In Kenya, Mobile Banking Takes Off

In Kenya, the use of debit and credit cards is taking a back seat to money transfers via cell phone. Increasingly, Kenyan financial institutions allow customers to move money between accounts and from institution to institution and even to apply for instant loans via their mobile devices.

As major players in the Kenyan telecommunications market continue to work with international as well as regional financial institutions to allow Kenyans to use their cell phones the way they would ordinarily use debit cards online and at bricks-and-mortar businesses, the Central Bank of Kenya announced that mobile money services surpassed credit and debit card use in the third quarter of 2011.

Cell phones have become personal banking tellers, with 80 percent of new cell phone service subscribers opting to add money transfer services to their phone plans. This amounts to 1.02 million new money-service users, bringing the total number of people who use their cell phones to conduct financial transactions to 18.4 million. With figures like these, it would likely be in the best interests of financial institutions to offer free cell phones with every new account.

According to the Communications Commission of Kenya (CCK), convenience and ease of use is behind the rise in mobile banking. “Continued growth is an indication of subscribers’ preference for mobile money transfer, which could be attributed to accessibility and affordability even to low-income earners,” the CCK stated in its third-quarter report on the financial industry.

Cell-phone users increased the number of deposits they made by nearly six percent during the third quarter alone, and the amount deposited grew by nearly 60 percent from the same time a year earlier. Financial service companies continue to rush to establish partnerships with cell phone providers, fueling expectations that deposits will continue to increase dramatically again in the near future.