Category Archives: SME solutions

CBA Launches Loop Banking

#unbankyourself

The 54-year-old bank continued the journey it started in 2006 with mobile payments (when they helped design, test and support m-pesa) and extended in 2012 with the launch of m-shwari, with another new chapter today.

The launch of Loop extends the transformation of CBA to a digital bank. removed paper. Loop creates a virtual cycle, a digital financial service that combines payments, savings, insurance, credit – into one solution. The account can be opened on a phone app or website, with no paper forms to be filled. Features of the accounts are the Loop app, Loop store, and Loop card – and combined, these enable access to Loop products.

Account owners get access access loans and overdrafts, as well as savings, budget and networking tools to help them grow their net worth and meet their financial goals. The Loop app also helps them control and analyze their spending in support of their financial goals.

The primary target is 20 – 34-year-old entrepreneurs, followed by 35+-year-old established bank customers. One can open a Loop account right on the app or website, and there are six Loop centers (Sarit, in Nairobi CBD, Yaya, Buru Buru, Rongai, and Garden City)

In reading the terms and conditions (T&C’s):

  • Loop is an electronic-only account, and customers won’t get served at CBA branches. This is similar to M-shwari.
  • Agreeing to the T&C’s also grant the bank the right to access a user’s mobile money information from telco’s.
  • To get finance, loan insurance from CBA (from death & disability) is mandatory.
  • A debit card (not a credit card) is provided, which can be loaded, can be used to deposit and withdraw cash at an ATM.
  • Account holders can also sign up for CBA investment products that range from between 3 to 12 months.
  • Any disputes that can’t be settled with bank staff, can only go to mutual arbitration (not a court).

The launch had a nice panel discussion that highlighted the disconnect between bankers and entrepreneurs. 

Fintech Moment in East Africa: AmEx FT Pesalink Bitcoin

Recent events in the fintech (financial technology) payment space in East Africa.

Banks

  • The Kenya Bankers Association (KBA) unveiled Pesalink, a digital payments platform that is expected to cut the cost of transactions and transform the way consumers interact with their banks. Pesalink is a fully owned subsidiary of KBA and it will enable customers to make payments between banks in real-time, around the clock, without having to go through intermediaries. It has been approved at Standard Chartered, Co-Operative, Barclays, Commercial Bank of Africa, I&M, Diamond Trust, Gulf African, Guardian, Victoria, Credit, Prime and Middle East banks…“RT @alykhansatchu: .@HabilOlaka says @KenyaBankers will be targeting payments that exceed M-Pesa’s maximum transaction of ($675)”
  • Cooperative Bank: Is a demonstration that the how banks ar moving in the technology space. Kenya’s 3rd bank has adapted to their customers embrace and they enable more customers to use alternative channels for transactions.  They had a valentines’ week promotion to highlight and encourage customers to use alternative channels such as MCo-op Cash (get a loan straight from ones’ phone  at 1.16%  per month and send money to other MCo-op users for free) or at a Co-op Kwa Jirani agent (deposit cash into someone’s Co-op Account for FREE at a Co-op Kwa Jirani agent) or Co-Op cards.
  • KCB will unveil it’s fintech future – a strategy based on a digital finance  in Q2 of 2017
  • Another is EcoBank which launched a new mobile app which integrates Masterpass QR, a mobile payment solution from MasterCard.  It enables customers to send and receive money instantly across 32 other African countries.

Government

  • National Bank has launched cashlite payment solutions suite for county governments, Ministries, Government Agencies, and Departments. The bank has provided a variety of options for payments including mobile money, smart cards, and e-wallet and cash options, aligned with the continuing growth of mobile technology as well as consumers’ expectations for convenient mobile and online payments.
  • Strathmore University has supplied Busia county government with a revenue collection systems called CountyPro® with which the government hopes to grow revenue by 300%. It caters for all the unstructured county revenue sources including parking, market cess and trailer parking.
  • Mastercard is the technology partner for the Huduma Card in Kenya enabling payments for government services.  It is being issued by Commercial Bank of Africa, Diamond Trust, Equity, and Kenya Commercial banks. Kenyans will be able to pay for an array of enrolled Government services such as the National Hospital Insurance Fund (NHIF), National Social Security Fund (NSSF) amongst others. 

