Bank customers shun agents for digital apps

Kenyan bank customers have shunned agency banking in favour of other digital channels including mobile banking apps, according to a survey by research firm Infotrak.

Of the banked Kenyans polled, only 12 percent use agency banking and most of them are low-income males from Nairobi, Central and Rift Valley.

Digital channels, such as mobile banking, are the most popular at 47 percent and are used primarily by men aged 18 to 34 years described as mid to high-income, college graduates, and generally, customers from Western, Nyanza and Nairobi regions.

Branch

Branch outlets are the second most popular channel used by 41 percent of customers, most of who are low-income females aged 50 years and above, with low education attainment of up to secondary school besides earning low incomes. These customers are concentrated in Coast and Eastern region.

This trend highlights lifestyle trends if viewed through regional lenses and also indicate the increasing importance of digital access to banking services in the lives of customers.

“A key finding of the research is that digital channels outperform other channels of access, with a preference rate of 47 percent; six percent and 35 percent points higher than alternative channels of account access such as physical branch outlets (41 percent) and agency banking (12 percent),” the report says.

While agency banking has continued to grow, the uptake of other digital platforms has accelerated even faster.

The number of bank and microfinance bank agents rose to 61,290 in 2017 compared to 53,833 the previous year, according to statistics from the Central Bank of Kenya (CBK).

More than 89 percent of the agents are contracted by the three biggest retail banks: Equity (28,663 agents), KCB (14,466) and Co-op Bank (11,207).

The number of banking transactions undertaken through bank agents over the period increased by 34.1 percent to 139.7 million from 104.1 million.

Banks have in the past decade launched mobile banking services to reach more customers, enhance the quality of their services and reduce costs associated with brick-and-mortar branches.

The trend has accelerated in recent years as the control of lending rates provided further motivation for banks to lower their overheads.

“Commercial banks continued to leverage on digital platforms to drive business strategies and models aimed at providing banking services more efficiently,” CBK says in its latest banking supervision report.

“Banks are reviewing their business and digitizing some processes that were traditionally manual such as personal loan application and disbursements and Know your Customer (KYC) documentation.

These digital innovations have enabled banks to reach out to more customers and offer them services more efficiently.”

Increased digitisation

The Infotrak report forecasts that up to two-thirds of bank customers in Kenya will take up mobile banking in the future as part of the increased digitisation of financial services.

“Our forecast for future likelihood of using mobile banking is 67 percent for Apps and 71 percent for USSD (text codes),” Infotrak says in the report.

“Digital platforms are expected to attract increased buy-in from the market,” the report says, noting that other traditional banking channels will continue to play an important role in serving customers.

Usage of ATMs is projected to be 78 percent in the future, according to responses from Kenyans who already have bank accounts.

About two-thirds of banked Kenyans are more likely to use physical bank outlets in future with a skew to 35 years and above, with older customers and those with low levels of education preferring to visit the brick-and-mortar branches.

Online/internet banking has the lowest likelihood of future usage, the report says.

Those that will use this channel will mostly comprise university educated banked Kenyans and the youth (18-34 years old).

“The fact that two in every five banked Kenyans prefer using physical branch outlets and 66 percent, regardless of the age, are likely to use them in future is an indicator that branches are here to stay,” the report says.

Customer interactions

Infotrak argues that customer interactions at the branch outlets play a huge role in the ultimate customer experience and loyalty, adding that this “offers banks that have been previously regarded as not offering competitive customer experience an opportunity to reposition themselves.”

Increased uptake of digital banking services, however, has resulted in closure of more physical branches over the years.

Data from CBK shows that banks have closed more branches than new outlets opened in recent years.