How many people does it take to run a mobile-only bank?
There are approximately 1.7 billion people globally who do not have access to financial services through the formal banking sector. One of the issues for banks in addressing this segment of the population has been a bank’s cost structure that has traditionally been built around physical branch access.
Today, two thirds of the global unbanked have a mobile phone, and it’s the introduction of this technology that enables basic financial services to be provided cost effectively.
Nowhere is this more demonstrable than at Commercial Bank of Africa (CBA), headquartered in Nairobi, Kenya. In 2012, CBA in partnership with the mobile phone operator Safaricom, created M-Shwari a mobile-only banking service that enables customers to both save and have access to short-term microloans, as and when, required.
Why create M-Shwari as an independent business unit?
CBA is a regular branch-based commercial bank in Kenya focused on the retail, SME and corporate customer segments. The bank recognised that it would need to establish a separate business unit with its own people, systems and processes in order to remove any potential constraint that might be an obstacle to M-Shwari’s success. It needed to think differently, re-imagining how it would deliver a 100% mobile self-service bank to customers that had never used a bank before.
The bank, a user of T24 Core Banking for its traditional branch and channel banking, together with Temenos, implemented another instance of the software, and ran an implementation project over just 5 months that integrated the core M-Shwari savings and loan products and services through the mobile operator’s M-Pesa Mobile Money Transfer (MMT) app.
M-Shwari was launched as a 100% digital self-service bank, the customer on-boarding and account opening process being remotely initiated by the customer and then fulfilled electronically using automated KYC processes collaboratively across Safaricom and the bank, completing in the space of a few seconds.
How successful was the launch?
In the first 40 days of M-Shwari having opened its mobile doors in November 2012, the Bank on-boarded 1M customers. After 3 months, they had 3M customers. To date, M-Shwari now has 25M million customers growing at an average rate of 10,000 new customers per day.
The mobile savings and loan product growth has continued over the last 5 years as M-Shwari under different brand names has expanded across Tanzania [8M M-Pawa customers], Uganda [4M MoKash customers], Rwanda [1M MoKash customers] and in 2018 opened up in Cote d’Ivoire [1M MoMoKash customers].
In 4 of these countries, the bank is a fully licensed banking entity and adheres to the local regulatory requirements. The exception is Cote d’Ivoire where the bank has partnered with a local financial institution.
So how many people does it take?
As at the end of 2018, there were 25M mobile savings and loans customers in Kenya and 39M in total across the 5 African countries where CBA does business.
This portfolio of 39M customers is managed by 60 business operations and 20 IT people working centrally out of Nairobi. This is what we call a “skinny back-office” and is as applicable to mobile-only banking globally as it is in Africa.
As impressive is the bank’s NPL rate over 90 days which is approximately 2%. This is 4% points lower than the banking industry average in Kenya.
M-Shwari is a product targeted for the unbanked but has also attracted a significant number of customers who would be regarded as regular banking customers. This mobile-only digital model is as applicable to higher value customers who may require more sophisticated products as it is to the newly-banked customers using M-Shwari.
CBA, for example, has recently introduced CBA Loop a “mobile-mostly” banking service where these customers have access to 8 specialist centres that can provide financial advice and guidance. The products and services offered to these customers include investments and financial goals.