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Emerging Opportunities in

Kenya's Cards and Payments

Industry

Market Size, Trends and Drivers,

Strategies, Products and Competitive

Landscape

Product Code: VR0907MR

Published Date: April 2013

TABLE OF CONTENTS

Emerging Opportunities in Kenya's Cards and Payments Industry

© Timetric. This product is licensed and is not to be photocopied Published: April 2013

TABLE OF CONTENTS

1 Executive Summary .............................................................................................................................. 6 2 Market Attractiveness and Future Prospects of Cards and Payments Industry ............................ 8 3 Analysis of Kenya Cards and Payments Industry Drivers .............................................................. 11

3.1 Macroeconomic Fundamentals ............................................................................................................. 11

3.1.1 GDP growth ........................................................................................................................................... 11

3.1.2 Annual disposable income ..................................................................................................................... 12

3.1.3 Inflation rate ........................................................................................................................................... 13

3.2 Infrastructure Drivers ............................................................................................................................. 14

3.2.1 Opportunity in mobile payments ............................................................................................................ 14

3.2.2 Evolution in M-Pesa ............................................................................................................................... 14

3.2.3 Internet banking ..................................................................................................................................... 15

3.2.4 Emergence of contactless and NFC payments in Kenya ...................................................................... 16

3.3 Business Drivers .................................................................................................................................... 16

3.3.1 Growing retail industry ........................................................................................................................... 16

3.3.2 Evolution in mobile commerce ............................................................................................................... 17

3.4 Card Fraud Statistics ............................................................................................................................. 18

3.5 Regulatory Framework .......................................................................................................................... 19

3.5.1 Regulations pertaining to M-Pesa ......................................................................................................... 19

4 Emerging Consumer Attitudes and Trends ...................................................................................... 20

4.1 Market Segmentation and Targeting ..................................................................................................... 20

4.2 Consumer Preference ........................................................................................................................... 21

4.2.1 Price ....................................................................................................................................................... 21

4.2.2 Convenience .......................................................................................................................................... 22

4.2.3 Services ................................................................................................................................................. 22

5 Competitive Landscape and Industry Dynamics ............................................................................. 23

5.1 Market Share Analysis by Payment Channels ...................................................................................... 23

5.1.1 Cash transactions .................................................................................................................................. 24

5.1.2 Credit transfer ........................................................................................................................................ 25

5.1.3 Cards payments..................................................................................................................................... 26

5.1.4 Check payments .................................................................................................................................... 27

5.2 Debit Cards Market Share ..................................................................................................................... 28

5.2.1 By banks ................................................................................................................................................ 28

5.2.2 By scheme ............................................................................................................................................. 29

5.3 Credit Cards Market Share .................................................................................................................... 30

5.3.1 By bank .................................................................................................................................................. 30

5.3.2 By scheme ............................................................................................................................................. 31

5.4 Charge Cards Market Share .................................................................................................................. 32

6 Market Size and Growth Potential of Payment Card Industry ........................................................ 33

6.1 Market Share Analysis by Type of Card ................................................................................................ 33

6.2 Total Market Size and Forecast of Card Industry .................................................................................. 34

6.2.1 By volume of cards ................................................................................................................................ 34

6.2.2 By value of transaction .......................................................................................................................... 35

TABLE OF CONTENTS



6.2.3 By volume of transaction ....................................................................................................................... 36

6.3 Debit Card Category Size and Forecast ................................................................................................ 37


6.3.2 By value of transaction .......................................................................................................................... 38

6.4 Credit Card Market Size and Forecast .................................................................................................. 39


6.4.2 By value of transactions ........................................................................................................................ 40

6.4.3 By volume of transactions ..................................................................................................................... 41

6.5 Prepaid Card Market Size and Forecast ............................................................................................... 42



6.6 Charge Card Market Size and Forecast ................................................................................................ 44



