What are hard economic times

hard economic times

Great economies are facing hard economic times and are struggling, hence living in a country where majority live below the poverty line, things seem to be moving from bad to worse. The Banking industry is also affected by hard economic times.

If one reads the Bible, one will notice that these are not unique situation. There are stories of mothers eating their babies and people feasting on the refuse of the donkeys. People in ancient days also lived through hard economic times too.

One of the most mind boggling things about the human species is the ability to adopt and be very innovative during these times. Tough people have an inner strength and that is why they have the ability to last during tough times. It is not about physical strength but inward strength that they draw from.

 Some of the secrets for living in hard economic times

• They acknowledge the change due to living in hard economic times and that is not business as usual.
• Apart from acknowledging the times they are living in they set strategies on how to thrive while living in hard economic times. This is to ensure that at the end of these hard economic times, they will not be beaten to pulp. Put in simple words they do not just whine but take action.
•  one must avoid taking loans and learn debt management strategies

Highlights of financial strategies one would adopt while living in hard economic times

1. Stick to your budget especially on non essential expenses. Take for example your monthly budget for fuel for your car; when you realize you are spending beyond this budget then reduce the number of times you use the car and stick to the budget. For ladies maybe one should reduce the visits to the salon, one can opt to do basic hair maintenance like washing or even treating the hair at home.
2. Please do not dispose off your near cash investment to meet your daily living expenses. These are assets such as shares. After all, with the poor performance of the economy one is likely to sell them at a loss.
3. There is no use on spending on holidays one cannot afford. You can opt to take the family for a simple drive to the park and spend quality time together instead of taking an expensive trip to the coast yet they cannot afford the same so they have to borrow. Let prudence take the place of pride, put image issues aside everyone is feeling the pinch.
4. Make sure when going to the supermarket a shopping list should be in hand to avoid buying what one does not need.

In the middle and lower class bracket where the salary is not increasing as fast as the inflation rate, disciple is one of the key qualities adopted.  Let us keep hope alive as we see these hard economic times through.

Chase Bank Kenya prepaid cards

The bank is known for its relationship banking. it has scooped many banking industry in Kenya awards in past years. Chase Bank has fifteen branches in Kenya.

Chase bank launched it suite of prepaid cards on the 24th of October 2011. The bank had full page advertisements for these products in both the Nation newspaper and the standard newspaper.

Chase Bank Kenya prepaid cards that were launched are:

Zawadi Chase Bank Kenya prepaid cards

Zawadi meaning gift, is an apt description of how the cards will be sold. These cards can be given to people as gifts. They offer good gifts as the person receiving the gift of the card can purchase what they want.

 Incentive Chase Bank Kenya prepaid cards

These cards may be given as incentives to staff who have performed well in their jobs. these cards could replace the cash bonus that are given to staff at the end of each month.

Traveller Chase Bank Kenya prepaid cards

These category of prepaid cards is targeted for people who travel alot. The account holders can purchase the card either in Kenya shillings or dollar denominated cards. the cards can be used over the Internet.

Chase bank Kenya prepaid cards are MasterCard branded. chase bank is the first bank to offer the MasterCard Chase prepaid cards in Kenya. other banks that offer prepaid cards are Visa branded. These banks are Kenya commercial bank, I and M bank and Bank of Africa.

Advantages of Chase Bank Kenya prepaid cards

• one does not have to be an account holder to purchase a chase prepaid card
• the cards can be purchases on Kenya shillings or dollars
• the cards are MasterCard branded cards so have a wide acceptability
• the cash or funds are held in the card not a bank account, so the risk affects funds only held in the card not a bank account
• they can be used in many outlets both in Kenya and the rest of the world, that accept MasterCard cards

Chase Bank has joined the world in availing customers with prepaid cards. Prepaid cards have become popular especially after the economic crisis in the western world from the year 2008. Credit rating for many people especially in America was affected and so they cannot qualify for credit cards, and prepaid cards is the solution.

Chase Bank Kenya prepaid cards have been introduced into the market at the right time when the growth is expected to double in the next two years.

