Cost of banking declines as Safaricom dominates mobile money transactions

Despite Mobile money transfer transactions being free and cheaper in most Telco’s, Safaricom remains the dominant player controlling about 97 % of the market share in Kenya.

A leading business intelligence, research and consulting firm Think Business Limited, partnered with Infotrak, and Financial Sector Deepening (FSD) Kenya to do a survey that made a finding that; there is a decline in the overall annual cost of banking.

The think business tariff survey covers retail banking and SME banking classes of business across the 38 commercial banks. It covered six major counties and featured 1093 respondents.

This explains why the recent system failure of Safaricom Limited network led to massive losses in the same day the Jubilee Party nominations also failed nationally. CEO Bob Collymore apologised and gave an incentive of a day’s free mobile money transfer transaction.

Reasons for Safaricom’s domination are that most telecom mobile subscribers are locked in Safaricom, hence despite it being expensive to transact compared to Airtels free cost amongst its subscribers.

“Kenyans need to look into how much they spend in mobile money transactions in a month and a year to understand they spend more in Orange Money than any other player,” said Mr. Oloo.

The survey further shows that Mobile money platform has become a complementary service to conventional banking. And, its proliferation continues to impact the financial Services industry in a tremendous way.

Generally, a sample survey reveals that Airtel controls 2 per cent of Mobile money transfer, Equitel and YuCash follows with 0.5 and 0.1 per cent. 0.4 per cent said they did not have a preferred mobile money transfer Service.

Among the total respondents in the survey, 83.3 percent of them operated a personal banking account exclusively. While 7.1 percent operated Exclusive SME bank accounts, 9.7 run a mix of both SME and Personal bank accounts.

The survey also points at a decline in the average cost of banking over the period between the years 2013-2017. As well as the overall cost of retail banking also decreased.

“During the period, the cost of SME banking (of the Sample of Survey) steadily declined from a high of Ksh. 105,077 in 2013 to Ksh. 87,885 in 2017 signifying 16.4 per cent decrease,” said Ochieng Oloo, CEO Think Business.

The staggering decline was recorded in the average cost of SME banking for tier one banks from a high of Ksh. 110,665 in 2013 to Ksh. 95, 427 in 2017 signifying an overall decrease of 13.8 per cent.

UBA Bank emerged to be the lending bank with the lowest Charges in SME banking. Paramount Bank trailed, ABC Bank then Credit Bank in that order. Consolidated bank and Guardian Bank tied in the fifth position.

In the retail banking category, Equity Bank is still the leading lender with the least charges overall in 2017 at Ksh 6, 430.

Most bank customers, 53.9 % still prefer over the counter deposits of their money as opposed to ATM machines, of which 69.6 % are rural based and 47.2% are urban banking population. Agency banking becomes the second most preferred way of making deposits at 17.4 per cent, then closely trailed by Mobile banking platform at 17.3 per cent.

Kenyans love ATM machines as the best way of withdrawing money. 54.5 per cent of respondents finds it convenient. While 19.4 per cent withdraws over the counter, and 15 per withdraw through the mobile platform.

“Most of the respondents withdraw at least 1 to 2 times every month, 22.2 per cent made withdrawals 3-4 times a month, “ observed Mr. Oloo.