Category Archives: bank service

Barclays Kenya 2016 Financial Results

Today, Barclays became the first Kenyan bank to release its financial results for the year 2016, which was a tumultuous year for the Kenya banking sector.

New bank chairman Charles Muchene said the year saw challenges with new business models, interest rate caps and the announcement of the parent sale. He also praised his predecessor, F. Okello.

Thereafter CEO Jeremy Awori said that while Kenya’s economy looked stable with an enviable economic growth rate, a stable currency and moderate inflation, the dip in shares at the Nairobi Securities Exchange and profit warnings issued by various companies showed some the struggles that companies, including their customers, were going through. He added that challenges at some banks had resulted in increased regulatory scrutiny and audits on systems, anti-money-laundering, and insider lending all other banks, and Barclays had passed. Also, that  2018 will bring new rules on impairment (bad loans) and capital requirements.

They had the investment in technology by going paperless and customer focused channels including intelligent ATM’s that allow 24-hour cash deposits, as well as enhancing internet and mobile banking. They have also invested in alternative channels and were the first international bank to embrace agent banking in a deal they signed with Posta Kenya under which they would have post offices in far-off places (like Wajir) act as customer interaction points for the bank.

Bank branches handled 43% of transactions in 2016, which was down from 59% as other channels recorded increases with ATM;’s handling 34%, digital 14%, and POS 9%

Summing up the financial results for the year, Barclays assets grew by 8% to Kshs 260 billion, deposits went up 8% to Kshs 178 billion while loans went up 16% to Kshs 169 billion. Interestingly 68% of bank deposits don’t earn interest (they are in transactional accounts). Also, the loans increases were mostly in the first half of the year while those after the interest rate cap law (passed in September 2016)  were mostly existing customers topping up their loans.

Income went up 8% to Kshs 31.7 billion as expenses also went up 8% to Kshs 16.9 billion. But there was a huge jump in provision got bad loans, which more than doubled, to Kshs 3.9 billion and this resulted in pre-tax profit dipping from Kshs 12 billion to Kshs 10.8 billion. 90% of the impairments were from retail/ personal lending.

The dividend for the year will be Kshs 1 per share – comprising an interim dividend of 0.2 per share and a final dividend od 0.8 per share – unchanged from 2015. The payout will be a total of Kshs 5.43 billion (~$54 million)

Going forward, digital and automation will be key drivers to give customers better and efficient experiences. Barclays also plans launch new mobile banking products soon, and to become a financial technology partner to their customers, not just a bank.

Kenyan Remittance from Europe .. as Facebook launches Money Transfers

TransferWise had just launched international money transfers via Facebook messenger chat.

Methods Kenyans use to remit money from Europe

  • TransferWise’s chatbot enables customers to send money to friends and family to and from the United States, Britain, Canada, Australia and Europe from Facebook Messenger.
  • Facebook already allows its users to send money domestically in the United States via its Messenger app, but has not yet launched similar services internationally. TransferWise said its service will be the first to enable international money transfers entirely within Messenger. 
  • One of Europe’s most well-known fintech companies, TransferWise was launched in 2011 by Estonian friends Taavet Hinrikus and Kristo Käärmann out of frustration with the high fees they were being charged by banks for international money transfers.

We did a survey a few weeks ago to see how a handful of Kenyans in Europe send money to Kenya, and asked them to give reasons why they use a particular method.  W hat’s interesting is how rare banks are in the person to person transfer space. We want to expand this further and see how Kenyans in other (European and non-European) countries remit funds.  This was almost Kshs 368 billion (~$3.7 billion of receivables from the rest of the world) in 2015 according  to the Kenya Economic Survey 2016.

 

 

KCB to Unveil a Digital Finance Future in Q2 of 2017

KCB is working on revolutionizing their banking strategy that will culminate in a digital finance rollout in a few weeks. This was revealed by KCB CEO Joshua Oigara at a financial technology forum at the Capital Club in Nairobi that featured futurist & author Brett King. Oigara said that in their 100 years of existence, KCB had gained 5 million customers, but in the two years since launching KCB M-Pesa, that number had doubled.
KCB is working with King and Deloitte, on new digital finance products and strategy, which they had already shown to the Central Bank of Kenya (CBK), who have to approve banking products and changes in the country.  Oigara said that customers are adaptable and don’t mind the changes, but that it is banks that have resisted innovation, and that said he has met many young KCB customers who have never been to branches (mobile is all that matters for them).

Numbers from KCB’s last Investor briefing (Q3 2016) show that 73% of KCB transactions were done outside branches (up from 62% a year earlier). Also, 75% of customers use mobile phone banking services and 91% of loans transactions are processed this way – and they averaged 80,000 loans per day after adjusting bank loan terms in line with the banking amendment law late in 2016.