7 Company Profiles, Product, and Marketing Strategies ................................................................... 46

7.1 Kenya Commercial Bank ....................................................................................................................... 46

7.1.1 Strategies ............................................................................................................................................... 46

7.1.2 Kenya Commercial Bank key financials ................................................................................................ 47

7.2 Barclays Bank of Kenya Limited ............................................................................................................ 48

7.2.1 Strategies ............................................................................................................................................... 48

7.2.2 Barclays Bank of Kenya key financials .................................................................................................. 49

7.3 Standard Chartered Bank Ltd ................................................................................................................ 50

7.3.1 Strategies ............................................................................................................................................... 50

7.3.2 Kenya Commercial Bank key financials ................................................................................................ 51

8 Appendix .............................................................................................................................................. 52

8.1 Methodology .......................................................................................................................................... 52

8.1 Contact Us ............................................................................................................................................. 52

8.2 About Timetric ........................................................................................................................................ 52

8.3 Disclaimer .............................................................................................................................................. 53

TABLE OF CONTENTS



LIST OF FIGURES

Figure 1: Current and Future Prospects of Various Cards in Kenya ............................................................................................................. 8 Figure 2: Kenyan Growth Potential of the Cards and Payments Industry by Area of Usage ......................................................................... 9 Figure 3: Kenyan GDP at Constant Prices (KES Billion), (Base Year 1999–2000), 2007–2016 ................................................................. 11 Figure 4: Kenyan Annual Disposable Income, (KES Billion), 2008–2017 ................................................................................................... 12 Figure 5: Kenyan Inflation Rates (%), 2008–2017 ...................................................................................................................................... 13 Figure 6: Kenyan Internet Penetration Levels, (%), 2007–2011 ................................................................................................................. 15 Figure 7: Growth in Kenyan Retail Sector (US$ Million), 2008–2012 ......................................................................................................... 16 Figure 8: Kenyan Card Fraud Statistics (KES Million), 2008–2012 ............................................................................................................. 18 Figure 9: Kenyan Cards and Payments Industry Segmentation ................................................................................................................. 20 Figure 10: Kenyan Consumer Preferences by Card Type .......................................................................................................................... 21 Figure 11: Number of POS Terminals in Kenya (Thousands), 2008–2017 ................................................................................................. 22 Figure 12: Kenyan Share of Payment Channels (%), 2012 ........................................................................................................................ 23 Figure 13: Kenyan Value and Growth of Cash Transactions (KES Million), 2008–2012 ............................................................................. 24 Figure 14: Kenyan Value and Growth of Credit Transfers (KES Million), 2008–2012 ................................................................................. 25 Figure 15: Kenyan Value and Growth of Card Payments (KES Million), 2008–2012 .................................................................................. 26 Figure 16: Kenyan Value and Growth of Check Payments (KES Million), 2008–2012 ................................................................................ 27 Figure 17: Kenya Debit Card, Market Share by Bank (%), 2011................................................................................................................. 28 Figure 18: Kenya Debit Cards, Market Share by Scheme (%), 2011 .......................................................................................................... 29 Figure 19: Kenya Credit Cards, Market Share by Bank (%), 2011 .............................................................................................................. 30 Figure 20: Kenyan Credit Cards, Market Share by Scheme (%), 2011 ....................................................................................................... 31 Figure 21: Kenyan Charge Cards, Market Share by Scheme (%), 2011 ..................................................................................................... 32 Figure 22: Kenyan Cards and Payments Industry by Type of Card (%), 2008–2017 .................................................................................. 33 Figure 23: Kenyan Cards Market Size by Volume (Thousands), 2008–2017 .............................................................................................. 34 Figure 24: Kenyan Cards and Payments Industry by Transaction Value (KES Million), 2008–2017 ........................................................... 35 Figure 25: Kenyan Cards and Payments Industry, Transaction Volume (Million), 2008–2017 .................................................................... 36 Figure 26: Kenyan Debit Card Category, Market Size (Thousands), 2008–2017........................................................................................ 37 Figure 27: Kenyan Debit Card Category, Market Size (KES Million), 2008–2017 ....................................................................................... 38 Figure 28: Kenyan Credit Card Category, Market Size by Volume (Thousands), 2008–2017 ..................................................................... 39 Figure 29: Kenya Credit Card Category Market Size by Transaction Value (KES Million), 2008–2017 ....................................................... 40 Figure 30: Kenyan Credit Card Category, Market Size by Transaction Volume (Million), 2008–2017 ......................................................... 41 Figure 31: Kenyan Prepaid Card Category, Market Size (Thousands), 2008–2017 .................................................................................... 42 Figure 32: Kenya Prepaid Cards Category, Market Size (KES Million), 2008–2017 ................................................................................... 43 Figure 33: Kenyan Charge Card Category, Market Size (Thousands), 2008–2017 .................................................................................... 44 Figure 34: Kenya Charge Card Category, Market Size (KES Million), 2008–2017 ...................................................................................... 45 Figure 35: Cards Offered by Kenya Commercial Bank ............................................................................................................................... 46 Figure 36: Cards Offered by Barclays Bank of Kenya Limited .................................................................................................................... 48 Figure 37: Cards Offered by Standard Chartered Bank Kenya ................................................................................................................... 50

