Columnists

Banks and telcos must partner for greater financial inclusion

BANKING-TECH

The importance of digitalisation in banking cannot be overstated. FILE PHOTO

The financial services sector plays a pivotal role in facilitating economic development and perhaps one of the greatest areas of opportunity is the collaboration we have seen between banks and mobile service providers.

Banking industry has operated in Kenya for over a century and evolved over time to meet and respond to market demands and dynamics. Indeed, we have come a long way as an industry from when “mobile banking” was carried out via Range Rovers in the 1970s to today, when it is a fully digital experience.

Over the last two decades, we have seen more players enter the financial services space and in turn banks collaborating towards advancing financial inclusion and creating value for society.

As a result, banking today is radically different from what it was at the turn of the millennium, making it a lot more convenient thanks to innovative platforms such as M-Pesa by Safaricom.

Of all the services delivered by the industry, mobile money has perhaps had the most transformative contribution to the financial services industry. The sector has leveraged mobile telephony to expand customer touch points and enhance efficiency.

Through strategic partnerships between financial services providers and mobile network operators and fintechs, digital transactions, and particularly mobile banking is thriving.

In a recent study by Kenya Bankers Association, we found that more customers are opting for digital banking, especially now as we adopt such models due to the global Covid-19 crisis.

We also found that mobile and internet banking use has increased, especially for clients with disabilities who the industry is working to better support in an innovative digital accessibility project that KBA embarked on in partnership with FSD-Kenya, inAble and seven financiers.

In a separate report by FSD-Kenya, Central Bank of Kenya (CBK) and Kenya National Bureau of Statistics, formal financial inclusion stood at 82.9 percent in 2019, up from just 26.7 percent in 2006. This FinAccess study also found that gender gap had narrowed.

A key driver for our country’s tremendous improvement in financial inclusion has been collaboration between banks, mobile network operators and fintechs. This co-operation – both within sector and across – has catalysed growth of mobile money, and inspired the world.

During this coronavirus period, we have seen e-commerce flourish at an exponential rate, riding on increased penetration of the internet and proliferation of mobile payments. This has made it easier for entrepreneurs to promote their merchandise and access markets, including globally.

As such, the digital financial services, including mobile banking, is impacting not just individuals and businesses, but also the financial services sector and the economy at large.

According to official statistics from CBK, the volume and value of mobile money transactions has grown exponentially over the years; from just 5.5 million transactions valued at Sh16.3 billion conducted on mobile money in 2007, to 1.83 billion transactions worth Sh3.34 trillion in 2019. This growth is due to collaboration and partnership, as well as, an enabling regulatory environment.

Indeed, we are fortunate to operate in a market where both the government and regulators support financial sector innovation. Most recently, KBA introduced the region’s first, 24/7 bank-to-bank instant payment platform in PesaLink , which is offered by KBA subsidiary Integrated Payments Services Ltd (IPSL).

PesaLink relies on mobile access and connectivity and is leveraging on partnerships to scale. Through PesaLink, the banking industry’s vision is to inspire future collaborative innovations so that we can build a more efficient and affordable interoperable ecosystem that includes not just banks, telcos and fintechs, but also all other service providers in the vast payments space.

The challenge for all players within the financial services sector and payments space, is to see how to leverage on this Covid-19 experience to create value for Kenyans.

Mr Olaka, is the chief executive officer of the Kenya Bankers