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Mobile banking industry in Kenya to reach USD 68.2 B by 2024

Mobile Banking Industry in Kenya was valued at USD 38.5 billion in 2018 ans is expected to grow at the CAGR of 10% within the forecasted time period of 2019-2024. It will reach USD 68.2 billion by 2024.

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Definition / Scope

Mobile Banking is the use of the electronic mobile device for banking and financial services provided by banks and microfinance. The mobile based banking services includes cash deposit, cash withdraw, money transfer, bill payment, buying insurance, loan products, and balance enquiry. It is the convenient method of managing money usually done through SMS as simple text messaging interface and mobile internet as web-based interface. It facilitates the use of bank virtually anytime flexibly in any location by using electronic data interchange for automatic processing.

Kenya is one of the leading country in mobile banking services.The leading mobile banking system are Orange, Airtel, Mobikash, Tangaza Pesa, Equity Bank.[1] In this context, the most commomly used banks with mobile banking services are as follows:

Kenya mobile banking def.png

Market Overview

Kenya is the world leader in mobile banking with more than 12 mobile banking system actively engaged. The market size of the mobile banking industry in kenya was valued at USD 38.5 billion in 2018, increased from USD 35.17 billion in 2017[2]. It is expected to grow at the CAGR of 10% within the forecasted time period of 2019-2024 because of the rising use of mobile technology for banking purposes. It will reach USD 68.2 billion by 2024.

On the basis of the type of transactions, the mobile banking services are daily used for fund transfer (45.6%) followed by purchase airtime (44.5%), and balance inquiry (34.3%).[3] On average, the monthly value of mobile banking is USD 108 and majority is used for money transfer. The key market players engaged in this industry are Kenya Commercial Bank, Equity Bank Kenya, and Barclays Bank Kenya.

Kenya mobile banking service users.png

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

  • Risk of fraud and privacy loss

Security issue is one of the hinderance faced by consumers towards the adoption of mobile banking services. About 8.4% perceive as a great hinderance for the mobile banking while 24.7% perceive it as little hinderance. Besides this, a survey conducted by Bersudskaya and kuijpers has found that 20% of the consumers are suffered from some sorts of fraud while using mobile banking services.[4] It might restrain the growth of the mobile banking industry.

Top Market Opportunities

  • Well developed banking system

In the context of Kenya, there are about 44 banks and 4000 savings and credit cooperative societies including 31 banks owned by the local people and government and the remaining 13 foreign banks.[5] They offer wide range of services in terms of retail banking, microfinance, telecom services, insurance, money transfer, etc. It is also creating the significant opportunity for the use of mobile banking services.

  • Rising financial account and fintech companies

In Kenya, almost 75% of the adult people have their financial account at bank and microfinance companies. Here, almost 11.5 million adults are using mobile phone for financial services because of its low cost and easy access.[6] For instance, Equity Bank Kenya is providing mobile banking services through the use of its own network operating telecom unit Equitel. Along with this, the number of financial technologies companies providing the services in terms of protection through the blockchain system and GPS functionalities is also in increasing trend, which is working in partnership with banks. For example, apollo is the tool being developed to combine GPS location for loan repayment and cashflow timing. Tulaa is also developing the mobile wallet to favor the saving and burrow of money towards the purchase of agricultural products with discount.[7] It has provided a significant opportunity for the mobile banking market.

Market Drivers

  • Rising mobile-based monetary transactions

Kenya is one of the leading countries in terms of mobile for banking transactions worldwide as more than 70% of people have access to a mobile phone.[8] The banking transactions through the use of the phone is in increasing trend. Within a year, the value of mobile-based transactions has been increased by 24.7% from USD 20.9 billion to USD 26.4 billion.[9] It is driving the growth of the mobile banking market.

  • Quickness in banking process

Use of mobile phones in the sector of banking has facilitated the easiness in banking processes such as loan processing. It has assisted the consumer to get the services in quick access. For instance, the consumer has issued almost USD 100 million of loans from the mobile phones from one of the popular bank of Kenya i.e. Kenya Commercial bank. The mobile banking services was capable to handle almost 30,000 loan requests every day on average.[10] This is the significant factor to favor the use of mobile bank services, which is driving the growth of the mobile banking market.

  • Low service cost and flexible working hours

In comparison to the conventional method of banking services, the mobile banking services reduces the cost of the basic banking services such as balance enquiry, money transfer, etc by more than 60% to all the consumers. The average cost of operating mobile-based financial account is about USD 13 per month. It results in the huge cost savings to the service users.[11] Along with this, the flexible operating hours of the mobile banking services is increasing the convinience of the services in comparison to the fixed seven hours per day working hours of kenyan banks. As a result, the usage of the mobile banking services by consumer will be widened and increased, which in turn bring the significant growth in mobile banking industry in Kenya.

