Mobile-money is an electronic wallet service that allows users to store, send, and receive money using their mobile phone. In Kenya, mobile money was introduced in 2007 through Safaricom’s M-Pesa platform. Since then, the service has seen ubiquitous adoption countrywide.
According to 2018 data from the Communications Authority of Kenya, Kenya’s mobile penetration rate (total number of active Sim cards to total population) stood at 100.1% with the number of active mobile money subscribers being 64.5% of the population. By transaction value, the Central Bank of Kenya (CBK) reported a total of Kenya Shillings four trillion exchanged through mobile money in the same year, equivalent to 45.3% of the country’s GDP.
Mobile money transactions have grown at a compounded annual growth rate (CAGR) of 66.3% since inception in 2007 (Kshs. 14.8 billion to a transaction volume of Kshs. 4.0 trillion in 2017).
As a result of the growth of these new digital services, financial institutions, mostly banks must find new ways to adopt to digital models introduced by telco operators here in Kenya. For instance, most cheques, on average take three working days to clear and these must be physically presented to bank-tellers for processing. Technology has not yet given way to effective use of scanning technology to verify and clear cheques in the comfort of one’s home. Is this an opportunity that presents itself in the startup world? Perhaps, only time will tell.
However, banks need to get rid of the queues we have become accustomed to in the hallways and fully embrace branchless banking and digital access channels for most of their transactions. This would not only make their services more efficient but would reduce transaction costs and offer lucrative opportunities to increase their profit and revenue margins. If banks do not innovate and find new working models in countries like Kenya, telcos will take up the mantle and provide a large array of financial services to customers across a wide range of sectors especially the informal sector. This will drastically reduce viable opportunities for large margins and revenues that banks in Kenya have been accustomed to.
It’s time for banks to rise up to the occasion and aggressively innovate!
