Banks feeling the technology heat

For a long time, the importance and impact of technology to the ordinary Kenyan seemed like a pipe dream. It seemed like the Web site would never be accessible to the ordinary farmer. The way it was presented, it was so elitist that rural folks were overawed by the technology.

Then the mobile phone came, and everyone realized it was easy to use. Now everybody is crazy about it. It has opened people’s minds. High school students are coming up with innovative ways to use the mobile phone to do other tasks, like switch off the lights or the security system.

All this time, the banks have been sitting tight, thinking that their dominance in the financial sector was not threatened. But with the development and use of money transfer services -- Sokotele by Zain and M-PESA by Safaricom -- the banks have seen the tide turn.

Money transfer has now moved from banks to the mobile phone kiosks. Indeed, since inception in March last year to July this year, M-PESA has handled 36 billion shillings. The signing of the agreement between Safaricom and Pesapoint allowing customers to use M-PESA services from the 110 ATMs countrywide underscores the impact of the service.

To counter the technology wave, some financial institutions have started questioning the Central Bank of Kenya for not developing a regulatory mechanism to regulate mobile money transfer.

In short, they want CBK to impose taxes and charges so that it can be more expensive. It’s the best way to beat competition in Kenya, undercutting each other and hitting below the belt.

Though Bernard Mathewmann, Paynet Group CEO, said that the new wave of mobile banking is no threat to banks, the writing seems to be on the wall.

There is also the question of security, which Mathewmann defended, saying that the cardless transactions employed precautionary measures and addressed all security concerns.

For the transaction to be complete, the phone used must be registered under M-PESA. The PIN (Personal identification Number) sent from the user is unique for each transaction and expires after two hours, which reduces the risk.

It is only a matter of time before someone comes up with a loan system using the money generated from mobile phone transactions or something like that.