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Redefining banking in new era of tech innovation and cybercrime

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Kenya is today seen by the rest of Africa as a leader in technology innovation in the banking sector – thanks to the invention of mobile money transfer services such as Mpesa. However, despite its robustness in the development of its ICT backbone, which has enabled banks to be more customer-centric and inclusive, the country has been on red alert due to cybercrime threats. The East African Business Times’ Ben Oduor caught up with Kenya Bankers Association (KBA) CEO, Habil Olaka, to shed some light on the newly emerging challenges and tech related developments in the sector.

EABT: What are some of the most significant technological innovations that have shaped Kenya’s banking sector?

Habil: Kenya is world-renown for innovations. At the moment there are a number of innovations to leverage on the Mobile Phone penetration; among them are Mobile Lending products to compete with the M-Shwari market leader.

There are also Fin-Techs partnering with either a bank or a Micro Finance institution to offer the lending products. Visa recently launched its Mobile-based range of products called mVisa that leverages on the Mobile phone and QR codes at the point of Sale. This is hot on the heels of Mastercard, which also launched a similar product.

The National Treasury has also launched the second issue of the world’s first Mobile based Public Bond, moments before the Bankers’ Association launched the industry’s Switch and its flagship Product Pesalink, the Real time Low-Value Account to Account Money transfer service available to all Commercial Banks and selected Micro-Finance Banks.

EABT: Move by traditional banks to apply fin-techs to satisfy customer centric demand has led to more staff layoffs. Is this good for a developing economy such as Kenya?

Habil: Applying fin-tech does not necessarily lead to staff layoffs. In a highly competitive industry like Kenya’s, there are pressures to improve on service delivery and lower cost of banking services. Recent challenges in the industry have led some banks to re-evaluate their business models thereby reducing on their staffing levels.

EABT: How best can banks embrace technology while at the same time protecting jobs?

Habil: This is achieved mostly by retraining or re-orienting jobs. In a majority of the situations where technology is applied, it leads to retraining and re-orienting staff to the new environments and redeploying the staff to other areas like increasing the customer service areas and marketing and sales functions. There is also a change in focus on hiring of staff where the staff requirements are changing, and we now see growth in demand for specialised areas of banking rather than traditional clerical roles.

EABT: Where does the future of Kenya’s traditional banks lie in the wake of increasing number of mobile banking lenders (such as Mshwari, Tala and Branch)?

Habil: The core services that the customers expect from banks are still very relevant. What is changing is the mode of delivery, where traditional face-to-face model is giving way to technology and self-service channels where customers interact with their banks through these channels. Traditional banks will have to adapt to these new business models if they are to remain relevant.

EABT: Which security measures have banks put in place to curb cybercrime even as they focus on displacing cash for cards and embrace fin-techs?

Habil: Before a commercial bank deploys any new product or service, a rigorous review of the risks associated with the product or service is undertaken. Banks have invested a great deal in resources, systems and procedures to ensure that products delivered to their customers meet the expected standards. This is partly the reason why the industry is sometimes seen to be lagging behind fin-techs in deploying innovations.

There are a number of regulatory, prudential and internal requirements that products undergo before they are ready to be offered to the market. In regards to Cybercrime, all banks have in place robust firewalls and other intrusion detection solutions to mitigate such events and these are periodically reviewed, updated and revised to ensure they are robust enough to withstand the challenges.

 EABT: How has the recently launched interbank transaction service Pesalink been received in the market since inception?

Habil: The reception has been very encouraging.  There are currently twenty seven banks on the platform, covering 95 per cent of the market in customer base. The growth in transactions and values is increasing with every month of operation, and there are currently 2.95 million customers registered to use the service.

The remaining banks are in different stages of on-boarding, and product approval processes with the Regulator. We anticipate that by the end of the year we shall have all commercial Banks fully integrated and a new range of products lined up for business Payments (P2B).

EABT: Pesalink service was launched at a time when the world was reeling from effects of computer hostage-taking malware, Wannacry, which grossly affected banking systems in countries such as Russia. How immune is the Pesalink service to such threats?

Habil: While no system is immune to such intrusion since threats keep morphing and the criminals are always looking at ways to penetrate the systems, the Wannacry attack seems to have been targeted at systems mainly in Europe and America. Africa was largely unaffected by this attack. This is not to say that we shall not be a target in the future and the industry remains vigilant by maintaining the robustness of their systems to be ready to meet the challenges.

EABT: Technological innovation has paved way for serious competition between traditional banks and their mobile rivals such as Mpesa. What are some of the banking regulations put in place to maintain fair playing ground?

Habil: Competition is good in that it keeps the players on toes, and provides the customers with more choices and better services. However, the banks and Mobile Network Operators are not rivals. Each has a market it targets to deliver service to, and there are areas like Payment Services where there is some element of competition.

In regards to Payments, the enactment of the National Payments Systems Act brings all Payment Service providers under the regulatory ambit of the Central Bank of Kenya, and this in a way ensures all players are regulated in a uniform manner.

EABT: What critical challenges is Kenya’s banking sector grappling with at the moment?

Habil: The enacting of the Interest rate capping law has led to some shocks in the Credit market in the economy.

EABT: How are you mitigating the challenges?

Habil: The effects of the law are still being studied, and member banks are relooking at their business models and reviewing how they do lending while adjusting to the new law.

 

 

 

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