Category Archives: bank charges

5 Reasons not to link your Bank and Mobile money accounts

Safaricom, the mobile money market leader with M-Pesa with 19 million customers has partnerships with 30 banks and 160 financial institutions as per their 2014 annual report that notes The new (API) platform (launched in January 2014) helped streamline operations for businesses that disburse staff salaries through M-PESA, as well as those that receive payments through M-PESA and need to move cash to their bank accounts on a regular basis. 

It seems to  very convenient to link your bank to your mobile money account – so that you can top-up your mobile money account. More so when you really need it in an emergency, or late at night or when on the road far away from any mobile money agent – but with just a few clicks on your phone, you get the cash you need to facilitate whatever need.

But there are some issues to consider about having the convenience of drawing cash from your bank account sraight on to your phone.

1. It drains savings. Looking at my M-Pesa statement at the Selfcare page on the Safaricom site, most of the activity that I use M-Pesa for is for payments out. All deposits are made with a purpose, usually to pay out a corresponding amount soon after either as remittance, utility bills, airtime, meals, repairs etc.  It is easier to pay out money than build savings, and there are few savings options like M-Shwari, compared to the hundreds of expense item ones.

2. It is costly, with banks charging about $1 (Kshs 75-250) for customers to tap their phones and do the transfer from bank to mobile money. It costs much less, or is free to withdrawal cash from a bank ATM and deposit it at a mobile money agent.

3. Customers inevitably have things go wrong with their bank accounts – from misplaced funds to banks changing their terms or costs. What is  a transaction fails? or money  is sent to the wrong payee? Who do you complain to? You’re better off dealing  with customer service at one or the other, but not at both a mobile company and a bank

4. Banks may have less trust than telcos in terms of being custodians of small amounts of funds.

.. if you leave Kshs 1,000 (~$12) in your M-Pesa account it will be there until you use it, with no phantom charges eating it away (it won’t stay in your phone for 6 months). But if you leave the same Kshs 1,000 in your bank account for a few months, the money will be exhausted by various tariffs like ledger fees, dormant account fees, minimum balance fees and the account will be drained out and shut down.

5. Banks change their terms and conditions too often. M-Pesa tariffs were revised again this week after almost two years in a  very public way. Yet banks make several changes and don’t even inform customers till they see they stumble on new charges on their statements, or go to the bank and find that a service has been cancelled or changed.

1% Equals 20% and Other Bank Tales

The Central Bank of Kenya’s Monetary Policy Committee has launched a KBRR a.k.a. the Kenya Bank Reference Rate and set it at 9.13%. All commercial banks and mortgage institutions are expected to price all their loan products around this. e.g Lend finance to customers at a rate of KBRR (+) or (-) “X” e.g. a loan rate of 15% will be known as KBRR +5.87%. This first rate of the KBRR set at 9.13%, will run from July 2014 to January 2015. 

The KBRR will help end the confusion that customers face with all manner of loans and rates at myriad banks. Different loans are pegged on interest rates that may be flat, fixed, variable, reducing balance etc and are marketed as the same without customers knowing what these measures mean. Yet a fixed loan rate of 1% per month (which some asset finance loans are marketed as) can be equivalent to a loan of 20% that is calculated using the reducing balance method.

The next step on the cards will be for Kenyan banks to adopt an APR (an annual percentage rate calculation) that not only includes the lending rate, but also factors in bank charges like commitment fees, facility fees, and third-party costs like legal charges, mortgage insurance, as well as a standard loan repayment schedule format for all loans.

NIC Bank Move to Now

Ten years after NIC pioneered a revolutionary flat fee banking model, they have now launched Move To Now a banking model that makes time-consuming banking experiences more convenient for any customer who can use a computer or smart device. This is represented in faster decision making, likes asset finance loan approval decisions which NIC delivers within 12 hours of application that can also be placed at various local vehicle dealers.

At an event this week, the Group Managing Director and his team highlighted four of the features of MovetoNow including online account opening, online banking, a mobile app and online cheque deposits  – all of which can be done without having to visit a bank branch, whether for existing or new customers. 

Notably, the accounts are in two types;  one being a transactional (pay as you go) model that charges Kshs 30/= per activity done by a customer, or a flat fee of Kshs 800 ($9.41) per month for a bouquet of products. The NIC app has all the features of the online platform as well as others like traffic cameras, movie listings, and the ability to make KRA enquiries and payments.

At the launch of M-Shwari in 2012, the then Immigration Minister spoke of an online platform that banks could access to immediately confirm identities of citizen identity/registration documents and this seems to be what has enabled banks to offer account opening verification by phone.

Mapping Financial Inclusion in Kenya

This week, FSD Kenya launched an interactive tool called the FinAccess Spatial Map that mapped all the formal financial service points in Kenya.  This has been an ongoing private-public partnership, and it’s notable as a previous FSD study on the numbers of ‘unbanked’ Kenyans became the justification for the relatively unregulated roll out of m-pesa and mobile money in the country.  

The searchable tool interprets data like financial service points (GIS locations of bank branches, mobile money agent), county borders, and local population numbers from the census – to plot some interesting metrics.

The tool tends to find that there are more financial service points in wealthier parts of the country (no surprise) and that more Kenyans live closer to a mobile money point (58% are within 3 kilometers of one) than a bank branch (21%). It can  also pick out useful trends for further research e.g. at the launch, it was mentioned that in Isiolo, 40% of the population own mobile phones, but only 20% use mobile money, while in Nyeri, 75% own phones, but an even larger number – 80% use mobile money.

Partners in the FSD mapping program included the Central Bank of Kenya, Brand Fusion, SpatialDev, and the Bill & Melinda Gates Foundation.

Why Telco Mobile Money wins over M-Banking

Safaricom’s mobile money transfer service M-Pesa is only five years old yet it has about twice as many subscribers as all the bank accounts in Kenya. The numbers are not growing as fast any more and many commercial banks now offer services that link to telco mobile money, or promote their own m-banking platforms, or extend services to customers through agents

But the attraction of mobile phone companies as preferred mobile money wallets is that they have gained customer trust with simple tariff structures. Millions of Kenyans are comfortable sending and receiving money by mobile phone. They know what it costs e.g. Kshs. 30 shillings ($0.40) to send money, and Kshs. 30 to withdraw money on the other end.

But for banks, they enter the mobile phone relationship with a stain in the minds of many of their customers as they have a legacy and history of imposing dozens of fees on their account holders & customers. While there are banks that have no ledger fees (just transaction charges similar to mobile phones Kshs 20 or 30 per transaction) and others that have free ‘mobile’ banking, the legacy of banks is also one of changing customer terms, raising tariffs and interest rates, phasing out services, migrating customers to new costlier services, phasing out services that were promoted as ‘free’, migrating their customers to more expensive options at will.

For comparison, if you leave Kshs 1,000 (~$12) in your M-Pesa account it will be there until you use it, with no phantom charges eating it away (it won’t stay in your phone for 6 months). But if you leave the same Kshs 1,000 in your bank account for a few months, the money will be exhausted by various tariffs like ledger fees, dormant account fees, minimum balance fees and the account will be drained out and shut down. Unfortunately, a similar distrust extends to companies offering third party payment services m-commerce, payments, settlements etc. as they are new or unknown entities to customers until they establish a behaviour pattern with customer tariffs.

This should also be a caution to mobile operators not to shake up their cost structures too often. Safaricom recently changed their M-Pesa tariffs, but by having simple & clear disclosures and not levying hidden or unexplained charges, they will keep the trust that their customers have.