Mobile banking drives accounts surge for lenders

Kenyan banks last year aggressively expanded their operations, increasing the industry’s staff count by 2,864 and the number of customer accounts by 30 per cent to 28.4 million, according to the latest Central Bank of Kenya (CBK) report.

The CBK says in the banking inspection report that the banking industry now has 36,923 employees or 8.4 per cent more than the previous year’s 34,059.

This was the second-largest wave of hiring in the industry after 3,834 in 2008.

The rapid growth in 2014 staff numbers came on the back of an aggressive expansion that saw the lenders open 101 new branches in a year.

The rapid growth in staffing and customer numbers is linked to the rapid uptake of financial services in Kenya and in Eastern Africa where 11 local banks have established operations in the past 10 years.

The CBK report also shows that Kenyan banks heavily invested in technology-driven service delivery, including mobile and Internet banking that resulted in the opening of 6.5 million new deposit accounts, the highest increase in a single year.

“Kenyan banks continued to leverage on robust ICT platforms in the provision of quality banking services that are efficient and on a wider scope,” the CBK report says.

Mobile banking contributed the most to the rapid uptake of formal financial services among the previously unbanked population, according to the report.

Banks have rolled out mobile banking products on their own or in collaboration with telecommunication companies such as Safaricom, whose mobile banking product M-Shwari that is offered in partnership with Commercial Bank of Africa has amassed 10 million customers.

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Other lenders, including Co-op Bank have developed own mobile banking products such as MCo-op, which has 1.2 million customers, representing half its 2.6 million customer base.

Technology has also become the foundation of agency banking offered by third parties for services such as deposits and withdrawals that are seamlessly reflected in customers’ accounts.

In what amounts to a stamp of confidence in technology-driven banking, the CBK says Kenya’s mobile, Internet and agency banking is underpinned by stable and efficient operating core banking systems that the lenders have installed in the past few years at a cost of billions of shillings.

While technology has reduced customers’ reliance on brick-and-mortar branches, the CBK found that the lenders remained focused on physical expansion, especially in Kenya where the establishment of county governments has expanded opportunities at the grassroots.

“A total of 28 out of 47 counties [in Kenya] registered an increase in the number of bank branches, indicating increased demand for financial services,” CBK says, adding that this was partly occasioned by increased economic activities in the regions following the introduction of devolved government in 2013.

The CBK says the latest banking jobs boom is partly driven by ongoing expansion into new markets such as Tanzania, Uganda and South Sudan where Kenyan banks have set up operations or acquired existing institutions.

Subsidiaries of Kenyan banks in Rwanda, Tanzania and Southern Sudan opened a total of 27 new branches last year or more than a quarter of the total 101 branches opened in the year. A total of 74 new branches were opened in Kenya, including 40 in Nairobi.

This raised the total number of bank branches to 1,443, up from Sh1,342 in 2013.

The CBK report shows that physical expansion of banks through wider branch networks mainly benefited support staff such as messengers, janitors, receptionists and drivers whose ranks grew by the largest margin of 31.8 per cent to 2,336.

Those in supervisory roles, mainly overseeing clerical and back office work, were second with a 13.8 per cent increase to 6,464.

Management, whose ranks grew 11.1 per cent to 9,584, also benefitted underlining the expanded domain of the highly skilled professionals.

Clerical and secretarial jobs, which form the bulk of banking sector careers, expanded at the slowest rate of 3.1 per cent to 18,539, reflecting increased automation of their functions.

The report shows that banks hired more risk managers as part of the plan to deal with fraud associated with increased use of technology-based banking channels.

“There have been increased cases of ICT-related frauds in the recent years,” the CBK says, warning that the new banking models are vulnerable to fraudsters.

“Data on fraud reported to Banking Fraud and Investigation Department (BFID) indicates that cases relating to computer, mobile and Internet banking are on the rise,” the report says.

The lenders have also lost money to plastic cash fraudsters, who use computer-based online transactions without effective preventive and detective controls to steal cash.

But banks aren’t giving up on technology-driven products. The CBK report says most banks are keen to overcome the challenges associated with technology-based services seen as the surest way to reduce overall wage bills in the long term.

Automation has also helped banks increase their workers’ productivity, a trend that is expected to deepen with improved margins as the ultimate objective.

One worker served an average of 770 customers last year, up from 642 customers in 2013 as the growth in deposit accounts surpassed the new hiring.

The industry has steadily improved its efficiency since 2007 when productivity was at a new low, with an employee serving an average of 190 customers at the time.

The efficiency gains have helped the banks post significant profit growth over the years, with their combined pre-tax earnings rising 12.2 per cent last year to Sh141.1 billion.