Digital banking was worth Kshs 641 billion ($6.4 billion) to KCB and of that Kshs 332 billion (52%)  was from mobile. 18% (Kshs 116 billion) was from internet channels, while ATM was responsible for 17%, 9% from agency banking, and 4% (28 billion) from merchant channels.

Rumours are that the bank’s strategy would be akin to Equity Banks’ 3.0 strategy .  This would enable KCB to manage customer accounts, cash, loans, insurance, as they send money or buy airtime, and sell them other products at a lower cost than agents and branches, while also integrating better with their customer lifestyles.

Writing in the Business Daily on the financial technology revolution that’s coming to East Africa, Oigara cautioned that, currently, a lot of the innovation in finance is happening outside traditional banking and finance institutions and beyond the sphere of regulators to manage risk in banking.
KCB will be having more fintech forums in the coming months.

Banks Close Branches as they go Digital

Branches are the customer face of most commercial banks, But yesterday Bank of Africa Kenya announced the closure of its 12 branches. This is almost 1/3 of its total branches in Kenya, with those targeted located in Nairobi (Githurai, Gikomba, Monrovia, Gateway, South B, Outer Ring Road, Likoni Road, Thika Road), Nanyuki, Embu, Kitale and (Mombasa (Digo Road branch)

This comes after Ecobank Kenya also announced earlier the closure on nine branches in Nairobi (Chambers, Ongata Rongai, Gikomba, Embakasi, Thika Road), Meru, Kitale, Busia, and Malindi.

Both banks attributed the closing of branches moves to reducing costs as they invest and offer more digital services to customers.  This may bring back bad memories of the 1990’s and early 2000 when large banks closed small or unprofitable branches, many of which were in rural Kenya. But unlike that time, banks are not completely abandoning their customers but leaving customers with a taste of their services through digital platforms, mainly by mobile phones as well as electronic and agency ones.

This comes at a time when banks like Equity have frozen new branches and other like Coop Bank celebrate that only 25% transactions are done at branches, as customers have the choice to use other channels like mobile phones. 

Still, it leaves many traditional customers wondering how they can connect with their bank without nearby branches. Many banks also have agents in rural and densely populated urban areas to handle cash deposits and withdrawals, but will their customers lose touch without physical branches that they can visit?

Shared Branches are the Bank Branches of the Future?

Despite new mobile, ATM, and internet channels, customers still need to come into bank halls quite a bit, as seen by the queues at beginning and end of each month. A lot of this is because customers need to bring and remit payments that end up going to other banks either via direct deposit, cheques, or RTGS. Does the money need to physically move? No But the customers do, going from building to building to do single transactions at many banks.

It helps if you have a building like Sarit centre which is an attractive banking destination because it has many bank branches under one roof, with much more in adjacent buildings.

New malls (the Hub, (remodeled) Westgate put bank branches upstairs and  have one corner where they put all the ATM’s . Presumably, banks are nice tenants at malls as they pay for space over many years and the branches bring in a lot of foot traffic to other shops.

zeepo-agent

A Zeepo agent handles a dozen different payments.

But for banks, there is a lot of redundancy. Every bank that has a branch network incurs a repeat of the same costs of staff, security, cash handling & transit, advertising signs, stationery, surveillance & alarms, insurance, etc. They also have building leases, insurance, and fees per branch or outlet – such Kshs 65,000 (~ $650) per year for an ATM license in Nairobi County.

Big banks have invested in big branch networks, but can smaller banks share halls in new neighborhoods or towns like Eastleigh and Kiserian that experience rapid growth, and the banks have to catch up?. Shall we see a bank hall or post office hall in such a place with 20 desks, and 20 sets of staff for 20 different banks? Can banks share a hall like a Huduma centre which houses several different government departments in one hall who each second some staff there to serve their customers in such a centre. Agents like Zeepo do it and there are shared branch halls in the US for cooperative societies.

It is certainly possible. They already share ATM’s (through Kenswitch), payments switches, card networks (Visa, MasterCard) – so why not building space? his way they can share the cost of security, which can be handled by armed guards outside, and leave a friendly customer –facing interface inside that is devoid of bullet-proof glass (like some Uganda bank halls)

  • This piece (h/t @AgostaL) which highlights that bank products will always be around, also has some stats on bank branches in the US ..The United Kingdom, the United States, Spain, and a host of other countries are seeing the lowest number of bank branches in decades.
  • While here in Kenya, CBK’s 2015 annual report notes that ..(while) the number of bank branches increased from 1,443 in 2014 to 1,523 in 2015 .. the slowdown in physical bank branches expansion is partly attributed to the adoption of alternative delivery channels such as mobile banking, internet banking, and agency banking.
  • What does it take to open or close or share a branch? Section 8 of the banking act requires that No institution shall open in Kenya a branch or a new place of business or change the location of a branch or an existing place of business in Kenya without the approval of the Central Bank.