Kenswitch matches shift to plastic with ATM system upgrade

By James Anyanzwa

The national payments gateway provider Kenswitch has put aside Sh20 million to upgrade services to banks and financial institutions locally and regionally.

The company’s latest move is in-line with the Central Bank’s national payments system modernisation and reform process, aimed at encouraging people to shift to non-cash payment instruments such as credit, debit or pre-paid cards.

The new investment will see banking portal enhancement, revamping of a contact centre, purchase of new software and hardware, plus the introduction of an unlimited licensing model.

Kenswitch’s upgrade will allow the firm access to quick credit.

George Wainaina, the company’s chief executive, says the additional investment will provide a robust platform for interconnection with banks and their distribution channels.

"Over the last couple of years, Kenswitch has invested heavily around core services, allowing banks coming onto the switch to interconnect and issue cards to customers, a allowing them access to basic banking services on the ATM and Point of sale at merchant locations," he says

The company whose infrastructure currently covers over 2.5 million cardholders in Kenya, a platform for traditional retail banking and value add transactions, is now gearing up for the next phase of expansion of financial services and rollout of value added services by financial services providers, such as bill payments and access to quick credit.

Low cost services

"This means a robust platform, backed by technical support and a convenient licensing regime, will provide banks with access to a multiplicity of services at low costs," Wainaina said in a statement last week.

Kenya’s national payment switch is capable of providing various points of sales solutions, transaction switching, remote banking through Internet, and WAP, mobile commerce and pre-payments. The landing of the fibre optic channel, and the growth of the Internet on the mobile phone, has further opened up new opportunities in distribution channels within the payments space.

In addition, changes within banking legislation around agency banking, as well as the licensing of Credit Reference Bureaus provide the platform of innovative services.

Wainaina reckons that the rollout of enhanced Postilion Banking Portal will provide banks under the Kenswitch banner with quick access and control over their transactions, where the member banks will be authorised to query transactions via a browser.

Multiple channels

Wainaina contends that the exponential growth of ATM’s in the region was the basis for the revamping the Kenswitch 24-hour contact center.

The face-lift of the facility is expected to help member banks lodge complaints through multiple channels, including secure Internet enabled channels. The firm also hopes to deploy additional staff to cater for the burgeoning numbers of transactions and member banks.

The Kenswitch network, which is the largest in East and Central African, currently has 762 ATMs spread across Kenya, Uganda, Tanzania and South Sudan, with numbers expected to cross the 1,000 mark in 2011.

The new investment in the software regime will see Kenswitch connect to as many platforms as possible to provide customers with a one-stop shop for financial services without paying premium fees on each additional service.

And because licensing costs are based on the number of transactions and participating entities, Wainaina says the new regime will provide value to the proposed agency model that bank’s are currently embracing.

"The costs of expanding the services with the support of third parties will be greatly reduced," he says adding that, "the common battlefront amongst banks is low transactional costs."

Available statistics show 28 financials institutions are sharing the switch provider’s infrastructure, which has enabled it to offer low transaction costs.

"This will allow benefits to be passed to the consumers, in terms of transactions fees across channels including the mobile and Internet," says Wainaina.

George Wainaina. Photos: Courtesy

The investments by Kenswitch over the years have brought down connectivity charges by 33 per cent.

Regional trade

Equally, Wainaina says, improved interconnectivity, low-cost cross border payments are now a necessity in order to further enhance regional trade and enable the country to tap increased trade in the neighbouring countries under the East African Community.

Market analysts predict positive economic outlook for the region based on foreign investments and infrastructure development founded on a possible boom from the discovery of oil.

According to Central Bank’s 2009-revised annual report, interest rates are expected to remain stable, consistent with expected stability in most of the macroeconomic fundamentals. The Bank expects to support interest rates stability by continued implementation of prudent monetary policy.

But, in order to stimulate savings and investments, deposit rates must increase and lending rates must decline in line with return on investments, as well as encourage production in future. Lower interest rates spread is expected to signal increasing efficiency in the financial market.

A number of commercial banks have already cut their base lending rates in response to Central Bank’s reduction in its key-lending rate.

The Bank has so far slashed 2.25 percentage points off its benchmark-lending rate in series of cuts since December 2008. The CBR now stands at a record low of 6.75 percent.

Amongst the banks that have lowered their base rates include Barclays Bank, Co-operative Bank, NIC Bank, Kenya Commercial Bank (KCB) and Citibank Kenya

Central bank Governor Prof Njuguna Ndung’u has been urging commercial banks for months to lower their lending rates to help spur growth in light of the looser monetary policy.