of access to mobile money has brought in more Kenyans into formal banking since lenders can now reach customers without needing to keep investing in brick and mortar branches.
In addition to pushing lenders to mobile platforms as a cost-saving measure, Sterling analysts say that banks are also likely to focus on short-term business financing, which may have a knock on effect on the economy.
“Banking sector re-engineering could push banks to focus on uncommon banking services which are short-term in nature such as trade finance and bank overdrafts,” says Sterling.
“However, given that Kenya is becoming a mercantile economy, the rise of trade finance may spur growth of imports widening the trade account deficit gap.”
This could in turn put the shilling under exchange rate pressure and also carries the risk of pushing up inflation.
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