TABLE OF CONTENTS



LIST OF TABLES

Table 1: Kenyan GDP at Constant Prices (KES Billion), (Base Year 1999–2000), 2007–2016 ................................................................... 11 Table 2: Kenyan Annual Disposable Income, (KES Billion), 2008–2017 .................................................................................................... 12 Table 3: Kenyan Inflation Rates (%), 2008–2017 ....................................................................................................................................... 13 Table 4: Kenyan Payment Channels (KES Million), 2012 ........................................................................................................................... 23 Table 5: Kenyan Cards and Payments Industry by Type of Card (Number in Thousands), 2008–2017 ...................................................... 33 Table 6: Kenyan Cards Market Size by Volume (Thousands), 2008–2017 ................................................................................................. 34 Table 7: Kenyan Cards and Payments Industry Size by Transaction Value (KES Million), 2008–2017 ....................................................... 35 Table 8: Kenyan Cards and Payments Industry by Transaction Value (US$ Million), 2008–2017 ............................................................... 35 Table 9: Kenyan Cards and Payment Industry, Transaction Volume (Million), 2008–2017 ......................................................................... 36 Table 10: Kenyan Debit Card Category, Market Size (Thousands), 2008–2017 ......................................................................................... 37 Table 11: Kenyan Debit Card Category, Market Size (KES Million), 2008–2017 ........................................................................................ 38 Table 12: Kenyan Debit Card Category, Market Size (US$ Million), 2008–2017 ........................................................................................ 38 Table 13: Kenyan Credit Card Category, Market Size by Volume (Thousands), 2008–2017 ...................................................................... 39 Table 14: Kenyan Credit Card Category, Market Size by Transaction Value (KES Million), 2008–2017 ..................................................... 40 Table 15: Kenya Credit Card Category, Market Size by Transaction Value (US$ Million), 2008–2017 ....................................................... 40 Table 16: Kenyan Credit Card Category, Market Size by Transaction Volume (Million), 2008–2017 .......................................................... 41 Table 17: Kenyan Prepaid Card Category, Market Size (Thousands), 2008–2017 ..................................................................................... 42 Table 18: Kenyan Prepaid Cards Category, Market Size (KES Million), 2008–2017 .................................................................................. 43 Table 19: Kenyan Prepaid Cards Category, Market Size (US$ Million), 2008–2017 ................................................................................... 43 Table 20: Kenyan Charge Card Category, Market Size (Thousands), 2008–2017 ..................................................................................... 44 Table 21: Kenyan Charge Card Category, Market Size (KES Million), 2008–2017 ..................................................................................... 45 Table 22: Kenya Charge Card Category, Market Size (US$ Million), 2008–2017 ....................................................................................... 45 Table 23: Kenya Commercial Bank Key Financial Indicators, 2010–2011 .................................................................................................. 47 Table 24: Barclays Bank of Kenya Limited Key Financial Indicators, 2010–2011 ....................................................................................... 49 Table 25: Standard Chartered Bank Kenya Key Financial Indicators, 2010–2011 ...................................................................................... 51

