I had a situation over the weekend, where I was faced with a choice of having someone send money instantly to me while I was in Eldoret - and this led to a discussion of the cash remittance business in Kenya
Surprisingly, Western Union and Moneygram, which have been recording growing volumes and signing up new banks (like KCB) every month, already represent the past in money remittance. The reason for this is the cost of the transfer, which now puts off savvy consumers. E.g. to send 10,000 shillings to Eldoret, the cost was 1,700 (14.5%) via Western Union and 1,850 (15.6%) via Moneygram.
Transaction time: a few seconds
Cost: about 15% of amount transferred
Convenience: All major towns, available at over 10 bank and dozens of forex bureaus which have extended hours.
With recent investments and advances in IT, banks like Barclays and Standard Chartered are now fully networked, with transactions made instantly reflected in accounts. For cash remittance, I’ll give a friend my Barclays account number, and he’d go to his local Barclays branch, e.g. in Mombasa, or Kisumu, and deposit the money into my account – and I’d be able to withdraw it almost instantly in Eldoret.
Transaction time: a few minutes
Cost: 0 – 500 shillings (depends on withdrawal fees at the bank for over the counter transactions since cash it not always reflected at the ATM)
Convenience: One must have an account with a bank which is networked e.g. Barclays, Standard Chartered, NBK, ABC and the bank should have a branch. But banks have very short working hours usually 9 a.m. – 3 p.m. KCB which has the country's largest branch system has not networked all its branches yet.
The future will be for money transfer via cellphone, as is already taking place in the Philippines and South Africa. Like MTN, Safaricom and Celtel will one day launch cellphone banking systems to capitalize on the millions of cell phone users, who don’t operate bank accounts, especially in rural areas, where banks have been closing unprofitable branches.
Transaction: a few seconds
Cost: transaction fee to be determined
Convenience: Safaricom and Celtel combined have over 5 million subscribers. Also one can expect market leaders like Western Union and Barclays to capitalise on cell phone banking.