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By Jackson Okoth
The money market landscape has since changed considerably.This is as mobile phone companies enter the credit space with electronic accounts, to challenge the dominance of commercial banks.
Gone are days when local subsidiaries of multinational banks could suddenly raise minimum deposit requirements, effectively closing down thousands of accounts belonging to small depositors.
Even those who had shut down rural branches have been aggressively resuming services, especially to the retail segment they had previously turned their backs on.
It is the customer who is king with an option of opening a bank account, without any minimum balance while having the option of running a mobile phone account. This is especially so for the low-end of the market, still cut off from the formal banking system.
Commercial banks now face competition for deposits from M-PESA and ZAP money transfer facilities provided by Safaricom and Zain. "Licensing of micro financiers as deposit taking institutions is also putting upward pressure on deposit rates," says a banking update by African Alliance Kenya.
The rapid increase in mobile financial services is leading to unprecedented opportunities for both business and consumers.
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Unlike in the past when it was difficult to send cash to relatives in rural areas, especially those with accounts in banks with upcountry branches, the mobile phone money transfer service has removed this bottlenecks.
Increased mobile phone ownership and accompanied technology now enables us to pay electricity bills, do online shopping and interface the handset with an automated teller machine (ATMs) operated by commercial banks.
Convergence between commercial banks and mobile phone technology platforms has made practical, affordable banking a reality, especially for low-income consumers, previously underserved by the formal banking system.
It is now possible for anyone with a mobile phone to access their bank accounts information, make payments, transfer funds between accounts, transfer and store value between phones without necessity of bank accounts.
During an M-banking conference in Nairobi, held in May this year, policy makers acknowledged that convergence of financial services and telecoms sectors present regulatory challenges.
Banks have been lobbying intensely for stricter regulation of telecoms to even the playing field, mobile money transfer services have continued to receive tacit support from Central Bank of Kenya.
While CBK has put a cap on amounts that can be moved through mobile phone accounts, it has instead encouraged banks to partner with mobile service providers, to increase market penetration and expand their services.
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