BY JAMES MULIRO Millions of Kenyans can confidently argue that M-Pesa is the best thing to have happened in the financial services sector in in their lives. It is no doubt that the service has revolutionalised the financial services landscape in the country and brought both the rich and the poor into the financial inclusion loop. Many things in the financial services sector have since changed. Banks are no longer taking chances. In the past, having a bank account was almost a preserve of the society’s high table. Getting a loan, however small it was, was a big deal. But that has since changed. Taking a loan is no longer a reserve of the elite especially in an environment of fierce competition from providers. With the attention now focused on what is referred to as ‘virtual banking’, lenders have opened up a new battlefront for competition by rolling out mobile phone and online financial services. With such, they are keen to not only grow their market share but also increase their customer numbers in what analysts describe as a battle for the titans. Bank executives contend that virtual banking is the way to go in a world with dynamic technology. People can now borrow in real time. From M-Shwari, M-Benki, Equitel and a host of other mobile money and digital lending services, people no longer have to go to a brick and mortar branch, rummage through near-endless paper work before their loan application can be approved or rejected. Analysts agree that mobile lending is the now and the future and banks have to adapt fast if not now. While this is a very critical area for growth and competition in the banking industry, it is also an arena where even the consumers are shifting given its convenience and ease. With the technological changes taking root, consumers will continue to demand more from their financial service providers- coerce them to circumstantially adapt to the rapid technological changes that now make it possible and easy for one to transact at the touch of a button, swipe on a smartphone or touch of the screen or by the click of a computer mouse. The current exponential growth, underlining the expansion of this sort of financial services in Kenya, has been buoyed by rapid adoption of the service by tech savvy consumers, deepening integration with other financial and non-financial providers and entry of more players in the market. This makes the future of mobile and Internet financial services bright. Commercial banks are now continually looking for ideal partnerships more so with M-Pesa. Some like Equity Bank are banking on the acquisition of a 70% stake in Orange Telcom by one of its shareholders, Helios, to forge mobile money partnership. Currently, Equity’s Equitel, a mobile money service runs on Airtel’s platform and it remains to be seen whether the relationship will be strained should Equity forge a closer partnership with Orange. In October this year, Equity Bank said it processed three quarter of loans disbursed to customers through Equitel. In the first ten months of the year, the bank said 1.2 million loans valued at Sh5.4 billion had been processed through the mobile money platform. This is significant when compared with just 438,000 loans processed through brick and mortar branches, although the value of the latter was significantly higher. Equity Bank’s chief executive officer James Mwangi acknowledged that the mobile platform had aided in realizing huge cost reductions that are ordinarily associated with branches. “We are happy that eventually we have an auto channel for the asset side of the bank which means people can borrow 24/7,” Mwangi told reporters in Nairobi. Besides borrowing money, Equitel allows customers to deposit or withdraw money from their bank accounts. KCB, Equity Bank’s key rival, does not have an organically developed mobile money transaction service. The bank instead forged a partnership with Safaricom in March last year to ride on the latter’s mobile money platform, M-Pesa to reach out to its customers who are moving with the changing tide of technology. As at the end of mid last year, customers on the KCB M-Pesa platform stood at 2.1 million. This was just in less than eight months after the two institutions partnered to introduce the service. A total of Sh130 million was issued out every week through the KCB M-Pesa platform, a sign of the meteoric growth the partnership had exhibited. More than Sh2 billion in loans had been processed and disbursed through the KCB M-Pesa by June 2015. “We will continue seeking new partnerships and strengthening the existing ones. This is what is driving our profitability as a business. We have in place a model to enhance operational competencies, revenue generation and drive greater efficiencies across the markets,” KCB’s chief executive officer, Joshua Oigara said at the time. Safaricom pioneered the mobile money service when it introduced M-Pesa in the market in 2007. At the time, banks tried to fight the service but their attempts were overruled. They had to adopt fast by seeking all sorts of partnerships with M-Pesa allowing customers to make different financial transactions on their mobile phones. While such partnerships are mutually beneficial, they continue to give Safaricom the influence it needs to stay ahead of the game. Equity’s Mwangi even went as far as to state that the relationship that many banks had forged with M-Pesa was skewed in favour of Safaricom as opposed to a balance of benefits to both parties. Alluding to the growth of the Equitel platform, Mwangi said that the average number of transactions on the platform had grown from about two per customer each month to 21 within the same period. Further, the typical amount of money transferred to M-Pesa through Equitel platform stood at an average of ShSh4,900 compared to Sh43,900 transferred between Equitel customers. “This shows mobile telecoms are purely for money transfer not banking. The banks connecting with telecoms are not serving their customers but those of the telecom,” Mwangi noted. As the competition intensifies, it is only the customers who will reap the benefits.