Wednesday , May 3 2017, Leading business intelligence, Research and Consulting firm Think Business Limited has released the Banking Tariff Survey for 2017. The Survey’s objective is to elucidate data from the customer’s perspective and to provide a general overview of the findings.
The scope of the Think Business Tariff Survey covers retail banking and SME banking classes of business across the 38 commercial banks where the information is categorized based on the tier each set of banks belong. In a research conducted by Think Business in partnership with Infotrak and Financial Sector Deepening (FSD ) Kenya, carried out across 6 major counties and featured 1093 respondents identified that 83.2 percent of the respondents operated personal banking accounts exclusively . The survey further revealed that 7.1 percent of the respondents operated exclusive SME bank accounts while 9.7 operate a mix of both SME and Personal bank accounts.
In the context of most preferable method of making deposits, the survey reveals that 53.9 percent of banking customers preferred the over the counter method, percentage that is much higher in the rural areas which stood at 69.6 percent compared to 47.2 percent in the urban areas. Agency banking was the second most preferred method at 17.4 percent, closely followed by the mobile banking platform at 17.3 percent.
When it comes to making withdrawals, an overwhelming 54.5 percent of the respondents view the ATM as the most convenient platform , while 19.4 percent withdraw their money over the counter and 15 percent using the mobile platform. 50 percent of the respondents, admitted to making at least 1 or 2 withdrawals every month, 22.2 percent made withdrawals 3 or 4 times a month, 8.2 percent made withdrawals ranging 5-10 times ,with only 4 percent doing so more than 10 times.
The mobile money platform has become a complementary service to conventional banking and its proliferation continues to impact the financial services industry in a big way. When quizzed about their preferred mobile money transfer service, an overwhelming 97 percent indicated they subscribed to M-pesa, followed by Airtel Money at 2 percent ,Equitel and YuCash trailing with 0.5 and 0.1 percent respectively. 0.4 percent indicated they did not have a single preferred mobile money transfer service.
The Survey also revealed that the average cost of banking has significantly reduced over the period between 2013-2017. During the period, the cost of SME banking steadily declined from a high of Ksh 105,077 in 2013 to Ksh 87,885 in 2017 signifying a 16.4 percent decrease. Moreover, the overall cost of retail banking also decreased from Ksh 12,087 in 2013 to Ksh 11, 959 in 2017 . Similarly the average cost of SME banking for tier 1 banks has also been steadily declining, from a high of Ksh 110,665 in 2013 to Ksh 95, 427 in 2017 signifying an overall decrease of 13.8 percent.
The same applies for average annual cost of retail banking in tier 1 banks where it registered a 3.3 percent decrease from Ksh 10,990 in 2013 to Ksh 10,623 in 2017. Average annual cost of SME banking for Tier 2 banks also registered a 21 percent decrease from a high of Ksh 108,890 to the current Ksh 86, 051 in 2017. The average annual cost of retail banking for Tier 2 lenders also registered a decline from Ksh 12, 462 in 2013 to Ksh 11,786 in 2017 indicating a 5.4 percent decrease.
In addition for the banks with the lowest charges UBA bank emerged as the overall lender with the lowest charges in SME banking for 2017 in both SME models , followed by Paramount bank which garnered 4 points, with ABC and Credit bank tied at third spot and lastly Consolidated bank and Guardian bank tie at fifth place having scored 11 points each.
When presented based on Tiers, Cooperative bank and Equity emerged as the banks with the lowest charges in SME banking for 2017 from Tier 1 garnering 3 points each. From Tier 2, Housing Finance registered the lowest charges for SME banking in 2017 garnering 21 points, while ABC bank from Tier 3 and UBA from Tier 4 had the lowest charges garnering 36 and 54 points respectively.
In the Retail banking category, Equity bank emerged as the lender with the least charges overall in 2017 at Ksh 6,430 followed by its Tier 1 counterpart Standard Chartered at Ksh 6,680 with Habib bank, UBA Kenya and Cooperative bank of Kenya following in that order.
Overall, the cost of retail banking registered an 8 percent decrease in 2017 as compared to last year, while the cost of SME banking decreased by 2 percent . Tier 3 banks had the highest charges in retail banking class of business, 25 percent higher than their counterparts in Tier 1, while banks in Tier 1 registered the highest charges in SME banking in 2017.
Within the SME class of business it is categorized into SME 1 & 2. Under SME 1 for small medium enterprises with annual turnover of less than Ksh 5 million, the industry average in cost of banking registered a 2 percent decline in 2017 from Ksh 56,023 to Ksh 55,063 last year. According to the survey, Tier 1 lenders registered the highest charges with an average annual cost of Ksh 59,973, followed by Tier 2 banks at Ksh 54, 968, then Tiers 3& 4 at Ksh 53, 817 and Ksh 51, 418 respectively.
In the SME 2, class of business, the industry average cost of banking reduced by 3 percent from Ksh 124,105 in 2016 to Ksh 120,726 in 2017. The Tier 1 lenders had the highest charges with an annual average of Ksh 130, 881 followed by Tier 3 banks with the average annual cost at Ksh 122, 047 followed by Tier 2 & 4 counterparts which stood at Ksh 117,135 and Ksh 112, 843 respectively. The survey also noted that the Tier 1 average cost was 16 percent higher than the annual average cost at Tier 4.
Similarly in retail banking, the cost of banking for the model customer in Tier 1 banks declined from Ksh 12,178 per annum in 2016 to Ksh 10, 623 this year representing a 13 percent reduction in the cost of banking. In Tier 2 the costs also reduced from an average of Ksh 13,536 in 2016 to Ksh 11, 786 this year also signifying a 13 percent decrease. However, the average cost of banking in Tier 3 marginally increased from Ksh 13, 243 per annum in 2016 to Ksh 13,289 in 2017, whereas amongst the 4th Tier lenders, the annual average cost of banking declined by 5 percent from Ksh 12, 783 per annum in 2016 to Ksh 12, 138 in 2017.