The rigidity of the financial services sector has not played in the favor of the 42 players and when you add the recent budget curveball that requires players to raise the minimum core capital to Sh 5 Billion up from the current Sh1 billion, signaling the start of industry wide consolidation, it may be a case of too little too late.
There is a chance at redemption for financial service players, if they can move quickly to position killer service propositions that would deliver a differentiated user experience and additional value, even as variants of their current offerings.
Rethinking access to short term credit
Banks have for years tried to push the Kenyan consumer to adopt credit cards with dismal numbers. It is not that we are averse to debt but the cost of consuming the card product is high. Look at the success of Mshwari to see how access to debt instruments can open up new opportunities and markets. Using aggregated consumer banking activity with real-time business intelligence from various sources , banks can provide a new service that would mimic the credit card opportunity with the element of shared risk since many consumers may operate more than one bank account and depending on the ask, they can dynamically split the risk and profit appropriately.
Fees, fees everywhere
The bread and butter for many banks outside their loan books has been fees. Many consumers are not up to speed on the service charges that are levied. Automation and interoperability which reduce both front and back office overheads can see these fees drop by a significant margin. Leaner operations coupled with agency banking would deliver on profitability even on lower margins, from volumes driven by increased utility.
Majority of the banks are already members of the consortiums that own the switches. Owing the switch also means controlling the costs of service delivery and the switch doesn’t need to turn a profit in my opinion. The innovation on services should however stem from here with a combined research and development outfit and shared total cost of ownership, breeding co-opetion that will see value delivered in other ways such as customer service and service bouquets. An interbank mobile money platform will need to do more and not have a first line strategic plan as crippling the telcos person to person business. The question they would ask is, what these p2p transfers are utilized for and position themselves at the beginning and at the end of those transactions.
Time to stop playing catch up.