Absa offers 5pc interest on mobile phone savings

Absa Bank Kenya PLC #ticker:BBK formerly known as Barclays Kenya, will start offering five percent interest on savings made on its mobile phone banking platform, upping the battle for deposits in the country’s banking sector.

The app, which was launched in 2018, allowed customers to only borrow up to Sh150,000 for 30 days using their phones.

Now, Absa Bank has introduced a saving component on the app, taking the battle to its competitors that have similar mobile phone banking platforms, including those run by KCB Group #ticker:KCB, NCBA Group #ticker:NIC and Equity Group #ticker:EQTY.

“(We) expanded our Timiza product to encourage a savings culture with returns of up to five percent interest,” Chief Executive Jeremy Awori said in a statement yesterday after the company changed its ticker name at the Nairobi Securities Exchange from BBK to Absa.

The announcement comes when banks have cut their savings rate to a 39-montth low, reflecting the ongoing impact of removal of the floor interest rate last year that has seen lenders ride on cheap deposits for record profits.

Official data shows that the average savings interest fell to 4.58 percent in September, compared to 6.33 percent in the same month last year when Parliament made changes to the banking law and removed a clause that compelled banks to pay depositors at least 70 percent of the base lending rate.

Absa Bank Kenya has moved most of its customers onto its mobile banking platform, which it sees as a major driver of its future growth, said Mr Awori.

When the bank first launched its digital app in March 2018, it attracted 300,000 customers. By the end of the year it had three million users, with lending standing at Sh10 billion.

“We have seen our app grow in leaps and bounds. We are now roughly under five million customers, and we really are looking forward to growing that number in the future,” Mr Awori told a news conference yesterday.

The bank says it has about 800,000 customers who are yet to sign onto Timiza.

Kenyan lenders have in recent years turned to technology as they try to counter competition from mobile phone-based financial services such as Safaricom’s #ticker:SCOM M-Pesa platform, which had 23.6 million users as of last September.

Pressure to use mobile banking services increased further when the government imposed a cap on commercial lending rates in 2016, which ate into bank profit margins, forcing banks to search for new ways to grow their businesses. The cap was scrapped at the end of last year.

Absa Group operates in 12 countries in Africa where it plans further expansion, including to Nigeria where it has a representative office.