Cards

  • mVisa will soon be in 10 countries as Visa expands its QR payment service for safe and easy mobile payments in emerging markets. It is already live in India, Kenya (started with Family Bank) and Rwanda, and will soon be available to merchants and consumers in Egypt, Ghana, Indonesia, Kazakhstan, Nigeria, Pakistan, and Vietnam.. (mVisa) allows consumers to use their mobile phones to make cashless purchases at merchant outlets, pay bills remotely and even send money to friends and family members by securely linking their Visa debit, credit or prepaid account to the mVisa application. Also any bank’s mVisa customer – regardless of where they bank – can transact on any mVisa merchant and merchants do not need to invest in POS infrastructure. Visa has partnered with Co-Operative, Family, KCB, and NIC banks.
  • Mastercard commitED to financially include 100,000 Kenyan micro merchants with Masterpass QR, a simple and secure digital payment solution. It will be introduced through various financial institutions. With it, consumers will be able to pay for in-store purchases by scanning the QR (Quick Response) code displayed at the checkout on their smartphones, or by entering a merchant identifier into their feature phones. Masterpass QR is currently being rolled out in Nigeria, Ghana, Rwanda, Uganda, and Tanzania.
  • Safaricom has issued 16,000 Lipa na M-Pesa cards in the pilot phase of a project that will launch later in the year. The Lipa na M-Pesa card uses pin and chip technology…It is also equipped with Near Field Communication (NFC) (which will) increases the speed at which customers make payments.
  • Verve: A dozen Kenya banks have partnered with Verve International, Africa’s leading low-cost payment network provider, in their push towards interconnectivity, cardless transact ability, and digital payments. Verve, best known as a card issuer has more than 32 million Verve cards and virtual/digital tokens issued across Africa and Verve is used in 19 African countries.
  • Pesapal adds American Express ​Pesapal integrated American Express into its payment platform on February 27, and  AmEx card holders can now use their cards to​ ​transact on any online payment portal that uses Pesapal. This is especially useful for hotels and other companies in the East African tourism space.  Pesapal which is in Kenya, Uganda, Tanzania, Zambia and Malawi and plans to expand to Nigeria in 2018 also offers an online booking engine for Hotels called ReservePort that’s used by Serena and Heritage brands.

Remittances

  • Facebook:  Facebook added international money transfers to its chat app. The service comes via London-based startup TransferWise in the form of a Facebook Messenger chatbot and enables transfers to and from the US, Britain, Canada, Australia, and Europe.
  • Bitpesa:  The company introduced an Africa to China corridor enabling users to send payments from Africa, directly to a Chinese bank account using bitcoin.
  • European choice: How much does it cost to send money from Germany to Kenya?@WehliyeMohamed posted that the global average cost for sending $200 in Q3 2016 was 7.42%, and that It cost him 6.7% to send money to Kenya. Then @MkenyaU answered that it costs 1.5% when he sends €200 from Germany and this reduces to 0.6% when he sends €500. He cautioned that some companies charge zero fees but their exchange rates are horrible as he shared a comparison of a dozen services available to send money from Germany to Kenya.

 

Mobile

  • Safaricom Mpesa: 10-year-old M-Pesa had 6 billion transactions in 2016 and is now in 10 countries – Albania, the Democratic Republic of Congo, Egypt, Ghana, India, Kenya, Lesotho, Mozambique, Romania, and Tanzania. A new feature in M-Pesa will enable users to see the cost of transactions. In the initial phase, customers will be notified of the costs after, and in the second phase customers will receive a pop up message informing them of any charges prior to the transactions, while the third phase will see the service being made available to value-added M-PESA financial products including M-Shwari, KCB M-PESA, Okoa Stima and M-Tiba. The second and third phases of the update will be rolled out in coming months.
  • There have been some calls and reports recommending that M-Pesa be split from Safaricom. This could have happened years ago, but it is more difficult now that M-Pesa is an entrenched and central part of Safaricom today.
  • Tala raised over $30 million in Series B financing, led by IVP and joined by Ribbit Capital.   Tala uses smartphone data to build financial identity ..  mobile app for Android aggregates more than 10,000 different data points on a customer’s device, including financial transactions, savings, network diversity, and geographic patterns, and builds a customized credit score, or financial identity. Tala operates in East Africa and Southeast Asia with its main top markets being Kenya and the Philippines. Tala has delivered more than one million loans totaling over $50 million, and more than one million individuals have accessed the product in East Africa alone. See how Tala compares to other (fintech) / phone-lending apps in Kenya.  Forbes termed this the largest Series B raised by a woman founder in recent memory.
  •  Zeep is a smart and simple mobile platform that helps young people (teens) nurture good  financial habits. They ‘learn by doing’ within the framework of a secure financial environment with guidance from their parents.

