Wednesday, 30th August 2017
Read our newest report The price of being banked, to learn more about transparency and cost in Kenya’s banking sector.
Mystery shopper exercises carried out over several weeks in 2015 and 2016 mirrored a typical customer’s journey in which most customers obtain information on banking from branches. But despite visiting over 30 bank branches, customer care representatives, bank websites, enquiring from colleagues and friends, we still couldn’t get consistent pricing information.
FSD’s newest report The price of being banked, reveals the need to improve transparency in the Kenyan banking sector. Mystery shoppers had to make up to six visits per bank as well as consult tariff guides to determine the cost of a transaction.
While bank staff were aware of the cost of more basic transactions (withdrawals, monthly ledger fees) most front-line staff didn’t usually know more complicated transactions such as the cost of bank-to-mobile wallet transfers or transfers between different banks.
Even though banks are required by the Central Bank of Kenya (CBK) to publish guides with all their fees and charges, we found that many were outdated, incomplete or lacking account-specific information.
Staff from the same bank, sometimes even at the same branch, gave different costs for the same transaction. Complicated pricing structures meant customers often didn’t know what they were being charged for.
We also found that the bank staff were quick to recommend certain accounts based on a customer’s income rather than their need and that accounts with charges were recommended even when charge free accounts were available.
The study, which focussed on the 11 largest banks which together hold 97% of all deposit accounts in Kenya as at December 2015, also revealed significant variance in the cost of running a bank account: from KSh 3,629 to KSh 13,460, with an average of KSh 6,436 annually. The most striking difference is fixed maintenance costs, which vary from around KSh 100 to around KSh 10,000 a year. The ability to clearly compare costs could save customers almost KSh 10,000 a year when choosing a new account.
There’s a lot that needs to change: the industry needs to standardise disclosure templates so customers can easily understand and compare costs and customers should be able to get information up front and early on when making a transaction.
But there’s also a lot that’s already changing: The Competition Authority of Kenya (CAK) has instigated a market enquiry to understand behavioural biases that impact consumer ability to access and assess relevant information from banks. In addition, the Kenya Bankers’ Association recently launched a “cost of credit calculator” to increase transparency in the credit market and incentivise price competition in the banking sector.
This change needs to continue; Kenyan customers deserve it. But it’s also important to remember that consumer protection is an opportunity, not a burden. When banks meet customer needs, they get more customers. It’s simply good business.
The price of being banked, FSD Kenya’s new report on transparency and the cost of leading banking services in Kenya will be published on 30th August 2017. For more details see: www.fsdkenya.org/the-price-of-being-banked/.
For interview requests, please contact Joyce Omondi Waihiga, FSD Kenya’s Communications Manager, via email email@example.com.
About FSD Kenya
Financial Sector Deepening (FSD) Kenya was established in 2005 to support the development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty. Working in partnership with the financial services industry, the programme’s goal is to expand access to financial services among lower income households and smaller enterprises to create value through financial inclusion. FSD Kenya operates as an independent trust under the supervision of professional trustees, KPMG Kenya, with policy guidance from a Programme Investment Committee (PIC). Current funders include the UK’s Department for International Development (DFID), the Swedish International Development Agency (SIDA), and the Bill & Melinda Gates foundation.
Joyce Omondi Waihiga, Communications Manager, FSD Kenya | firstname.lastname@example.org
FSD Kenya, 3rd Floor, 9-Riverside Building, Riverside Drive, Nairobi
Tel: +254 20 513 7300 | Website: www.fsdkenya.org
Twitter: @FSDKe #BankingTransparency