Advancement in Mobile Banking Use

Mobile Banking

Mobile banking is where one can send money through the phone and the receiver access the funds without having to go through the bank.  Majority of the mobile phone companies have collaborated with Banks to enable their subscribers access money in their bank accounts through these money transfer facilities on mobile phones.

The bank customers must subscribe to Mobile banking facilities. subscribers must ensure that confidentiality is maintained. They must also avoid fraud, by use of the secret code which sent to the customer. This code is also known as the Personal Identification Number, which should only be known to the customer and should at no time be revealed to any third party.

This has been a great breakthrough for banks given that their customers can access money conveniently.  They recieve Funds anytime, anywhere and not restricted by banking hours.

Mobile Banking range of services

There are a range of services which the bank’s customers  and banking industry in kenya can enjoy through this collaboration

• They can inquire their bank account balances without necessarily visiting the banks premises or the Automatic teller machine (ATM). This reduces queues in the banking halls and improving on customer service.
• The customer can purchase airtime or phone credit  through their accounts without having to withdraw the cash first and then purchasing the airtime saving on the time for the customer.
• The customer can sign up to be alerted by the bank anytime there is a deposit in their account, for example, salary deposit. Customers do not have to visit the bank premises to be able to budget and even make transactions.
• Bank customers do not have to carry cash which can be a great risk. They are still able to easily pay for goods or services through transfer of the money to the vendor. some of the services include Kenya Airways Tickets purchases, pay for water and electricity bills.
• The customer can transfer money from their bank accounts to their mobile accounts and access the funds.
• In recent days, some mobile service providers have teamed up with international money transfer companies like Western Union. this partnership allows people in the Diaspora to transfer money back home safely and conveniently. the Recepients of such funds are not bound by banking hours to acess these monies unless the bank is an agent of Western Union.

 Mobile Banking and Government Development  Policy and  Planning

With the Vision 2030 in Africa and indeed the developing world,  gearing up for twenty four hours economyis becoming a reality through mobile banking.  Banking in Kenya has greatly been revolutionized by mobile banking with bank customers able to  access of their money from the bank accounts twenty four hours a day, seven days a week.

 History of Front office services Activity

Front Office Services Activity

Traditionally Savings and Credit Societies facilitated provision of affordable loan facilities to its members. Majority of these Savings and Credit Societies usually loan their members three times the shares they hold with the society. These types of loans are categorized as school fees loan, emergency loans or quick loan and development loans. The loan repayment period is usually between twelve and thirty six months.

The idea of Front Office Services Activity was birthed in these Savings and Credit Societies. AT that time, banking services were out of reach for the middle and low class income earners due to the high account maintenance commission and minimum account balance.

The main purpose of this Front Office Services Activity was to enable members open accounts and operate them. Even though this was a good idea there are some un-scrupulous members of Central Management Committee membership who were determined to swindle their members of their hard earned income through this Front Office Services Activity.

 Challenges of managing front office services activity

Front office services activity is a savings and deposit taking enterprise. this attracts unscrupulous people. They are supervised by the Ministry of Co-operative Development. The Ministry does not have or seem to have capacity to adequately supervise the FOSAs.

Due to loopholes created by inadequate supervision, corrupt Committee members embezzle funds from the front office services activity account-holders’ savings accounts.

Central Management Committee members are elected into office. Majority of them do not have qualifications to manage this Front Office Services Activity.

 Measure that can used to protect front office services Activity members

In order to protect members deposit and save the Front Office Services Activity, the following should be put in place:

• A regulatory body should be establishing to monitor the activities of each Front Office Services Activity. This body should also vet the Savings and Credit Societies who intend to start offering these services.
• Qualified personnel should be engaged to effectively run these services. These staffs will be tasked with making sensible business decisions, formulating policies and controls, and taking responsibility of  financial performance of the front office services activity.
• The deposit protection fund should be expanded to include the front office services activity, to protect the members from losing their hard earned monies.
• The services of independent auditors should be obtained as opposed to the Ministry of Co-operative Development auditors. Final accounts should be availed to all members and the public at large.
• A Board of Management should be constituted to ensure that the  Front Office Services activity are professionally managed.

