KCB Group and its subsidiary National Bank of Kenya (NBK) are set to start running on the same back-end system, delivering up to Sh5 billion cost-reduction and allowing customers to transact in any of the group’s branches.
The lender acquired NBK in September 2019 but the two have been running on separate core banking systems that cost billions of shillings given the technology, hardware and licenses involved.
Now KCB Group chief executive Paul Russo says NBK operations will be migrated to the KCB core banking system as the current software contract for the subsidiary expires, helping the group to realise a cost saving.
“We had not put them in the same core banking system because of the long-term contracts with the party they (NBK) had before and exiting would have cost us money,” said Mr Russo.
“We decided to run down the contract. That is coming to an end. This year NBK and KCB will start running on the same core banking system. I expect to see Sh4 billion to Sh5 billion cost reduction.”
Core banking is a back-end system that connects multiple branches of the same bank together to deliver operations like loan management, withdrawals, deposits and payments in real time.
Mr Russo said a joint core banking system will allow customers of either KCB or NBK to transact in any of the branches unlike now, helping to increase convenience and relieve some branches of pressure, without having to open new ones.
“Our competitors have opened more branches in Nairobi. We will have a solution once we migrate to the same system which for instance will open a Moi Avenue branch for NBK customers or Kenyatta Avenue for KCB customers,” said Mr Russo.
About Sh2.5 billion of the savings will come from IT and shared service centralisation. KCB Group has 498 branches. Some 214 branches are for KCB Bank Kenya while those of NBK are 83.
KCB had initially wanted to drop the NBK brand after fully acquiring the over-50-year-old lender but made a U-turn, saying the two brands had built their own value in the market.
A single core banking system will also give KCB an opportunity to harmonise its data centres unlike currently where KCB and NBK run separate primary and secondary data centres.
The move to shared services is likely to lead to job cuts but Mr Russo says “you have to make a call” and that the process will be on a voluntary basis.
“What we are clear on as an organisation is that the day we do that [start running on one system], it will be about bringing together competencies and redeploying people or giving voluntary exits to those willing to leave,” he said.
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