Capital Markets

Top banks eye billions from mobile transaction fees


M-PESA Super App for Safaricom customers, with an “Offline Mode” and “Mini Apps” that enable customers to use the M-PESA Super App and complete transactions even without data bundles or when totally offline. PHOTO | DIANA NGILA | NMG

Banks are set to grow their revenue by billions of shillings once they reinstate charges on bank-to-mobile transactions at the start of next year.

The Central Bank of Kenya (CBK) announced on Monday that lenders would resume charging on the transactions, adding that the fees would be reduced by a range of between 45 per cent and 61 per cent.

Retail banks with millions of customers led by Equity Group and KCB Group were the biggest losers in the fee waivers introduced on March 16, 2020, to offer financial relief to customers besides boosting the uptake of cashless transactions to fight the Covid-19 pandemic.

Equity disclosed that it lost Sh1.2 billion in 2020 and Sh2 billion last year due to the removal of the charges, taking its cumulative revenue losses in the two years to Sh3.2 billion.

READ: Mobile money wallets hit 70m

KCB meanwhile said it lost Sh1 billion each in 2020 and 2021, pushing its losses to Sh2 billion.

The banks are foregoing revenue once again this year. Before the financial reliefs were introduced, most bank-to-mobile transactions attracted fees ranging from Sh30 to Sh197.

Co-op Bank meanwhile said its bank-to-mobile revenue declined by Sh900 million in 2020. The lender was, however, authorised by CBK to reinstate fees on its MCo-op Cash platform earlier in April 2021 though at reduced rates than before.

The regulator said platforms such as MCo-op Cash offer unique and critical services to savings and credit societies (SACCOs).

The other banks will also soon resume charging but at lower rates as well.

“The revised maximum charges for transfers from bank accounts to mobile money wallets will be reduced by on average up to 61 per cent, and mobile money wallet to bank account by on average up to 47 per cent,” the CBK said.

The reinstatement of the fees is set to increase banks’ transaction-based income which they have been growing aggressively over the years.

The Business Daily’s analysis, for instance, shows that tier-one banks earned Sh52.89 billion from trading in currencies in the nine months that ended September.

This represented an 87.11 per cent surge from Sh28.27 billion a year earlier.

The CBK noted that following the removal of the charges the monthly volume and value of transactions between payment service providers like Safaricom and banks increased from 18 million transactions of about Sh157 billion to more than 113 million deals valued at Sh800 billion.

The CBK said the waivers resulted in significant benefits, with an increasing number of Kenyans suddenly getting plugged into the financial system.

READ:Mobile money agents handle Sh5.9trn in nine months

However, the reintroduction of the charges is likely to hit consumers who had come to rely on the waiver as one of the copying mechanisms against the high cost of living that has seen the cost of critical services rise sharply.

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