Banks’ mobile cash plan fails to take off yet again

Two missed deadlines and uncertainty on when local banks will roll out their interbank switch allowing direct money transfer through mobile phones across the industry now dampen the prospects of the entire plan.

The move to establish the Real Time Interbank Switch, which has already fallen five months behind schedule, now stands on a shaky ground after a second roll-out timeline elapsed without a word from banks.

A number of lenders have been going through financial turmoil and have consequently been entering into partnerships with telcos while some have since set up their own mobile networks. These developments have thrown cold water on the Sh700 million  joint initiative first mooted in 2012.

Kenya Bankers Association (KBA), which is spearheading the plan that was set to go live in November 2015, denies it has been shelved.
KBA Chief Executive Habil Olaka who had given April as the new date for the system to start operating declined this time to give any possible roll-out timelines only maintaining that the plan is “on course”’

“The plan has not been shelved at all, we are just moving step by step and various banks are at various stages of system adjustments to facilitate the project. We are currently carrying out User Acceptance Tests and we will soon start piloting before we roll it out in the shortest time possible,”Mr Olaka told Smart Company .

“This is our own innovation and banks identified the gap in money transfer including the amounts involved as well as costs and that is the solution we intend to provide.”

Earlier, Mr Olaka had also admitted to the emergence of some “new areas of concern” that needed to be addressed causing the delay in roll out of the plan.

Banks contacted by Smart Company for comments on the matter kept a tight lip only saying KBA is handling the issue.

“Apologies for the delayed response, the bank feels these question should be answered by KBA as it’s their initiative and all banks are required to comply,” came an email  reply from one of the top three lenders.

Eliminate M-Pesa

The scheme is in response by  local lenders to  the financial pressure from the growing  mobile money service providers who run more convenient services which have eaten into the lenders’ lucrative earnings.

The move is meant to eliminate the mobile wallet intermediary offered by Safaricom’s M-Pesa and Airtel money services when customers are conducting mobile banking.

In a rare show of unity, the local lenders had resolved to set up their own money transfer switch that will enable any mobile phone owner send and receive money without relying on any mobile money services.

Apart from allowing transfer of money from one account to another across banks, the plan included a person-to-person transfer of cash, a system similar to the one run by telcos. The move would deal a heavy blow to Safaricom’s cash cow, M-Pesa.

Mr Olaka confirmed in an interview that the switch would offer a wide range of solutions apart from removing the mobile wallet that users have to go through in sending money from bank to person in the current mobile banking arrangement.

A recipient of cash through the switch would get a code which is used to either carry out payments or withdraw the cash from the agents.

“We want to create a convenient way where one can use their mobile phones to buy a newspaper from a vendor by going straight into their bank account and paying using their mobile phones without first withdrawing to an intermediary platform. This should be regardless of where the vendor’s account is,” Mr Olaka said.

According to the plan, the cash-by-code service would serve even customers who have no bank accounts as long as they have mobile phones.

Both the sender and the receiver get a code. The receiver gets an SMS with a numeric code: For example, “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.”