Banks take on telcos with two-month free cash transfer

Kenya Bankers Association (KBA) Vice Chairman John Gachora(left) Integrated Payment Services Limited Chief Executive Jennifer Theuri(centre) and KBA Chief Executive Habil Olaka(right) review the functionality PesaLink, a digital payments platform that is expected to cut the cost of transactions and transform the way consumers interact with their banks. (Photo: Wilberforce Okwiri/Standard)

Banks have officially launched their money transfer platform with free transactions between customers in the first two months in a move likely to hot up competition for the telecoms.

Rolled out in mid-February on a pilot phase, Kenya Bankers Association (KBA), the umbrella body for licensed banks, says that the switch, called PesaLink, has transacted more than Sh2.5 billion in the last four months as more customers signed up.

“Given that most transactions were for system-testing, we expect transactions to grow as more banks come on board. So far, customer coverage is at 90 per cent,” said KBA Chief Executive Habil Olaka.

Despite insisting that the service is only meant to boost financial inclusion, it could pose competition and likely eat into Safaricom’s M-Pesa which currently commands the biggest share of mobile money transfer market.

The service wants to strengthen a cash-light economy or even possibility of need to handle cash. Part of transactions on M-Pesa involve withdrawing from banks and sending through M-Pesa.

Speaking in Nairobi’s Intercontinental Hotel during the launch of the service, Mr Olaka said that the switch, which now enables customers to transfer money from one bank account to another in 45 seconds, will soon extend the service to businesses and will be used for paying utility bills.

Minor hitches

In the next two months, customers will enjoy free access and tariff free services on the platform. This means over 3.5 million customers who have already signed up have a chance to move up to Sh999,999 without incurring any cost.

Thereafter, Mr Olaka told the press that banks have agreed to make transactions of up to Sh500 to be free. More than that amount, customers will incur a transaction cost of between Sh20 and Sh200, giving the switch a cost-effective edge over existing mobile money transfer platforms.

While sending say Sh900,000 using PesaLink will cost Sh200, sending Sh70,000 through mobile money currently costs Sh110 and the recipient incurs a Sh330 withdrawing charges. So far, 26 banks have signed up on the platform, an increase from 12 in mid-February.

KBA boss says that the remaining 16 are facing “minor hitches” in getting the green light from their head offices, in the case of multinationals.

All major banks including Barclays Bank of Kenya, Cooperative Bank of Kenya, Equity Bank, Kenya Commercial Bank, NIC Bank, Stanbic Bank, Standard Chartered Bank, Commercial Bank of Africa, Diamond Trust Bank, Family Bank, and I&M Bank have already signed up.

Speaking at the same function, National Treasury CS Henry Rotich lauded banks for embracing sharing of infrastructure to help bring down the cost of transactions. “PesaLink will address structural inefficiencies that have seen banks increase costs of banking to customers due to compartmentalisation of operations,” said Rotich.

Central Bank of Kenya Deputy Governor Sheila M’Mbijiwe said that the switch, developed by Integrated Payment Services (IPSL), a subsidiary of KBA, will boost financial inclusion by building on gains of agency banking. Since 2013, agency banking has transacted over Sh1.3 trillion.