The critical role played by front office services activity in the economic development should be recognized and encouraged. Countries should adopt this kind of banking channel to ensure financial inclusion for its poor and marginalized citizens. Front office services activity could be considered as a type of Agency banking.

card payment schemes

The main business carried out by card payment schemes is processing of card transactions between acquiring banks and the issuing banks. A list of the card payment schemes below, showing links to the NYSE:

MasterCard Worldwide (NYSE: MA) card payment schemes

This is a multinational company from America.  Since 2006, mastercard has been listed and publically traded, meaning anyone can invest in Mastercard shares.

Visa Inc.( NYSE: V) card payment schemes

Visa is also an American global corporate. The head quarters are in San Francisco, California. Visa is also listed in the NYSE, though this is a recent listed. Visa has operated since 1966 when it was founded.

Japan Credit Bureau (JCB) card payment schemes

This company was founded in 1961 and in 1968 it bought Osaka credit bureau. The purchase made the card get dominance over the credit card market in Japan. JCB co. Limited is its English name. JCB issues cards in twenty countries

American Express Company (NYSE: AXP), card payment schemes

AmEx is another name for American express company. This company was founded in 1850 with head quarters in New York. It forms one of the thirty components for the dow Jones industrial average. It is a global financial services firm. The AmEx charge cards, credit cards and travelers’ cheques have made this payment scheme very well known.

The company has a mascot which was adopted in 1958. This is the image of a centurion or a roman gladiator which appears on their travelers’ cheques and charge cards. AmEx has strategy to have their customers spend in large volumes which have paid off.

China unionpay card payment schemes

CUP is also referred to as Union pay, is a chiness card. It was founded in 2002 March. It is an approved card scheme by the central bank of China – people’s bank of china.  It is the only domestic bank card organization. China Union Pay acts as interbank network for China but Macau and Hong Kong. This card scheme also links ATMs for major banks and smaller banks. Funds transfer and point of sale are part of the network.

Both mastercard and Visa provide banks and financial institutions with branded payment products which are used for ATM, prepaid, credit and debit cards for customers.  Mastercard and Visa do not issue or Acquire cards so they do not extend credit or even set the fees and rates financial institution offer their customer.

China unionpay is one of the card payment schemes with potential to compete with the American Associations.

When you use your card, the card business model comes into play,( whether it is a debit, credit or prepaid card,) a merchant discount is paid to the card company. A merchant is where the Point of sale device has been placed by the card company. The merchant commission is paid for the convenience of not having to deal with cash and the risks associated with cash.

card business model

The fee is split among three parties which make up the card business model

Card business model -Acquiring Bank

An acquiring bank is the bank that processes transactions when a card is used. The acquiring bank also credits the merchant’s account for the amounts spent by card owners less the commissions and fees. The acquiring bank is responsible for negotiating eh commissions with their merchants.

Card business model –issuing bank

Issuing bank is the bank that gives the card to the cardholder. The bank is responsible to settle all their cardholder bills either by debiting the cardholders account or taking cash payments from the cardholders. The issuing bank also gets to share on the merchant commission and this income is known as interchange fees.

Card business model – network connectivity

Network connectivity is the links that are used to connect issuers and acquirers. The banks do not have direct relationship with each other but rather they share a network. This allows a transaction from a card issued in Kenya to be accepted and used in a Tanzanian shop. The two largest networks in the work are Mastercard and Visa.

Typically the average merchant discount is approximately 3% of the purchase price. The amount is divided among the three players, issuers, acquirers and network

ATM usage fees for card business model

Whenever you use an ATM a fee is charged for the transaction. The fee charged is share between the Acquirer of the ATM (owner), the Network and the card issuer, just like the usage of cards at Point of Sale. Some concessions may be given to cardholders who use their banks ATM or the fess are less than when another banks ATM is used.

The major credit cards are mastercard, visa and JCB. The major debit cards are mastercard, maestro and Visa electron. American express and diners club are major charge cards. China union pay and discover are major regional cards.all these have a card business model in place to be successful.

M-pesa bulk mobile money transfer works by listing the phone numbers and amounts of the beneficiaries in one SMS and sending the message to the listed recipients at the same time. The application to perform this task is given to the sender by the bank or financial institution.

