ATMs get their groove back as mobile transfer fees reinstated

Are the perceived out-of-fashion Automated Teller Machines (ATMs) about to become obsolete and technological dinosaurs like the infamous telephone booths?

Maybe not so fast!

An increasing number of Kenyans are now shunning transfers of money from their bank accounts to mobile money wallets such as M-Pesa and Airtel Money in favour of physical cash withdrawals from bank ATMs, citing high charges.

This is after banks started effecting new levies from this month, following the reinstatement of the service charges by the Central Bank of Kenya (CBK) in early December.

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"The Central Bank of Kenya announces the reintroduction of charges for transactions between mobile money wallets and bank accounts, which were waived on March 16, 2020, as part of the emergency measures to facilitate the use of mobile money in the context of the Covid-19 pandemic," CBK said in a statement early December.

The return of the fees comes as fresh pain for consumers, but a major win for lenders who have experienced a drop in fees and commissions.

A spot check by The Sunday Standard showed bank customers are back to queuing at the ATMs - whose usage has declined over the years - away from the cashless transaction platforms to escape the newly reintroduced fees.

The increasing preference for ATMs is seen to renew discussion on the utility of ATMs in a world of rapid digitisation.

"I had stopped using ATMs due to the convenience of bank transfers but with the reintroduction of the fees, I have now become an ardent user for my weekly cash needs," John Mwangemi, a Nairobi-based worker, told The Sunday Standard.

Miriam Mwai, a Masters student at one of the public universities in the city, said planned withdrawals at the ATMs are the only way to evade the "punitive" new charges.

Commercial banks used to charge fees ranging from Sh30 to Sh197 before the waivers were introduced and the transfers zero-rated. They are now charging between Sh20 and Sh70 under the new guidelines.

Some banks are also charging customers to notify them of any digital transaction, making the bank transfer fees exorbitant, customers say.

Banks have been clamouring for the end of the freeze to rev up non-interest income. The use of mobile money, which has made Kenya a global pacesetter, has rendered cashless popular due to the growing array of alternatives.

But a shift back to ATMs is likely to reverse Kenyans' use of the technology, which had dropped to its lowest level in a decade.

Earlier studies showed Kenyans were in recent years withdrawing smaller amounts from ATMs as faster, easier technologies such as tap-and-go payments surged in popularity.

The machines that are common in urban centres have been slowly losing popularity as the digitisation of financial services in the banking sector continues to gain momentum.

According to CBK data, the number of ATMs decreased by 46 (19 per cent) to 2,366 in December 2021 from 2,412 in December 2020.

"The general decrease in ATMs in 2021 is because of the adoption of mobile phones and digital banking in the banking industry," said CBK in its 2021 annual report.

This followed a trend where lenders including Standard Chartered, Stanbic, Equity and SBM banks shut several branches, headlining the shift to digital banking in place of the traditional brick-and-mortar.

According to CBK Governor Prof Patrick Njoroge, 96 per cent of the transactions happen outside bank branches. This was up from 91 per cent before the Covid pandemic.

This has come as many lenders roll out digital banking platforms, which have in turn cut the need for customers to visit the outlets for services such as the opening of accounts, balance inquiry and settling bills.

Consumers have been enjoying the relief of zero-rated bank transfer services introduced in March 2020 to contain the spread of Covid-19 through cashless transactions. But lenders have been bleeding millions monthly due to the free transfers between them and mobile wallets.

The rise of digital banking has allowed banks to reach customers directly, reducing the need for physical locations, and has also led to massive job losses among clerical staff.

According to CBK data, the fee waiver saw the number of Kenyans actively using mobile money increase by over 6.2 million between March 2020 and October 2022.

It is also during the period that the monthly volume and value of peer-to-peer transactions increased from 162 million transactions worth Sh234 billion to 440 million transactions worth Sh399 billion, a rise of 171 per cent and 71 per cent, respectively.

The monthly volume and value of transactions between payment service providers and banks within the two-year period increased from 18 million transactions worth Sh157 billion to over 113 million transactions worth Sh800 billion, an increase of 527 per cent and 410 per cent, respectively.