Roll-out of banks’ joint mobile cash transfer platform postponed

Banks have postponed their plan to introduce a new interbank switch that will enable money transfer through mobile phones across the 43 lenders.

The plan to establish the Real Time Interbank Switch, or the Switch, which has already fallen three months behind schedule will now wait until April as difficulties in setting it up begin to show.

Kenya Bankers Association Chief Executive Habil Olaka said the move has not been shelved but admitted that there are “new areas of concern” that need to be addressed.

“A project of this nature has several things that come along the way that can affect the projected timing but I can assure you that there is nothing like a technical challenge or anything of that sort. All the players are in agreement and we are working towards the April timeline. We had to coordinate a lot of things with the solution provider,” Mr Olaka told Smart Company.

The scheme was hatched in 2012 after the local lenders felt the financial pressure from the growing mobile money service providers who threatened to eat into their huge earnings.

In a rare show of unity, the local lenders resolved to set up their own money transfer platform that will enable any mobile phone owner send and receive money without relying on any mobile money services. A recipient of cash in this way gets a code, which is used to either carry out payments or withdraw the cash from agents.

EXPIRE AFTER 24 HOURS

The key plank of the initiative is the cash-by-code service meant to attract customers who have no bank accounts.

The new method will see money sent to the individual mobile numbers but not to a mobile money account like M-Pesa or Airtel money.

Both the sender and the receiver gets a code. The receiver gets an SMS with a numeric code, that goes: “You have received money. Kindly go to any bank Agent, ATM or branch to withdraw using this 873921. Request the Sender for the additional 3-digit code.”

The code sent by text will expire after 24 hours when an automatic reversal of the cash transfer is triggered if no withdrawal or transaction is made.

“The sender then receives a 3-digit code which they forward to the receiver who can use it for withdrawal either in cash through a bank branch, bank agent or ATM location or use it at a merchant location to pay for goods and services,” the strategy document explains.

The lenders’ umbrella body, the Kenya Bankers Association, is championing the move that also aim to cut down money transaction fees.

“The plan will enable lower transaction fees - currently M-Pesa cost for sending Sh2,700 is Sh55 (withdrawal is Sh49). The Switch aims at lowered   transactions costs of approximately Sh20 for a similar amount. The price per transaction based on the business case is estimated at Sh2.50 per transaction. This will gradually decline at annual average of 10 per cent and by year 6 to be at KES 1 .In addition the cost of SMS is projected at Sh2 per SMS,” read the strategy document.

Central bank estimates show that Sh2.312 trillion was transacted through mobile phones in the ten months to October 2015.

The figure is bound to rise with the increased mobile money subscriptions and the entry of Equity Bank in the mobile money space through its thin SIM technology. The mobile money deals hit Sh2.37 trillion as at the end of 2014.