Why Banks Need to Stay ahead of the Innovation Curve for Digital Banking to Succeed


The Kenyan banking sector has in the last few years progressed towards being more financially inclusive. Slightly over a decade ago, clients in need of banking services had to spend long and grueling hours on queues in banking halls waiting to be to pay their utility bills and carry out other normal banking transactions. One had to set aside a particular day dedicated for banking transactions.

Fast forward to 2019 and the same clients are now able to make transactions and pay bills by a touch or click of a button wherever they are – thanks to technological advancements throughout the banking sector.

With more than 41 million Kenyans owning a mobile phone and an ever-increasing internet penetration, the young generation are getting very digital savvy with each passing day. Their quest for convenience makes them more likely to embrace new types of financial solutions compared to the older generation.

Although Kenya tops the list of African countries that have ease of accessing financial services – which is mainly credited to high mobile phone penetration and improved internet speeds – a recent survey has shown that over 17.4 per cent of the country’s bankable population cannot access financial services.

Rural bank branches are still underdeveloped with branches only found at the main town centers. This, coupled with the fact that more than 78 per cent of the adult population in Kenya has access to mobile phones has made banks recognize the potential of reaching millions of potential customers. The high number of Kenyans without bank accounts stems particularly from lack of enough infrastructure in the country, high financial illiteracy and inaccessibility of some parts of the country. For those who have bank accounts, grappling with high transactional costs is an everyday problem.

Increased efficiency and the ability to go past geographical constraints has put mobile banking miles ahead of the traditional banking methods. This has seen mobile banking overtake and remain way ahead of other digital banking platforms and solutions. Kenyans living in the most remote parts of the country can easily access mobile phones. The low cost of moving cash around has further endeared them to many Kenyans.

Technology is currently the big differentiator in the banking sector and over the last few years, banks have resorted to innovative ways of expanding mobile enabled financial services. Competitors such as mobile banking will always be there, and so are new competition from other financial technology solutions. Banking institutions should think about developing market-leading innovations and ensure they provide a much better customer experience than their competitors.

In a bid to stay ahead of mobile phone service providers, banks have to also, closely and regularly check on customer tastes and preferences as this is a key driver when it comes to digital banking. For instance, millennials have distinct sets of expectations, which makes it imperative to segment clients and potential clients on guiding principles that best serves their interests.

In addition, for digital banking to fully live to its expectation, banks should be alive to the fact that the fast pace of mobile technology and its subsequent adoption by clients has made transaction types to keep shifting.

The increased drive by mobile providers to offer faster internet speeds in the country is a move that the banking institutions should leverage on, through developing strategies on how to bring on board the unbanked population. Although many Kenyans are adopting digital banking, a much lower cost of digital banking will further accelerate this move. With mobile banking is already ahead of digital banking, banks need to get their act right to improve customer digital experience through well thought through high-value digital services.