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Banks, CBK hold talks on return of mobile cash transfer charges

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • The lenders have witnessed a fall in fees and commissions from such transactions and see the end of the freeze of the charges as the avenue to rev up non-interest income.
  • KCB chief executive Joshua Oigara says the lender is in talks with CBK and hopes for a deal that will either allow full or discounted charges by end of the year.

Banks are in talks with the Central Bank of Kenya (CBK) to reinstate charges on customers’ transfer of money from bank accounts to mobile money wallets.

The lenders have witnessed a fall in fees and commissions from such transactions and see the end of the freeze of the charges as the avenue to rev up non-interest income.

KCB chief executive Joshua Oigara says the lender is in talks with CBK and hopes for a deal that will either allow full or discounted charges by end of the year.

“Customers are getting more transactions digitised. We are working with CBK to get fees and commissions on these transactions,” said Mr Oigara.

“This is a good opportunity to look at the charges. I don’t see the charges going back to the levels they were before [the pandemic]. We see a discounted level of charges on the mobile transactions.”

A return of the charges will be a boost to banks who have forgone revenue in an environment of increased digital transactions.

Equity Group last year put the lost revenue at Sh120 million per month.

Banks are losing millions per month due to the free transfers between them and wallets such as M-Pesa given that they used to charge fees ranging from Sh30 to Sh197 before the waivers were introduced.

The fee waivers were introduced mid-March last year alongside M-Pesa cash transfers of Sh1,000 and below to help curb the Covid-19 pandemic by reducing handling of cash.

KCB mobile banking transactions have increased by about 70 percent in the six-month period to June and Mr Oigara says the rise will compensate for discounted rates.

“A number of players have led the way with reduced charges. I believe the volume acceleration can more than compensate for discounted rates,” said Mr Oigara.

CBK in April announced resumption of charges of bank to mobile wallets that are linked to the Sacco sector, prompting lenders such as Co-operative Bank to roll out discounted rates.

The value of KCB mobile transactions, including lending, grew by 104 percent to hit Sh1.12 trillion at the end of June from Sh550 billion in the previous similar period.

However, revenue from these mobile transactions dropped 18 percent to Sh3.22 billion, highlighting the impact of continued fees waivers.