Companies

Post Bank reaps from agency business deals with rivals

POSTBANK

Postbank headquarters in Nairobi. FILE PHOTO | NMG

Kenya Post Office Savings Bank (PostBank) has emerged as one of the beneficiaries of the increasing closure of branches by commercial banks, providing it with a fresh revenue stream through agency banking offerings.

Managing director Raphael Lekolool says the State-owned savings bank is witnessing a growth in revenue from services it offers in 97 branches on behalf of other banks.

Commercial banks have shut 59 branches and 430 automated teller machines (ATM) in five years through 2021, according to the latest statistics by the Central Bank of Kenya.

The shift has been prompted by a sweeping digital revolution that has seen banks invest heavily in online and mobile service delivery infrastructure.

“We have seen an upsurge of customers of other banks coming to those branches of ours to continuously transact. When you look at the number that we are serving, it has gone up because of the agreements we have signed with commercial banks,” said Mr Lekolool in an interview.

“We expect this to be the norm because most banks, as they do away with some of their branches, have created a need in our branches for them to serve their customers.”

The struggling PostBank has partnership deals where it offers agency banking services such as cash withdrawals, deposits and account balance inquiries in its wide network of brick-and-mortar outlets on behalf of commercial banks.

The partnerships under a non-disclosed revenue-sharing framework also enable banks to process bulk payments such as salaries, dividend payouts and loans in PostBank outlets.

PostBank plans to retain its branch network, citing a partnership with the government under the social welfare programme that disburses stipends to the elderly. “Also as we continuously engage in social payments we make on behalf of the government we have to still maintain those branches,” said Mr Lekolool.

“This is because for those [elderly] customers, we have to use biometrics and — apart from PoS [points of sale] which we are rolling out — recruitment and enrollment, as well as distribution, has to be coordinated from a point.”

The savings bank has for more than a decade set its sights on entering the relatively lucrative commercial lending space in line with global banking trends. The plan has, however, been hampered by stringent regulatory requirements including at least Sh1 billion core capital and capping of property investment holding at 20 percent of the capital base.

PostBank’s transition to a commercial bank has lagged behind its counterparts in Tanzania and Uganda, which operate as full-fledged commercial lenders. This despite being the oldest having started operations in 1910 unlike its Tanzanian peer (1925) and Uganda’s (1926)

Tanzania’s TPB June last year rebranded to Tanzania Commercial Bank after a series of reforms that started gathering steam in 2015 and involved mergers and acquisition deals for three other banks.

Uganda’s PostBank similarly became a full commercial bank last December after a restructuring process that involved recapitalization by the government.

[email protected]