BANKING

Banks lose out on revenue to mobile money

Compared with other countries in sub-Saharan Africa, 73 per cent of Kenya’s population used mobile money services as of 2017.

In Summary

• The growth in reliance on mobile money services has grown ten folds from four per cent in 2006.

• Compared with other countries in sub-Saharan Africa, 73 per cent of Kenya’s population used mobile money services as of 2017. The level is at an average of 35 per cent in Sub Saharan countries. 

 

STABLING: A bunch of money. Photo/FILE
STABLING: A bunch of money. Photo/FILE

Mobile money services have pushed access to financial services to 83 per cent up from 26 per cent in the last 13 years, rating agency Moody’s has said.

In a sector in-depth report titled Bank of the future, the agency shows that at least 39 per cent of Kenyans now rely on mobile money services instead of banks to transact.

The growth in reliance on mobile money services has grown ten fold from four per cent in 2006.

Report findings show that in turn, the financially excluded population has decreased within the same period from 41.3 per cent to the current 11 per cent.

According to Moody’s investor service, the coming of M-pesa is largely attributed to the broadened financial inclusion and disruption in the banking sector.

While it was a good thing to broaden the financial inclusion, Moody’s noted that mobile money platforms have distabilised bank revenues.

“Kenyan banks lost out on payment-related revenue when telecom company Safaricom developed its peer-to-peer payments service M-pesa in 2007,” the agency said.

As at December 2018, M-pesa had 25.57 million customers with its value of transactions valued at Sh1.65 trillion. It's subscribers outside Kenya hit 13.4 million within the same period.

The report estimated M-pesa’s financial services-related revenue at roughly 5-10 per cent of banking system revenue, representing an approximation of banks’ forgone revenue.

This largely accredited to a move by the banks to cede mobile payment control to M-pesa as a majority of payments were made on feature phones that require mobile network.

Western Union, Moneygram, post office, and informal channels like bus company money transfer services are some of the channels largely disrupted with the coming of M-pesa.

Compared with other countries in sub-Saharan Africa, 73 per cent of Kenya’s population used mobile money services as of 2017. The level is at an average of 35 per cent in Sub Saharan countries. 

Uganda usage of mobile money service falls at second place standing at 51 per cent, Zimbabwe is third at 43 per cent. At least 39 per cent of Tanzania’s population uses mobile money services.

While M-pesa has taken root in the banking sector, other mobile money service providers such as Airtel Money and T-kash are yet to partner with the banks.

However, as the study reveals, banks have opted to offer higher value-added loans and savings accounts through the mobile money platforms.

The report shows that the largest and most innovative banks stand to gain, but must fight to retain a direct relationship with customers.

Further, it reveals that as the market matures, direct access to customers and their data will be key for the banks to grow. 

While Equity Bank has its large customer base from Equitel, other banks rely on M-pesa to provide the data they use for loan granting decisions.