Companies to watch

Irish Tech News released a list of 38 Kenya fintech companies to watch in 2017; these include Abacus, BitPesa, Branch, Cellulant, Chura, FarmDrive, Kopo Kopo, M-Changa, Pesapal, Tala and Umati.

Summit

The FT Africa Payments Innovation Summit will take place on 29 March 2017..it will bring together 250 business leaders from various mobile and financial interest groups and explore challenges and opportunities inherent in these developments: from providing greater financial access to un-banked people across the continent to providing new services and opportunities for an emerging middle class.

 

 

Mombasa and Tax Collection

There was an interesting screen shot of the amount of customs tax collected by the Kenya Revenue Authority (KRA) on 16 December 2016.

It showed a total of Kshs 1.57 billion collected that day. Of that, Kshs 1.24 billion (79%) was recorded at Mombasa, and Kshs 139 million (9%) at Nairobi. Other top collection points were 6% at Nairobi’s  JKIA airport, 2% at Mombasa Airport and at Pepe Containers each, and 1% (Kshs 15 million) at Busia town.

Other centers listed include Eldoret and Wilson airports, and border towns of Moyale (Kshs 640,000), Isabanya, Namanga and Malaba which all recorded small collections. Other centres were Lamu with Kshs 21,000 and Kshs Kisumu 10,000. Mombasa had 1,887 transactions, JKIA had 1,205 transactions, Busia had 141, as Lamu had just 3 on that day.

In 2016, KRA collected Kshs 1.2 trillion of revenue for the government, which included Kshs 386 billion of customs tax – which works out to almost Kshs 1 billion per day. So Friday, December 16, was an exceptional collection day that came just before the Christmas break.

It’s worth noting that landlocked countries in East Africa are also able to pay tax and clear goods at Mombasa before transportation to the countries. This is done to prevent dumping of untaxed cargo during transit through Kenya.

KRA’s strategic corporate plan calls for clearing more cargo at Internal Container Depots (ICD’s) and this may have implications for Customs’ deployment of staff in the coast region. KRA’s 6th corporate plan also noted that the perception of corruption is highest at Customs service area at 66%.

Make Innovation the Centre of your Business and Job or Face Disruption

These were the words of Brett King, a futurist and bestselling Author spoke about disruptive innovation to guests at a business forum at the Capital Club, Nairobi. He had been invited by KCB Group, Kenya’s largest bank, which he is advising on a digital finance strategy.

He said that companies that are based on innovation and technology ( E.g Google, Facebook, Alibaba, Baidu, have ten times more profit (~$500,000 per employee) than traditional companies of ($30,000 per employee) or banks ($50,000 per employee)  as they are more efficient at converting production to profits

Other comments:

  • Historically technology that is cool but disruptive ,is resisted and he compared Luddites who smashed factory machinery in England in 1812, to taxi drivers smashing Uber cars in France 200 years later.
  • He expected more contextualization of financial service a based on location and behaviour: e.g. walk into an Apple Shop and you get a finance offer on your phone about a new device you have been longing to buy.
  • Bitcoin’s ability to be a currency is hampered because owners of the coins are hoarding them like gold so they appreciate in price (which is now $1,000). They are not using the bitcoins to make payments which are what currencies are meant to do.
  • There’s a bright future for peer to peer (P-2-P) insurance (more than P-2-P lending).
  • The service jobs there today will be replaced by automation/robotics. But this creates even newer service jobs (every job lost to technology create 2.6 others), and students considering careers should ask themselves how they will compete with Artifical Intelligence (AI) or work in jobs that enable the future e.g. solar adapters.
  • Entrepreneurs should create businesses that take advantage of AI. The mid-2030’s will be an exciting time as there will be more energy from renewable sources than fossil fuels and more robots than humans.
  • On Kenya’s revolutionary M-pesa, which had facilitated the fastest financial inclusion shift in history, he said it was clunky as it was designed for feature phones.

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.