Mobile, agency banking takes toll on ATMs

A number of cash dispensing machines belonging to PesaPoint have been disconnected owing to low business in what could signal an end to ATM-era in Kenya.

Bank to mobile cash transfers and agency banking have provided more convenient access to customers’ accounts, to a great extent eliminating the need of looking for a teller machine let alone making withdrawal over-the-counter.

Paynet, which owns the PesaPoint, one of the independent ATM service providers, has said several of its machines have been relocated due to low business in specific locations that are now well covered by banks it serves. The other service provider is Kenswitch.

“Due to the increase in number of banks’ ATMs where PesaPoint services are available, we are relocating from areas where there are lots of ATMs and where there is no need for specific PesaPoint ATMs to areas like large farms and rural growth points,” Paynet Chief Executive Bernard Mathewman told The Standard.

PesaPoint’s blue-and-orange-painted booths are missing in several locations they had been installed, especially in Nairobi, as a measure to cut costs and losses linked to the low utility of its ATM outlets.

Pesa Point has more than 1,200 machines installed in all major towns countrywide and has been a preferred channel by customers who transacted an average of over 500,000 cash withdrawals every day.

But across the market, more drastic events are shaping the financial services sector that could well cut the usefulness of the teller machines in the daily lives of ordinary Kenyans.

Dozens of people The Standard talked to in a random survey have not used their ATM cards to withdraw cash from their bank accounts in months because they opted for a bank-to-mobile transfer, which they say is more convenient.

Costs of mobile banking are generally higher than ATM access, but our respondents said they would pay a premium for the additional cost to enjoy convenience.

More than 30 banks have entered partnerships with Safaricom and other mobile phone services, allowing direct access by account holders through their mobile phones. Such customers can then withdraw the cash from agents or even pay for goods and services using the virtual accounts, cutting the need of handling hard cash in completing transactions.

 

Safaricom has more than 40,000 agents spread across the country who are now replicating the services offered by ATMs, and a lot more. Further, the top tier banks have embraced agency banking to allow third party outlets to provide terminals for cash deposits and withdrawals.

In an investor briefing in Nairobi three weeks ago, Equity Bank’s Group Chief Executive James Mwangi painted a picture of how agency banking and mobile-based transactions were shaping his business. Almost 4.3 million transactions had been done by the bank’s agents in August alone, helping move more than Sh29 billion in that month.

Habil Olaka, the chief executive of the Kenya Bankers Association, promised to provide an industry overview but had not done so by end of day yesterday.

Nigerian controlled

Underutilisation of PesaPoint’s machines and the decision to relocate them now, comes after a decade of success for the firm which managed to sign up most of the commercial banks to its network.

Now the firm says its services are available on the ATMs owned by the different banks, in a partnership that has gone full circle.

“We are increasingly investing in public education to make more financial services consumers aware that any ATM near them that displays a PesaPoint logo is indeed a PesaPoint and they can get their services at the same fee charged by alternative service providers.”

These developments come less than a year after Paynet was acquired by Interswitch Transnational Holding – a Nigerian firm. Interswitch offers similar services as Paynet in West Africa. The acquisition was hoped to grant the customers a wider access to the services, across the continent. The value of the transaction which handed the Nigerians a controlling majority has never been made public. Mr Mathewman was retained as the group chief executive, overseeing the business in the East African region.