KENYA: Agency Banking Fights for Relevance in Era of Internet, Mobile Money

Increase in mobile money and internet banking is eating into the agency banking space with number of transactions through bank agents decreasing by 8.3 percent from approximately 158.4 million transactions recorded in 2022, to 145.3 million transactions in December 2023.

• The number of transactions related to cash deposits, cash withdrawals, payment of bills, transfer of funds, account balance enquiries and mini statement decreased in 2023 compared to 2022.
• Central Bank of Kenya (CBK) data indicates number of transactions related to payment of retirement and social benefits was up from 965,865 in 2022 to 2,087,191 in 2023 while transactions linked to collection of account opening applications were up from 15,037 to 25,916 in 2023.
• CBK’s Bank Annual Supervision Report notes that mobile phone financial services in Kenya experienced a growth rate of 1.67 percent in 2023, mirroring the trend observed in 2022.

In 2023, the value of banking transactions through agents decreased from Ksh.1.8 trillion (USD 15.2 billion) in December 2023 to Ksh.1.7 trillion (USD 10.5 billion) in December 2023. The decrease was attributed to increased use of mobile money, as mobile subscriptions slightly grew to 66.8 million, and internet banking.

“Despite the subdued growth, the total value of mobile money transactions in the year ended December 2023 reached a record high of Ksh.788.35 billion. This surge was driven by several factors, including, the increasing demand for cashless transactions, and the establishment of 8,555 new active mobile money agents,” CBK says, “The number of active mobile money agents marginally increased by 2.68 percent from 318,607 to 327,162. Consequently, this resulted in a 13.8 percent increase in the value of transactions from Ksh.708.06 billion in December 2022, to Ksh.788.35 billion in December 2023.”

In 2023, 16 commercial banks and 5 microfinance banks (MFBs) contracted 87,531 and 677 bank agents, respectively. As at December 2023, commercial banks recorded 82,780 bank agents, while MFBs agents were 921. The change was an increase of 4,409 commercial bank agents (5.6 percent) and a decrease of 277 MFB agents (25.1 percent).

Over 90 percent of the approved bank agents were concentrated in 3 banks: Equity Bank with 40,211 agents, KCB Bank Kenya with 24,055 agents and Cooperative Bank of Kenya with 15,519 agents.

On the other hand, over 90 percent of the agents were contracted by the two largest MFBs – Kenya Women Microfinance Bank Limited (127 agents) and Faulu Microfinance Bank Limited (409 agents).

SOURCE:https: kenyanwallstreet / Fred Obura