Market Restraints

  • Poor web design and network problem

In the context of developing countries like Kenya, network of the mobile phone, internet connection and design of the application and web based designs is quite critical. A survey conducted by Orucho Daniel Okari in Kenya has found that almost 57.5% of service users as study participants faced the problem of slow network connection and 15% of them has been suffered from network failure. About 10% of them indicated that webpage of the bank has poor design.[12] Along with this,a survey conducted by the Lyman et al had revealed that almost 73% of the non users and infrequent users of mobile banking prefer face to face financial transactions because of the issues related to the use of the technology. So, the poor design of the financial webpages and technologies might restrain the growth of the mobile banking market.

Industry Challenges

  • Strong competition from telecommunication industry

The telecommunication company safaricom has lauched M-pesa to access the customer's money with mobile technologies. Although some of the banks are working in partnership with this technological platforms and telecom industries, it is still challenging for the banks and microfinancies to compete them in mobile banking services through the use of their own banking solutions.

Pricing Trends

The price of mobile banking services differs in accordance with the type of services being used, their quality, and the pricing strategy of the banks. The price for the use of Mpesa service provided by the Safaricom mobile service provider is about USD 0.3 per transactions while the price of the zap service provided by the mobile service zain is USD 0.5 per single transaction. The price of the mobile service provided by the Orange and Econet is about USD 0.05 per transactions on average.[13] The average price of the money transfer ranges from USD 0.048 to USD 0.19 per transactions.[14]

Regulatory Trends

The Central Bank of Kenya is the concerned authority responsible for the formulation of policies related to the monetary policy and financial stability. It is the banker and advisor for the government. Some of the regulatory trends associated with mobile banking industry in Kenya are as follows:

  • The Banking Act: This act is concerned with the banking industry and its matters which provides the framework and procedures for licensing of banking institutions and criteria under which their licences will be officially cancelled. Without valid license, the banks and other financial organization aren't allowed to carry out any sorts of financial bussiness and banking.[15]
  • The Central Bank of Kenya Act: According to this act, the central bank of Kenya has the power to develop rules and regulations about the banking and financial matters. It has also specialized the techniques for calculating the amount of the total liabilities of any financial institutions.
  • The Microfinance Act: It provides the regulatory framework for the licensing, regulations and supervision of the microfinance bussiness entities.
  • The proceeds of Crime and Anti-Money Laundering Act: This act controls the money laundering and set out the reporting center for any cases of the financial frauds. Along with this, it combatswith the effects of the money laundering.
  • The Kenya information and communication Act: It is concerned witht he licensing of all the services and system engaged in the delivery of services regarding communication industry. It facilitates e-commerce and consumer rights for information.

Market Size and Forecast

Sub-Saharan Africa constitute 49.1% of total global mobile banking industry. In the context of Kenya, there are almost 47.7 million mobile accounts in 2018. Kenya is the world leader in mobile banking with more than 12 mobile banking system actively engaged. The total market size of the mobile banking industry in kenya was valued at USD 38.5 billion in 2018. [16]. It is expected to grow at the CAGR of 10% within the forecasted time period of 2019-2024.

On the basis of the type of transactions

  • Fund transfer is the mostly used mobile banking services on daily basis which is used by almost 45.6% of the service user [17]
  • Purchase airtime is used by 44.5% of the mobile banking service user on daily basis.
  • balance inquiry is done by 34.3% of service user as mobile banking service on the daily basis.

On basis of the average monthly value of mobile banking transactions

  • The average value of all mobile based banking transaction is USD 108 million per month in kenya.[18]
  • Money transfer has the largest market value of USD 57 per month per consumer on average.
  • Cash deposit has the market value of USD 56.4 per month per consumer.
  • Airtime top-ups has the lowest average market value of USD 2.8 per month per consumer.
Kenya mobile banking transaction average.png

Market Outlook

In Kenya, the mobile banking industry is expected to grow at the CAGR of 10% within the forecaste time horizon of 2019-2024 because of the increasing usage of mobile technology for financial purposes. it is estimated to reach USD 68.2 billion by 2024.

