Banking on a Mobile Money Future

Feb 2, 2018 · 6 min read
Jimmy Gitonga @iHub “Technology and Customer Experience in the Financial Sector”

“30% of the banking jobs will disappear.”

That should not raise eyebrows, if banks have, say, ten more years to adjust to it. But they don’t, not even in Kenya.

I was watching a David Cokker, a lecturer of Finance at the University of Westminster, London as he was being interviewed on Al Jazeera’s Counting the Cost program. David got me thinking.

Banking is the business of taking and securing valuable deposits and offering credit services to those who need “liquidity”. Most other services that banks and bankers make money from are through these two actions. These services of cashing of cheques and offering credit, based on banking activities and other “credit scoring” systems, are being disrupted by “mobile money” and data technology companies respectively.

Banking in Kenya

In Kenya, before early this century, large sections of the population were “unbanked” because they did not meet the traditional criteria for a “banking customer”. The unbanked, still needed financial services. But two things happened at the around the same time.

Equity Bank, that started off in 1984 as a micro-lending institution, built a strategy on offering traditional banking services to this section of the population. By going for the “bottom of the [financial] pyramid”, they changed the Kenyan concept of banking and brought many people in from the cold.

The other thing was Mpesa. Second now only to cash payments, this instant and secure way to pay for goods and services took the Kenya and the world by storm. The fact that unbanked users could also store money on the phone created new opportunities for Safaricom to team up with banks to offer deposit and credit products. Mpesa created spaces for micropayments for products such as a “daily insurance” scheme.

This is interesting to me because on one hand, I became a customer of Equity Bank when it was still a building society and I have one of those “Equity saved my life …” stories. The other is that since I operate in the technology space, I have been intrigued by how Equity Bank implements technology. It has overtaken, across all metrics in a very short space of time, the banking herd, including 80+ year old behemoths, creating a feel of “small” and nimble — a bank near its customers. KCB, is the only bank ahead of Equity in Bank Rankings of 2016 has stayed ahead mostly by ripping Equity’s playbook, in my opinion.

The Mobile and the Banks

So to get a feel of what is happening on the ground, I went for an event at the “new” iHub, at Senteu Plaza on Galana Road. The event was the “Technology and Customer Experience in the Financial Sector” held on the 14 of September 2017.

Kirui announced. There was polite clapping at the iHub. Kirui, the MC for the night is well known iHubber, UX Researcher and Product Manager. Here are Kirui’s thoughts on the event. I found it interesting that the two banks representatives did not show up or even send an apology to their absence. No matter, let us look at where we are now.

The Mpesa experience significantly questioned why anyone should wait 3 days for a cheque to clear through a bank. Banks began working with Mpesa and two banks in particular saw huge growth in their joint venture with Mpesa. These joint ventures soon exceeded internal bank branch perceptions. What is a “big” branch when the Mpesa arrangement passes 2 million accounts in one month of growth, as one bank asked. What is the need for physical premises and staff, if the “branch” is run by software and accessed online and through a mobile?

It dawned really fast that Mpesa will eat the banks for breakfast and none would make it to lunch time. The banks came together and pushed back, launching the Integrated Payment Services Limited also known as Pesalink. Banks chose to cannibalise their over-the-counter cheque and electronic money transfer services. Pesalink allows partnering banks to offer these services through USSD or mobile banking apps. Of course Pesalink has had some teething troubles like not thinking through the product costs and fraud.

The banks have integrated the Pesalink into their banking apps and well as the USSD channels. Equitel has added it into SIM menu as well. Not to be caught napping and after years of holding out, the mobile network operators reached an agreement that mobile users should no longer experience differences in costs while moving money across networks. This is important so that Mpesa is not hived off from Safaricom, as the competition had suggested, and it allows Mpesa to “spread” across mobile networks.

Equity Bank again comes out with a win-win since it is both a bank using Pesalink and has a fintech company that is a MVNO, which benefits from the mobile network money transfer termination agreement.

So the banks with an Mpesa joint venture product still have to pay Mpesa transfer fees when a bank customer chooses to use Mpesa to transfer money. The banks are not overly thrilled with the arrangement but the customers are and they are making the banks and Mpesa good money, in this era of lower interest charges. But the race to grow Pesalink and wean off Mpesa is on, moving the banking customers to Pesalink for all banking and mobile money transfer services.

However, Mpesa hopes to keep the customers in the vast eco-system that includes agents and merchants. All this is happening as Visa and MasterCard are moving to mobile payments and our very own Pesapal, who facilitate card and mobile network payments in Kenya as well as six other east and southern Africa countries, has released a mPOS (mobile Point of Sale) for merchants on their platform.

Banking on the future of Mobile Money

Banking has not been disrupted — yet. But it will be soon, and here are some things I watching and products and services I am expecting to see soon:

· Pesalink develops a “wallet” application where a multi-banked customer can store accounts from different banks in one place and then add a payment option/process to allow merchants to come on board and accept Pesalink payments.

· Banks, led by Equity Bank will become technology companies that offer financial services. This in turn means there are technology, communication, insurance and medical companies that will begin to offer “core” banking services. Health is the number 5 spend of most households in Kenya. Imagine your preferred hospital allowing clients to save money with them so that they are not impoverished the next time they go to hospital. Then imagine insuring that money, in case there is an emergency procedure.

· Globally, core banking software is evolving to allow secure mobile and desktop access with on-premises banking systems such as Nymbus.

· The next thing is leaving the bank premises and into the Cloud so that the speed can increase and costs can be managed with SaaS such as Mambu.

· Finally integrating Blockchain technology either as banking software such as VaultOS or using it to settle payments across platforms like Ripple with their XRP crypto-currency.

How are Kenyan banks going to adjust to this mobile money reality and frictionless money transfer across different networks (Western Union, etc)? How will Mpesa and other mobile operator money transfer services evolve? What customer experiences will develop with them?

Yes, this is banking on being interesting, very interesting.

I am currently looking at how to build interesting and dynamic user interfaces across devices that tell the customers stories about the data they have. This also includes what banking staff will use in the backend to monitor the systems and serve customers. I have some ideas. :-)

This article first appeared on LinkedIn.


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I am a trans-media Artist working across graphic and motion design, video, Web Dev and mobile games. I help small companies step up onto the global stage.