M-pesa bulk mobile money transfer

the Advantages of M-pesa bulk money transfer as listed below are not exhaustive.

Salary payments through M-pesa bulk mobile money transfer

M-pesa bulk mobile money transfer is designed mainly for corporate entities. The money transfer may be used to pay salaries to employees who do not even have bank accounts. This makes this banking channel very convenient both for the corporate and the employee. The mode of transfer is simple and fast.

Financial inclusion using M-pesa bulk mobile money transfer

Reaching the unbanked was a target for money transfer services and M-pesa bulk mobile mobile transfer or payment service is achieving this. M-pesa has a very wide reach in the Kenya and neighbouring countries. In Kenya, M-pesa agents are found in all parts of the country. The money is transferred to a cell phone and not an account and there are more people with mobile phones compared to those with bank accounts. The money may remain in the M-pesa account for use when it is required or it may be cashed when cash is required.

Convenience and costs of M-pesa bulk mobile money transfer

Since the funds are sent to the M-pesa bulk mobile transfer or payment service by the click of a button, the speed of transfer is very fast. When the networks are down, the transfer may take a while to reach the recipients.

Unlike banks that close their doors at some timeat the end of the day, M-pesa bulk mobile transfer service is available to the users twenty four hours a day, every day. The recipient can look for an all night M-pesa agent or an ATM that accepts M-pesa transactions, to cash the funds if need be.

Since cash is sent to bulk recipients, the audit of the funds sent becomes easier and the recipients do not have to carry cash in their pockets but can use M-pesa as an account and save their monies. When a cell phone is stolen, funds do not get stolen since the actual cash is not on the phone and a PIN is required to transfer funds. This makes this solution safer than cash payments.

Operating costs for M-pesa bulk mobile money transfer services are competitive. Banks charge less for M-pesa bulk mobile transfers compared to the costs of cheques and cash transfers.

CFC Stanbic bank is the a bank that has this M-pesa bulk mobile money transfer.

prepaid cards in Kenya

What are prepaid cards in Kenya

They are a type of debit cards. They differ from the usual debit cards in that they are prepaid while a debit card uses the money in your bank account. They are sold or given out mainly by banks and also by some individual stores or shops, especially in the western world. The cards are called prepaid because the amount to be used is predetermined by the cardholder and paid for in advance. This is convenient to the bank because it is able to collect and mobilize funds before it has to pay for the cardholders spend. Prepaid cards may be used as gift cards, salary cards, store cards and travel cards, to name but a few.

Features of prepaid cards in Kenya

A unique feature on some prepaid cards in Kenya is that they do not necessarily have to have a name printed on the cards. As the banking industry in Kenya evolves and the card business moves to a higher level, cards may be sold to customers from supermarkets and through Agency banking agents. They will be sold like the mobile phone top-up cards. They will be availed to all who need them especially as gift options. The prepaid cards in Kenya can be used in stores that accept the credit and debit cards across the globe.

The prepaid cards may be magnetic strip meaning they have to be swiped at a Point of sale machine. The alternative is to have the prepaid cards as chip cards, which means the information is held in a chip. Chip cards may be used on merchants that are not yet Chip because the default for these cards is the magnetic strip.

Prepaid cards may be denominated in local currency or in foreign currency depending on the financial institution that is issuing the cards.  The cards may be for local use only or they may be used internationally. The prepaid cards are usually re-loadable. Whenever more money is required on the card, the cardholder deposits more money in his card account.

Banks giving prepaid cards in Kenya

Not many banks in Kenya have started on this business line yet. There are three banks who currently give this service. The banks are Kenya commercial bank, Investment and mortgages bank and Bank of Africa.

As the prepaid cards continue to grow in popularity in most parts of the world, the banking sector in Kenya has to be involved. We should prepare ourselves for the competition that will be witnessed in the financial institutions as they get into the prepaid cards in Kenya.

Management of Credit Card Risks in Kenya

Credit Card Risks in Kenya

Credit card companies rely very heavily on the credit scoring bureaus and the information that is given on the application forms. Rarely do the card companies engage credit card risks management firms to assess the risks of running the cards business they engage in. The credit card risks are also not usually managed by the financial institutions’ risk management units. The banking industry in Kenya and indeed in the world has not appreciated the nature of credit card risks.Credit card applications are one area where credit card risks are most prevalent.

