DISRUPTION

Safaricom giving banks sleepless nights

In Summary

•Analysis of the banks profit shows that the mobile service provider made Sh6.9 billion more than the top three banks in net profit. 

•KCB CEO Joshua Oigara says that more collaboration will take place between the telcos and banks defined by growing technologies.

Safaricom chief executive Bob Collymore speaks to the media after an investor briefing on the company's full-year results at its headquarters in Nairobi, May 11, 2016. Photo/REUTERS
Safaricom chief executive Bob Collymore speaks to the media after an investor briefing on the company's full-year results at its headquarters in Nairobi, May 11, 2016. Photo/REUTERS

Safaricom is giving lenders a run for their money having reported a net profit that is 98.14 per cent of the combined net profit for the top four banks.

A look at the financial statement of KCB group, Equity Bank, Cooperative Bank, and Standard Chartered Bank shows that they cumulatively reported Sh64.6 billion net profit as of December 2018.

This is only Sh1.5 billion more than the Sh63.4 billion net profit reported by Safaricom for the year ending March 2019.

In the last one year, KCB reported Sh24 billion net profit to remain the most profitable lender, followed closely by Equity Bank at Sh19.8 billion.

Cooperative Bank comes in third at Sh12.7 billion and Standard Chartered Ban is fourth having reported Sh8.1 billion in net profit within the review period.

A further break down shows that the mobile service provider made Sh6.9 billion more than the top three banks.

While at that, the telco reported Sh240 billion in service revenue, with 31.2 per cent of it driven by mobile lending platform Mpesa.

This explaining the existing partnership with KCB to produce the KCB-Mpesa product and the overdraft product FULIZA also with CBA bank that has so far lend out Sh45 billion in less than three months.

Their is also an existing partnership with CBA bank to offer the credit lending platform Mshwari.

Further it shades more light into the recent partnership between the telco and Equity Bank signed last week.

Asked if a new credit product is in the offing courtesy of their new partnership with Equity Bank, Safaricom CEO Bob Collymore said, “we have grown past the battles between the banks and telcos...it's time we talk on collaboration."

In the last one year, M-Pesa grew 19.2 per cent adding 2.1 million new customers to reach 22.6 million customers.

According to Financial analyst Aly Khan Satchu, the once “analogue” banking system has digitized and been pulled by Mpesa and Uber-like platform that has blitz scaled. “It’s a collaborate or die existential level question.

As an investor one would calculate that the Mpesa platform will outperform the banking sector by a wide margin,” Satchu said.

On his end, KCB CEO Joshua Oigara told the Star that moving forward more collaboration will take place between the telcos and banks defined by growing technologies.

“Big data analytics, artificial intelligence, robotics, open data initiatives will all determine the success of the banks…innovation is key,” Oigara said.

According to a recent report by Moody’s dubbed Bank of the Future, 39 per cent of Kenyans now rely on mobile money services instead of banks to transact.

The services have pushed access to financial services to 83 per cent up from 26 per cent in the last 13 years with Mpesa service-related revenue representing an estimated 5-10 per cent of banks’ forgone revenue.