Banks with low charges to rule Kenyan market
Lower costs of opening and operating a bank account will be the main drivers of customers to banks operating in Kenya and other African countries in the next four years, consultants at McKinsey & Company say, citing low income levels of households.
Findings of a survey of 2,500 bank customers in Africa conducted earlier in the year show that banks which invest in low-priced products, which can be accessed at a nearby branch or agent are likely to control the lion’s share of customers until 2022.
A quarter of the customers surveyed said the choice of their banks was informed by affordability, a fifth cited convenience while 12 per cent were driven by services on offer.
“The mass market is still going to drive the numbers but most of those transactions are still very small.
“We still see the concentration of value among the middle-income,” McKinsey’s partner Munya Muvezwa said in Nairobi.
“The distribution of absolute value is unlikely to change because the revenue you get from a client is mainly driven by how much that adds to the (revenue) mix.”
Other reasons for choosing banks included referrals, which was cited by 11 per cent of the polled customers, requirements by employer (nine per cent), security in event of bank closures (eight per cent), products and services (five per cent) and brand (four per cent).
KCB,#ticker:KCB Equity #ticker:EQTY and Co-operative banks #ticker:COOP – which have invested heavily in agency banking model – controlled 33.1 per cent of the market in 2016, the latest official statistics show.
The McKinsey survey suggests that the middle-class —those with $6,000-$36,000 (Sh607,080 -Sh3.64 million) in annual income – will drive 69 per cent of growth in retail banking revenue on the continent between 2017 and 2022. This will rise to 87 per cent of growth when the affluent (more than $36,000 income a year) are roped in.
The report adds the core middle-income (annual income of $6,000-$12,000) and mass market (below $6,000) will post the highest growth in revenue at 13 and 11 per cent, respectively.