Kenya mobile banking market size.png

Key Market Players

  • Kenya Commercial Bank: It has the largest branch network of 168 branches in Kenya. It is capitalizing in terms of revenue for the mobile banking service and launched KCB M-Pesa as the mobile-based bank account. It is providing services to more than 15 million customers.Kenya commercial bank has partnered with Safaricom, which is used more than 25 million. M-Pesa is the popular mobile-money service provided by telecoms operator, which was launched in 2007 in partnership with KCB. Safaricom mobile banking penetration is 30-40% with consumer and mobile banking is in the early stage of development [19] It contributes to the transactional value of 26% with revenue of USD 46 billion.
  • Equity Bank Kenya: It is providing the services of retail banking, microfinance and telecom services through mobile-based banking platform. It specially offers the services of bill payment, equitel airtime, moneygram services, Eazzy 247 registration, Equitel SIM cards, etc.[20]
  • Standard Chartered Bank Kenya: It has 36 branches and 108 ATms in Kenya. It offers a range of services of local and foreign currency banking solutions. It has ISO 9002 certified technology system with 24-hour convenient automated banking center.[21]
  • Barclays Bank Kenya: It has 119 branches and 230 ATMs in Kenya. It is providing mobile banking services through active internet platform.
  • Diamond Trust Bank of Kenya: It provides the services of the electronis banking and insurance facilities. It offers free airtime top-up, unmilited SMS alerts for credits and debits, internal and external funds transfer, etc as mobile banking service for customers.[22]
  • National Bank of Kenya: It has the internet banking platform and offers the services of personal internet banking and corporate internet banking. It facilitates the money transfer, debit card request, cheque book request, statement request,etc for the consumers.

Strategic Conclusion

Mobile Banking Service in Kenya is in the growth stage and is growing at the rate of 10% because of the increasing use of mobile technology in the delivery of financial services. Its use is in increasing trend because of its easy accessibility, low cost and convenient use. However, the risk of fraud, poor web design and network connectivity issue might restrain the growth of its market.

References

  1. https://bankingfrontiers.com/mobile-banking-leads-the-way-in-kenya/
  2. https://www.paymentscardsandmobile.com/mobile-money-transactions-half-of-kenyas-gdp/
  3. https://chss.uonbi.ac.ke/sites/default/files/chss/ESTHER%20A.%20OUKO%20ODERA%20D61-71319-2008_0.pdf
  4. https://www.cgap.org/sites/default/files/Brief-Fraud-in-Mobile-Financial-Services-April-2017.pdf
  5. https://bankingfrontiers.com/mobile-banking-leads-the-way-in-kenya/
  6. https://oxfordbusinessgroup.com/analysis/way-forward-banks-are-joining-race-mobile-banking-customers
  7. https://bankingfrontiers.com/mobile-banking-leads-the-way-in-kenya/
  8. https://www.futureofeverything.io/mobile-banking-changing-kenya/
  9. https://oxfordbusinessgroup.com/analysis/way-forward-banks-are-joining-race-mobile-banking-customers
  10. https://www.theafricareport.com/719/kenyas-mobile-banking-pioneer-we-need-to-focus-on-the-customer-experience/
  11. https://www.w3.org/2008/10/MW4D_WS/papers/njenga.pdf
  12. http://library.kisiiuniversity.ac.ke:8080/xmlui/bitstream/handle/123456789/339/Consumer%20Perceived%20Risk%20of%20Internet%20Banking.pdf?sequence=1&isAllowed=y
  13. https://www.w3.org/2008/10/MW4D_WS/papers/njenga.pdf
  14. https://chss.uonbi.ac.ke/sites/default/files/chss/ESTHER%20A.%20OUKO%20ODERA%20D61-71319-2008_0.pdf
  15. https://www.iflr1000.com/NewsAndAnalysis/Key-financial-laws-in-Kenya/Index/4082
  16. https://www.paymentscardsandmobile.com/mobile-money-transactions-half-of-kenyas-gdp/
  17. https://chss.uonbi.ac.ke/sites/default/files/chss/ESTHER%20A.%20OUKO%20ODERA%20D61-71319-2008_0.pdf
  18. https://www.paymentscardsandmobile.com/mobile-money-transactions-half-of-kenyas-gdp/
  19. https://www.theafricareport.com/719/kenyas-mobile-banking-pioneer-we-need-to-focus-on-the-customer-experience/
  20. https://ke.equitybankgroup.com/personal/banking-services/agency-banking/services-offered
  21. https://www.sc.com/ke/about-us/
  22. https://dtbk.dtbafrica.com/digital-banking/mobile-banking/

Appendix

  • SMS= Short message service
  • SIM= Subscriber Identification Module
  • KCB= Kenya Commercial Bank
  • USD= United States Dollar
  • CAGR= Compound Annual Growth Rate


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