Mobile to bank charges to boost 2023 profits

Banks are looking at a windfall of roughly Kes3 billion each following the reinstatement of transaction charges between bank and mobile that began in January this year.

EFG Hermes Director, Sub-Saharan Banks Ronak Gadhia said since 2020 when the Central Bank of Kenya (CBK) introduced free mobile money transfers at the onset of the Covid-19 outbreak, mobile money transactions have jumped tenfold as Kenyans adopted cashless transactions.

The mobile money transactions are expected to lift non-interest income, even as banks make more money from improved private sector credit and huge foreign currency exchange spreads.

The Egypt-based broker EFG-Hermes predicts that banks return will, however, decline slightly from 18 percent last year to 16 percent in 2023.

Read also: I&M Bank drops mobile transaction charges on high cost of living

“Transaction charges from mobile to banks will be. A big driver of non-interest income where we see them making an average Kes2 billion to Kes3 billion for many of the big banks,” Mr Gadhia said.

Mr Gadhia, however, said the return will be subject to the impact of the charges on the volumes of transaction.

Kenya has already seen I&M Bank drop the charges on customer sentiment which the lender noted was against the extra cost under the current inflationary times. 

Cost of living has shot up in Kenya over a cocktail of factors including high food prices due to failed rains, increased cost of imports of oil, wheat and edible oil on depreciating national currencies new taxes and pass-on effect on the increased cost of business. 

Official data shows that inflation has eased slightly from December’s 9.1 percent to 9 percent in January.

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