Prudent management of Credit card risks in Kenya -The Application screening process.

The cardholder is required to complete an application form for which he signs that the information he has availed to the card company is correct. It is not usual to have the cardholder do a face to face interview for a credit card. Where an application is suspect, the application is declined and usually the applicant is not interviewed or arrested. Information of this fraudulent application may not be sent to the credit reference bureau. This means the applicant would just approach another financial institution.

We have many cases where the applications with credit card risks are approved as the applications are not well screened. The staffs that are screening application forms do not understand credit cards risks and so do not know what to look out for. The management of credit card risks requires training, experience and also exposure to real life cases and/or case studies on the same.

When not adequately screened and monitored, many fraudulent applications are successfully processed. This is a major revenue leakage and more so because the credit card may never even be paid for since the applicant is fraudulent.

Credit card risks in Kenya and the role of credit rating bureaus

Financial institutions should ensure to make use of credit rating or scoring bureaus to ensure that they catch some of the fraudulent applications before credit cards risks are experienced by the bank. Prevention is definitely better than cure. The credit reference bureaus have to ensure that they keep updated and accurate information in their data. If the integrity of the bureaus is compromised, then credit card risks management would become harder to frustrate and contain to manageable levels.

It is therefore extremely important for the financial institutions to consider the losses they incur due to weak or nonexistent credit card risks in Kenya management department or unit that is involved in vetting credit card application forms.

We will look at the various card enhancements that a card company can use to competitively stay ahead of other companies. When deciding which card company to apply to for a card, it would be good to look out for the card enhancements.

Card Enhancements

• Card Enhancements -Credit card protection

This is very important as the card will be paid in case you die or in case you are retrenched or incapacitated. Your family will not have to pay for your debts because the amount of your credit limit had been insured. The insurance may be free with the card or the cardholder may be required to pay a minimal amount.

• Card Enhancements – Discounts/rebates

Cards companies work with various outlets and service providers to get their cardholders discounts or rebates. The card companies may refund the customer by crediting their card companies with a stated amount if they spend the required amount for the campaign. These discounts and rebates are very popular and customers are very happy to spend as much as they can to get free or discounted prizes.

• Card Enhancements – Emergency services

The card companies also may provide emergency services to the cardholder. Emergency services may include emergency cash advance facilitation where a card is lost when the cardholder is travelling. The cardholder may also get a card replacement when their card is lost when they are in another country. Cardholders may also get free advice on where to seek medical services as they travel.

• Card Enhancements – Financial services

The cardholders may be able to access financial services in or outside their countries as a bonus to having that particular card. The services may be free or at discounted prises. These are important especially for those who are new to use of cards and have little financial exposure. It prevents cardholders from going into debt.

• Card Enhancements – Insurance

Whether it is lost card, medical or travel insurance, it is important to find out which insurance if any is provided by your card company to cardholders. Some of the insurance is free and others require that the cardholder pays for it. The travel insurance is a favourite especially where the cardholder travels a lot. In case the cardholder gets sick or loses their luggage, they are refunded by the insurance company.

• Card Enhancements – Travel services

Additional to the insurance the cardholder may get consirge services, pick up and drop off services at hotels and airports. The cardcomapny may be working with certain airlines making the services more accessible.

• Card Enhancements – VIP services

Services for ‘very important persons’ are mainly given to high net work cardholders and are usually not availed to all the cardholders. The services are geared to ensure that the experience of the cardholder is the best that there is. The cardholder may be availed a personal assistant, airport lounges and office services when they travel

• Card Enhancements – Rewards

Many card companies participate in the rewards and loyalty services. These are seen as a way to ensure that they reward their loyal customers and make the customers feel valued. These rewards are for all cardholders. Card companies usually work together with the betting and licensing board.

The above card enhancements are a way to ensure cardholders are rewarded and retain the cards they have or to get new customers. As you decide which card to get, always consider the card enhancements that the card company will make available to you and compare them to your needs.