Post on 09-Dec-2021
Digital Revolution: A Case from
Kenyan Banks
Presentation by George Bodo
Head of Banking Research,
Ecobank Capital.
8th September, 2016.
Villa Rosa Kempinsky, Nairobi
Source: Ecobank Research 2
Kenyan Banks: Retail Franchise Strength
0% 2% 4% 6% 8% 10% 12% 14% 16%
KCB
Equity
Co-operative Bank
Barclays
Family Bank
National Bank of Kenya
Diamond Trust Bank Limited
Standard Chartered
Sidian
Bank of Africa
I&M Bank
Ecobank
CBA
NIC
CfC Stanbic
Jamii Bora Bank
Consolidated Bank
First Community Bank
Prime Bank Limited
Trans-National Bank
GTBank
Gulf African Bank Ltd
Credit Bank Limited
Spire Bank
Fidelity Commercial Bank
Bank of Baroda
ABC Bank
Guardian Bank
M Oriental Bank
UBA
Source: Ecobank Research 3
Kenyan Banks: Loan book concentration by key segments
0% 20% 40% 60% 80% 100% 120%
KCB
Equity
Co-operative
Standard Chartered
Barclays
CBA
CfC Stanbic
NIC*
DTB
I&M
Family Bank
Bank of Africa
National Bank
Citi
Ecobank Corporate
SME
Consumer
Source: Ecobank Research 4
The ‘New Normal’ now requires certain key adjustments
13.5%
15.0%
11.1%
6.8%
11.9%
7.0%
9.5%
7.8%
6.9%
8.1%
11.6%
7.1%
8.6%
7.1%
3.7%
8.0%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
KCB
Equity
Co-op Bank
Standard Chartered
Barclays
DTB
CBA
CfC Stanbic
I&M
NIC
NBK
Citi
Family Bank
Bank of Africa
Prime Bank
Ecobank
W.A.R on Deposits Spreads W.A.R on Loans
Chart below shows old normal as at FY2015
Source: Ecobank Research
* Expressed as ratio of total interest expenses to gross interest income
5
New Normal: Key adjustment points
29%
41%
51%
34%
43% 47%
70%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Tier 1 Banks Tier 2 Banks Tier 3 Banks Industry
Cost of Deposits* Efficiency(CIR)
Now that caps on lending rates as well as floors on deposit rates are part of our national laws,
banks will have to make adjustments to their business models-especially around costs (both
funding and non-funding). Technology is likely to be the next game changer in this new battlefront;
and banks will have no choice but to elevate technologization of their businesses.
6
Sources: Ecobank Research
28%
17%
33%
24% 20%
44% 45%
39% 41% 39% 36%
14%
41%
49%
71%
55% 50%
41% 44% 44% 45%
39%
52%
31%
37%
51%
29% 31%
64%
35%
72%
20%
85%
42%
89%
64%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cost of Deposits Efficiency(CIR)
Tier 1
Tier 2 In the new normal:
•CIR must not exceed 40%;
•Cost of funds must not exceed 30%
8
Regular banking transactions and frequency
Type of Transaction
Daily-
several
times
Daily-
Once
Weekly-
several
times
Weekly-
once
Monthly-
several
times
Monthly-
once
Occassionally
-less than
once a month
117 141 608 484 786 1328 626
Cash Withdrawal 76% 9 12 149 133 260 254 141
Cash Deposit 67% 7 20 142 105 166 272 132
Savings 59% 6 29 73 89 159 293 88
Balance Enquiry 40% 11 15 47 53 88 163 122
Airtime Recharge 26% 76 52 120 29 21 18 9
Funds Transfer 23% 3 4 46 42 47 80 69
Bill Payments 21% 0 1 13 18 20 193 17
Other Payments 5% 0 2 8 2 14 16 19
Purchasing 4% 4 5 7 8 6 15 11
Sources: KBA-Survey on the interplay between Banking and MNOs, 2014
9
Places where cash is withdrawn
ATMs
58%
Mobile Operator Agent
20%
Bank Teller
16%
Bank Agent
5%
Sources: KBA-Survey on the interplay between Banking and MNOs, 2014
10
Payment of Bills
0%
0%
0%
1%
2%
3%
4%
10%
14%
64%
0% 10% 20% 30% 40% 50% 60% 70%
Prepaid
Credit Card
By cheque
Pay outlet by company
ATM
Others
Third party outlets
At the bank teller
Mobile Banking
Cash direct to company
Sources: KBA-Survey on the interplay between Banking and MNOs, 2014
12
Channels…
0
50
100
150
200
250
300
350
400
2009 2010 2011 2012 2013 2014 2015 H1 2016
ATMs ATM Cards Debit Cards POS Machines Branches
Sources: Ecobank Research, CBK
13
Payments…
1% 3% 4% 4%
6% 7% 7% 8%
21%
28%
12% 11%
12% 12% 11% 10%
1% 1% 3% 2% 4% 5% 4% 4%
78% 75%
83% 84%
80% 79% 79% 80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2008 2009 2010 2011 2012 2013 2014 2015
Mobile Payments as % of Total National Payments Cheque&EFT Payments as % of Total National Payments
Card Payments as % of Total National Payments RTGS Payments
Sources: Ecobank Research, CBK
14
Agency Banking…
# of
Banks
# of
Agents
Cash
Withdrawals
(KES'Bn)
Cash
Deposits
(KES'Bn)
Total
Transactions
(Mn)
Value of
Transactions(KES'Bn)
2011 8 9,748 15 28 9 44
2012 10 16,333 50 101 30 152
2013 13 23,477 74 160 42 236
2014 16 35,847 105 236 58 346
2015 17 40,592 133 297 80 442
Sources: Ecobank Research, CBK
15
Initiatives currently in the pipeline: Switches
Sources: Ecobank Research, CBK
• Commercial banks now want to bypass
telcos in the battle for mobile money
wallet.
• Banks are currently on top gear to
launch a common mobile switch to be
used by banks.
• Access to this wallet will be through
USSD or an app.
• This effectively means that banks want
to dominate mobile payments.
• This is definitively a game change and
banks just need to drive its acceptability.
Mobile Switch
Bank
Account
USSD
App
Safaricom/
Airtel
MNO Platform
Customer
Mobile
Wallet
MobilePhone
Bank
Account Customer
Mobile
Wallet
USSD
App
Common Switch
Mobile
Phone
16
Mobile Phone Loans
Sources: Ecobank Research, CBK
Loan
originator
(RM)
No objection from
head of credit
CAD-Availment and
Letter of Offer
Operations-
disbursement
CAD-Monitoring
Credit Analyst
Appraisal (Credit
Factory)
Customer
drawdown
Registering of charge (in case of secured lending)
The normal bank process
17 Sources: Ecobank Research, CBK
The Mobile Process
Loan
origination
by the
customer
Mpesa
usage Airtime
Usage
Okoa
Jahazi Okoa
stima
Airtel
Money
usage
CRB
listing
Limit
setting
Loan
availment
Credit Appraisal by the MNO
• The mobile process is a lot more
cheaper and efficient;
• Less people involved in the
process;
• A very ideal platform going
forward for mass-market focused
banks.