Kenya’s Equity Bank relies increasingly on digital services

By Morris Kiruga, in Nairobi
Posted on Monday, 1 April 2019 18:36, updated on Tuesday, 2 April 2019 11:23

Equity Bank's Chief Executive Officer James Mwangi addresses investors at the Equity Bank headquarters in the Upper Hill district of Kenya's capital Nairobi REUTERS/Thomas Mukoya

Unless you have been living under a stone, you will recognise Kenya's digital headstart. But you may not know quite how much Kenya's largest banks now depend on it.

Kenya’s first mobile virtual network operator (MVNO), Equitel, and Equity Bank’s mobile banking app now account for 77% of the banking group’s transactions.

While releasing Equity Group’s 2018 financial results last week, Equity Bank CEO James Mwangi said that “89% of all successfully processed loans are now originated via mobile channels, while 96% of our transactions are happening outside the branch.”

  • In 2018, ATM transactions reduced to 4% from 5% in 2017; agency banking transactions dropped from 15% to 12%; and branch transactions dropped from 5% to 4%.
  • Equity Group Holdings, which is cross-listed in Kenya and Uganda, also announced 6% growth in profit before tax for 2018, to KSh28.5bn ($282.8m). Its balance sheet grew to KSh573.4bn from KSh524.5bn in 2017, marking another successful year.
  • Customer deposits grew by 13% to Ksh422.8bn while the loan book grew by 6%, with a non-performing loan ratio of 7.6%.

Equitel handled KSh572bn in 2018, a 19% rise from the KSh480.3bn it transacted in 2017. Data from the Communications Authority of Kenya shows that while both Safaricom’s M-Pesa and Airtel Money have more subscribers than Equitel, the latter is the second-biggest mobile-money transfer service in Kenya by all other metrics. With 2.075m subscribers, about 4.2% of the mobile-money subscriber base, Equitel processes 21.7% of the value of Kenya’s mobile-money transactions, second only to Safaricom’s M-Pesa.

  • Equitel still has room for growth, especially as it leverages Equity Bank’s customer base (13.5m) and the payment ecosystem the bank is building. Equitel Eazzypay offers interoperability and cheaper services because payments through the platform are transferred directly into merchants Equity Bank accounts at no extra cost.
  • In February, Nairobi-based stockbrokerage firm Genghis Capital suggested that the Airtel-Telkom tie-up would benefit if it was to include Equitel, which runs on the Airtel network. While there’s been no news of whether such a deal is being considered, Equitel has been seeking greater market share in the voice, data and text markets, which it initially treated as value-added services.

Equity Bank’s fintech arm launched Equitel after receiving an MVNO licence in April 2014. The mobile service offered its subscribers ultra-thin SIM cards which allowed them to operate on more than one network even on single-SIM phones.

In August 2018, Equity Group spun off its fintech arm into Finserve Africa Limited, a fully-owned subsdiary with its own board and management, headed by Jack Ngare.

  • Other than Equitel, Finserve Africa also runs Jenga Payment Gateway, an online payment system, and mKey, a multifunctional app where users can pay bills, send money and access loans.

Bottom Line: Equitel is M-Pesa’s foremost competitor and comes with the added advantage of being operated by a banking behemoth. While the value and number of transactions on the platform have increased, its subscriber base remains relatively small, mostly because it was initially branded as a fintech service and not a telecoms company.

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