Kenya is one of the leading countries in Africa in terms of financial inclusion, despite low internet availability. Instead, mobile money is dominant. Alexander Atkins reports on how Kenya Commercial Bank one of the country’s largest banks is tackling digitisation
Financial development in Kenya is steadily gaining pace, as banks look both to banking in developed countries and to Africa’s own methods of innovation to confront their unique financial issues.
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By GlobalDataIn October 2014, Kenya Commercial Bank (KCB) took its next step forward in financial evolution when it launched contactless cards with MasterCard PayPass technology, only the second bank in Kenya to do so.
However, a year on and KCB’s contactless technology appears to be catching on: now every single MasterCard plastic card the bank has issued has been contactless enabled. “Our entire MasterCard issuance is contactless,” Annastacia Kimtai, KCB Group retail director tells RBI.
But the focus has also turned to spreading contactless to the retailers. “The bank has rolled out and is scaling up contactless acceptance devices, particularly point-of-sales terminals issued to the merchants,” she adds.
Its progress into the world of contactless comes at a time when Kenya’s payments services are fast evolving. But KCB is continuing to push development into this realm, looking at the possibility of other contactless objects besides cards.
Its latest product is the Pepea Card, a prepaid card that has tap-and-go technology and is globally accepted. Over one million cards have been distributed over the last year, and have, according to Kimtai, been crucial in ticketing, retail, online shopping and in-transit.
Yet KCB has many more challenges ahead, especially concerning digitisation in a market that, whilst making great strides in technological development, still has a long way to go to providing basic internet access to large areas of the country.
However, Kimtai believes Kenya’s digital market is fast accelerating due to a number of factors – mainly an increase in mobile usage, internet access and a largely youthful demographic.
Currently over 68% of Kenyans have access to a mobile phone and more than 70% of Kenyans are below the age of 35. “The combination of a youthful demographic, growth in the use of smart devices and increasing access to the internet makes the digital banking space a very natural area of focus for the banks,” says Kimtai. “The digital market space is therefore getting bullish in growth and opening at a fairly fast rate.”
Currently only 39% of Kenya’s 45 million people are internet users, yet that number is expected to grow as access to the internet becomes more widespread, a change that could help Kenya’s financial system greatly along the path to digitisation.
However, despite the current low internet usage figures, KCB is taking digitisation head on with new online products and services. One such concept is the KCB Super application which is accessible on the mobile banking platform alongside KCB’s internet banking.
The app allows customers to run Peer-2-Peer transactions, manage bill payments, and fund their prepaid and credit cards. The success of the application is shown in the uptake: since its launch four months ago, adoption has already exceeded 100,000 users.
However, whilst the future focus may be on digital, the present for Kenya’s financial industry is, without a doubt, on mobile. With such a high rate of mobile phone usage, Kenyans with no previous access to the financial system are slowly being brought into the fold, mainly through mobile money schemes such as M-PESA, one of a number throughout Africa that have experienced huge success.
One issue in the past has been access to bank branches in order to open an account, but this was solved when mobile provider Safaricom launched its mobile money scheme M-PESA. This turned the mobile phone into a bank account that can be used to send money across the country to other mobiles, without the need for internet access.
The concept, which began in 2007, is hugely popular and had attracted over 17 million users by 2013.
The success of M-PESA caused the banks to take notice, in particular KCB. “For an average Kenyan demanding convenience, their mobile phone provides the solution in that they can transact through their phone, wherever they are, whenever they need to”, says Kimtai. “The bank has therefore adapted to the needs of the customers.”
Kimtai is referring in particular to a partnership between KCB and M-PESA, which has resulted in the KCB M-PESA account, a mobile enabled platform that allows customers to save money and borrow based on their credit worth. The product was launched in March 2015 and already has over 4.7 million customers. Its main selling point is that, alongside offering the usual M-PESA services, it allows users to apply for loans in a more efficient way.
“This revolutionised banking as we were able to lend as low as five dollars to our customers. Through this we are underway in achieving our banks strategy of deepening financial inclusion”, says Kimtai. She adds: “As a bank, we have tailored our products to suit the divergent needs of our mobile customers”.
Most importantly, it gives Kenyans something that M-PESA alone cannot: access to a tangible bank account. With an account, Kenyans will be able to use more products and services than the mobile money scheme can offer alone. From KCB’s perspective, it will mean the bank can innovate new ideas specific to the needs of their expanding customer base, especially those in rural areas looking for diversified products that suit more basic financial needs.
Kimtai concludes by pointing out that no matter what sort of market you are in, you cannot ignore digitisation. “Digitisation is to some a basis for competitiveness while to others a means of survival, without which they become completely uncompetitive,” she says.
Digitisation in Kenya, as in many other parts of Africa, faces significant challenges and for now it is clear that mobile money is prevailing. Yet just as they have realised the power of the mobile for banking currently, KCB know that as Kenya continues to develop, they must embrace the growing potential of digitisation to reach new markets and create innovative products or be left behind.
