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Digital Shift Dawns on Banks

As new technologies seek to displace the use of cash, banks are hastily adopting to the new wave or risk being left behind

With the massive growth of digital technology, a lot of institutions are slowly adapting to this new trend in a bid to reduce cost, enhance efficiency and generate more revenue.

The trend is gaining momentum in the region with institutions like the Media industry, financial and the education sector have not been left behind.

One notable industry is the Bank, as the reception of mobile banking takes the course, it has marked one of the fastest and most efficient technology in the sector’s history while traditional platforms have been rendered redundant and others have resorted to closing shop.

The smaller screens are where the action is the future of traditional banking is bleak, mobile banking has disrupted the banking sector and in this regard, banks are ramping up in a bid to embrace the new change to cater for the growing customer demand.

Today the banking sector is under tremendous pressure to offer a multi-channel presence to the customers for seamless customer experience as it provides valuable options like location information, digital presence, customer profile, client interaction and much more to help the sector to keep up with the competitive environment.

According to a recent study by Brookings’ financial and digital inclusion 2016, Kenya has been ranked as the top country in the adoption dimension; its financial services sector is characterized by very high rates of mobile money usage apart from this, it is considered the most mature mobile money market in the world, driven by the widespread success of Safaricom’s M-PESA service.

More importantly, the report also highlights that technology has been evolving at a fast rate and without reinvention and adaptation traditional platforms will soon be outdated in a few years’ time. Because in the next few years the banks that will respond quickly to customer needs/trends through innovative digital products.

With the vast information and data collected by the digital devices, banks will need to use data analytics to study customer trends and use that as a basis for innovation, marketing and decision making.

“Digital banking is not just about publicity about the next big thing in the market. It is a necessary part of every bank’s agenda as a way to overcome outdated approaches and mismanaged client relationships. Banks around the world are actively pushing digital topics both internally and externally” reads the report.

The Shift

The Central Bank of Kenya last year reported that the number of new branches in the banks dropped from 101 in 2014 to 80 in 2015 in their annual banking supervision reports.

The regulator also predicts the number will even drop further in the near future. This shows the digital shift is taking shape and soon it will transform Banks to be fully digital and branchless.

On the same front, several banks have announced they will no longer open new branches as they will now focus on digital banking.

A month ago, Bank of Africa (BOA) announced it would close 12 of its 42 branches, and move most services to its digital platform.

Eco Bank also officially launched its mobile banking app this year after it announced plans to close nine of its 29 branches in a bid to encourage more clients to shift to digital banking.

The Bank expects the digital banking platform will grow its customer base across the continent to 100 million from 13 million by 2020. The Bank has since signed up over 1.5 million accounts through the mobile app.

Also on the same respect back in 2015; Equity Bank downscaled their staff in Kenya as the Bank opted to recruit more customers on its mobile platform, Equitel. The bank said that through their social media platforms they get to interact with customers directly.

Sidian Bank has also turned to IBM Cloud and Cognitive solutions to fuel its digital transformation. Family Bank is also eyeing the same digital front.

The digital shift has also become a global trend with foreign Banks exploiting this sector, including MovenBank from the US, Knab in the Netherlands, Alior Bank in Poland, and Fidor Bank from Germany, as they seek to embrace social media, mobile banking and online customer insight to better meet their clientele’s needs.

Drawbacks

With all this development, it also presents a whole new issue of security risk and compliance in the entire digital lifecycle.

If robust encryption software is not in place then customers confidential account information will be available in the hands of criminals posing serious threats to your finances. Risk departments in banks must hire talented information security experts, and conduct regular stress tests and vulnerability assessments.

Kenya has made remarkable progress over the last decade in expanding financial access with 70 percent of adult Kenyans now having a formal account through which they can save and transact, the country has reached a level of financial access seen in other developed economies.

Being out of businesses is the cost of not adapting to digital technology. Banks have to act to avoid being displaced and achieve a sound and profitable while at the same time a sustainable economy.

In essence, it is important for Banks to assess and adapt to the new change in the digital space for them to stay ahead of the curve. Looking at the rate of progress revealed by the surveys and reports, it shows that Kenya is well positioned to achieve this goal.

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