Mobile banking has sounded death-knell to plastic money in Kenya

25 November 2016

Money Transfer

A shift in droves to mobile banking by citizens in Kenya is sounding a death-knell to plastic money, whose uptake and usage has stalled despite service providers making the cards versatile.

The debit, credit and charge cards are slowly being edged out of the financial system after failing to gain traction among consumers in the face of stiff competition from mobile money.

Nearly all Kenya’s 42 commercial banks have mobile banking services that allow customers to transact business on their cell phones.

Using the gadgets, they can deposit, withdraw, transfer and make payments from their bank accounts without visiting the financial institutions.

And this is causing trouble for plastic money such as debit cards because card holders must visit a bank to withdraw cash.

The inconvenience has made many citizens to fully embrace mobile money, withdrawing cash from their bank accounts into their mobile money accounts and transacting with it from the comfort of their homes.

And with about 90 percent of loans from commercial banks in the East African nation currently being disbursed through mobile phones, plastic money stands little chance to survive.

Latest figures from the Central Bank of Kenya (CBK) point to the fact that plastic money is in distress in the East African nation. Instead of usage and uptake going up, it has been on the decline.

As at June, there were about 11 million debit cards and 238,000 credit cards in the country, with the number of the former going down from over 11.1 million the previous month.

However, the real distress is in the usage of the cards, where transactions in June only stood at 1.1 billion U.S. dollars.

On the other hand, on average, Kenyans were moving 2.6 billion dollars on mobile money platforms every month as at June, according to the CBK, from to 1.9 billion dollars in a similar period last year.

"I no longer use my ATM card...most of my business I now transact on mobile phone," Cleophas Masiga, a vehicle salesman in Nairobi, said Wednesday.

Like many other citizens, Masiga has linked his bank account with his mobile money account using an app provided by his bank.

Thus, when his salary is credited on his bank account, he gets a notification message immediately from his bank.

And using his mobile phone, he withdraws the money into his mobile money account and pays bills, goes for shopping and sends money to his parents.

"With such convenience, who will go to the bank to withdraw money using the card?" he posed.

Masiga has two debit cards from different commercial banks and he doesn’t remember using any in nearly six months.

For Antony Kariuki, a businessman, he has not used his ATM card for the last three years due to security reasons. Kariuki stopped using the card when he was waylaid one day in Kitengela after withdrawing cash from an ATM and robbed.

Commercial banks have realized the changing trend and are divesting from teller machines and investing in mobile banking services.

CBK data indicates that there are currently about 2,600 ATMs across the East African nation, down from an estimated 2,800 seven months ago.

"The rate at which mobile money use is growing is a clear indication that plastic money stands no chance of growth in Kenya.

"With banks shifting to mobile banking, it is a matter of time before the cards die because people can withdraw money from mobile money agents conveniently found next to their homes and not necessarily from ATM machines in shopping centres," said Henry Wandera, an economics lecturer in Nairobi.

Source: Coast Week 21 November 2016