Banks go full circle as new technology cuts branches

Bank Of Africa’s Monrovia branch is one of the outlets marked for closure. [Photo: Wilberforce Okwiri, Standard]

In the bustling Busia town at the frontier of Kenya and Uganda, residents knew only one thing about banking — extremely long queues with poor service by tellers, who were quick to go to lunch but very slow to attend to exhausted customers.

The problem with the town was that it had only two banks and the postal bank service; National Bank, Kenya Commercial Bank and Postbank.

All teachers in the hinterland, cane farmers, beneficiaries of diaspora remittances and other assorted customers had to come to the two banks.

A famous narrative there is of an old man who rode his bicycle from Nambale town to Busia to receive a windfall from his sugarcane proceeds. He lined up to withdraw the money but before he could get to the front of the queue, he fainted. He had not had a meal, yet he had money in the bank.

Then in a few years, Barclays Bank, Cooperative Bank, Equity Bank, Ecobank and Family Bank stormed the border town in an unprecedented way.

Helped customers


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Customer service was quickly improved, sales people helped customers open accounts and set them up with debit cards.

People equated this to growth; that there must be money in the town to spur such interest.

The presence of new banks spurred real estate development. Developers, in a rush to offer facilities to host the banks, put up high-rise buildings.

But the fantasy is over as banks now pull back, opting to shrink brick-and-mortar branches for the ubiquitous mobile phones. Some towns such as Busia are again seeing a reduced footprint by lenders as customers shift to Internet and mobile-based platforms.

“We are in a ‘Schumpeter’ moment. The old brick-and-mortar model needs to be right-sized and at speed. Soon every Kenyan will be on a smartphone and most will never set foot in a branch. Offline retail and banking is getting ‘ubered’,” said Aly-Khan Satchu, CEO of advisory firm Rich Management.

A professor at Harvard, Joseph Schumpeter, authored the ‘creative destruction’ theory. He predicted how the “gales of creative destruction” would replace one technology with another. Through creativity, new inventions render previous technology irrelevant.

Schumpeter argued that by being innovative, it was possible to spawn new products or services that ‘destroy’ existing ones. The gramophone was left for the cassette player, which gave way to the CD player. Now we have the iPod and iPad. E-mail has left Posta flat-footed.


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For banking, technology is killing jobs as clients can now use their mobile phones or computers to transact without visiting branches.

Recently, Ecobank closed shop in Busia alongside eight other branches in Nairobi, Ongata Rongai, Meru, Kitale and Malindi.

Standard Chartered Bank is set to shut down four branches next month. Its outlets in Bungoma, Kisii, Kitengela and Gigiri have all been marked for closure as it pushes online and mobile banking channels to cut costs.

“We are realigning resources to meet the changing needs of our clients,” said Chief Executive Lamin Manjang.

He said clients can bank from anywhere anytime at their convenience on a mobile app or through the online banking platform.

Barclays Bank closed down its branches in Meru and Wundanyi as well as several outlets in the city, including Moi Avenue, Haile Selassie, Waiyaki Way, Kawangware and Rahimtulla.

Managing Director Jeremy Awori said the closure was to reflect changing needs of the customers. He, however, said branches are not likely to die because there are customers who still believe in physical services.


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“Going forward, you will see us open new branches in areas where we feel there is need. The entire industry is now alert to the changing habits of customers,” he said.

Bank of Africa also closed 12 branches of the 42 that were in operation, bringing its presence down to 17 in Nairobi and 13 outside the capital.

The banks maintained that the closures will not interrupt clients’ access to their cash, although their accounts have been moved to the nearest branches.

“They will still access all our banking services through the cash deposit machines that will be installed before closure and from any branch that is most convenient,” said StanChart.

For the small towns, the lenders proved to be good tenants while their employees, often from out of town, had disposable incomes that fanned local economies.

“Banks will support the outside-Nairobi economy but, for sure, branches will not be the preferred channel,” Mr Satchu said.

Consolidation move

For the employees, this has raised concerns about job security given that most lenders have announced layoffs, coinciding with the branch closures.


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Barclays, which has offered 130 employees an early retirement deal, had to quickly play down the effect of merging branches and staffers that would likely lead to duplicity of roles.

“This is a consolidation move aimed at aligning our business to the current environment. No staff will be sacked,” Mr Awori wrote to the apprehensive employees.

StanChart also moved to assure its employees that they would not be asked to leave, even though in most organisations, such a move usually leads to staff rationalisation.

“All staff working at the branch will be redeployed to other roles in the bank,” Mr Manjang said.

Banks have also scaled down operations in South Sudan which had opened up potential for the unbanked population.

Equity Bank closed seven branches in the country while KCB announced it was cutting down its exposure owing to civil strife and hyperinflation.

The move seems to pour cold water on the expansion binge Kenyan banks had undertaken in the East African region, including making overtures at Ethiopia and Somalia.

Getting jobs in the sector is also becoming hard. Even for those banks which have not announced layoffs, their management is banking on natural attrition to trim staff costs.


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