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Mobile banking, agents cut ATMs in Kenya to six-year low

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Summary

  • Central Bank of Kenya (CBK) data shows that banks closed 70 ATMs in the year to December 2019, remaining with 2,459 units.
  • Lenders reckon that while ATMs require upfront capital investments to acquire the machines and lease space, they depreciate at 20 percent annually while agency and mobile banking have no such commitments.
  • The fall in ATM numbers points to the waning popularity of the once revolutionary technology that was introduced in Kenya in the 1990s to decongest banking halls.

The number of automated teller machines (ATMs) in Kenya has dropped to a six-year low as bank customers increasingly turn to agency, internet and mobile banking.

Central Bank of Kenya (CBK) data shows that banks closed 70 ATMs in the year to December 2019, remaining with 2,459 units. This is the lowest ATM count since February 2014, reflecting the growing use of alternative means of accessing cash and paying for goods and services.

The shift has also been quickened by the banking sector’s pursuit of cost-saving technologies to boost their profitability in an environment where a legal cap on lending rates had slowed down loans and earnings. The cap imposed in September 2016 was removed last November to spur lending.

“The increase in use of technology by banks has been driven mainly by stiff competition among the banks. The banks have had to adopt cost-effective delivery channels in offering financial services to ensure efficiency and maintain their market shares," CBK said in its report.

Lenders reckon that while ATMs require upfront capital investments to acquire the machines and lease space, they depreciate at 20 percent annually while agency and mobile banking have no such commitments.

According to the CBK, 19 commercial banks and five microfinance banks (MFBs) had contracted 59,578 and 2,026 agents respectively across the country by December 2018.

The fall in ATM numbers points to the waning popularity of the once revolutionary technology that was introduced in Kenya in the 1990s to decongest banking halls. ATMs offered customers the first escape route from long banking queues and banks installed more machines as customer appetite grew, growing from 1,581 in July 2009 to a peak of 2,626 in June 2016.

However, customers are now increasingly turning to other alternative channels such as transacting via mobile phones, which is proving more convenient than ATMs, given the growing number of a mobile telephony agents to 235,168 in September. Kenya had more than 16 million active mobile phone deposit accounts in 2018, which was nearly a third (28.9 percent) of the 55.27 million deposit accounts in the sector.

CBK data shows Kenyans moved Sh4.35 trillion through their mobile phones last year, a 9.3 percent jump from the preceding year. This was 3.7 times more than the Sh1.17 trillion that was transacted in 2011.

More Kenyans are also using cards to transact, including at points of sale, and for online transactions. The fall in ATM use is in line with global trends as was observed by Retail Banking Research, which found that the number of ATMs installed worldwide fell by one percent to stand at 3.24 million in 2018.

Disclosures of top banks in the country - KCB #ticker:KCB, Equity #ticker:EQTY and Co-operative Bank #ticker:COOP - show that ATM transactions have been declining and, therefore, reducing contribution to overall revenue.

The value of transactions via KCB ATMs dropped by 4.2 percent to Sh112 billion in the nine months to September 2019 compared to the previous similar period.

The bank reckons that ATM dealings accounted for five percent of its transactions in the nine months to September, down from 12 percent in the same period a year earlier.

Revenue from ATMs dipped from Sh361 million to Sh359 million during this period. This was in contrast with 57 percent growth in revenues from agency transactions to Sh653 million from Sh405 million as value of transactions jumped 42 percent to Sh217 billion.