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Bankers see rise of mobile pay and agency business

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Mr Habil Olaka, chief executive, Kenya Bankers Association. PHOTO | SALATON NJAU

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Summary

  • Banks are likely to keep shifting their business to agency banking and mobile payments as they adapt to a new way of doing business.
  • The industry is also heading to a scenario where more payments will be made in real time, with customers no longer willing to wait for days for their payments to be processed.

Banks are likely to keep shifting their business to agency banking and mobile payments as they adapt to a new way of doing business in the wake of tougher legislation and shifting customer habits, an industry lobby has said.

Kenya Bankers Association (KBA) chief executive Habil Olaka, speaking on NTV on Thursday, said the industry is also heading to a scenario where more payments will be made in real time, with customers no longer willing to wait for days for their payments to be processed.

“We can’t discount the role that M-Pesa has played in facilitating banks to be able to ride onto the mobile banking wave. From where I sit, we are going to have more of that,” said Mr Olaka.

Lenders have moved towards alternative banking channels as they look to cut costs in order to protect their bottom lines in the wake of the rate cap law which came into force in August 2016.

READ: How technology is transforming Kenya’s banking

Banks’ interest income from customer loans fell by Sh26 billion in the first six months of this year to Sh140 billion, indicating a need for the lenders to diversify their income streams in the face of a changing market.

Last month, Equity Bank #ticker:EQTY, Kenya’s biggest lender by customers, said it was closing some of its automated teller machines (ATMs) as it shifts to agency and mobile banking in a fresh cost-cutting strategy.

“The entire banking community is volatile, and therefore it is inevitable that there will be a change in the way banks operate,” said Patrick Obath, a director in the Kenya chapter of the International Chamber of Commerce.

READ: Equity sheds ATMs in shift to mobile, agency banking

Banks have also looked to claim a larger slice of the mobile money payments space. In February, KBA launched an interbank money transfer platform, PesaLink, which by early August had transacted about Sh8 billion.

“PesaLink is a product that came into the market to facilitate banks to be able to transfer in real time money from account-to-account and person-to-person. I can see that product evolve to include person-to-business, person-to-government and in real time,” said Mr Olaka.