EXECUTIVE SUMMARY



1 Executive Summary

Kenya is the testing ground for a revolution that could help extend financial inclusion to some of the poorest

and most remote places in the world. Its m-payments channel is considered to be in the same league as

Korea and Japan.

Over KESXXX billion (US$X.X billion) worth of m-payments were made in 2011, equivalent to XX% of the

country’s GDP. With plans to form a currency bloc between Uganda, Tanzania, Burundi and Rwanda by 2012,

Kenya could be the launch pad for a boom in electronic payments across east Africa.

As mobile phone use rises, banks and governments in economies with less-developed payment

infrastructures may be able to bypass investment in areas such as bank branches and ATMs. Instead, they

can concentrate on tailoring their systems to benefit from the ever-increasing popularity of mobile phones as

payment devices.

Mobile is not the only part of the Kenyan payments system which is undergoing a period of growth; debit is

also becoming an essential transaction platform. Despite the popularity of m-payments, debit remains the

most popular payment option in terms of transaction volume.

Debit card category registered significant growth during the review period

Debit cards recorded remarkable growth during the review period (2008−2012), with cards in issue increasing

from X.X million in 2008 to X.X million in 2012, representing a review-period CAGR of XX.XX%.

The transaction value of debit cards increased at a CAGR XX.XX%, from KESXXX.X billion (US$X.X billion) in

2008 to KESXXX.X billion (US$X.X billion) in 2012, almost eight times higher than spending on credit during

the same period. There are now X.X million debit cards in the country.

The nation’s credit card category is relatively limited. Central Bank of Kenya (CBK) figures show there were

XXX,XXX credit cards in circulation in total in 2012, with card spending of KESXX.X billion (US$XXX.Xmillion).

Credit card spending registered a CAGR of XX.XX% during the review period.

There is a general lack of enthusiasm for credit in Kenya, particularly among lower income groups who show

a preference for prepaid products. This preference is part of the reason mobile money transfer through e-

wallets has become so popular.

Growth prospects in the prepaid cards category

Prepaid cards are showing some encouraging signs of growth, although MasterCard has not yet launched any

such product in the country. The only pure prepaid product available is issued by Visa. CBK figures show

there were XXXXX prepaid cards in circulation in 2012, an increase of XX.X% from 2008 figures. Spending on

prepaid cards registered a decline during the review period, from KESXXX.X million in 2008 to KESXXX.X

million in 2012.

Emergence of NFC-based transit cards

In 2012, Google rolled out a near-field communication (NFC) card called the Beba Card for use on public

transport in Kenya’s capital Nairobi. The card will be used on the Citi Hoppa buses. The Beba Card is a

prepaid product that can be loaded with up to KESXX.XXX (US$XXX) and will be marketed to commuters.

Users can check their balance and view a history of their transactions on the Beba website. The Kenyan cards

and payments industry is highly mobile driven and many firms are attempting to replicate the success story of

Safaricom’s M-Pesa.

Significant increase in internet users to drive the growth of online retail in Kenya

The volume of internet users more than doubled in 2012, from X million in 2011 to X.X million in 2012.

Government investment in fiber-optic cables is expected to increase the number of users, which will have a

positive impact on internet banking.

EXECUTIVE SUMMARY



Adoption of effective security measures resulted in a low level of card fraud

During the review period, the central bank mandated the use of chip-based ATM cards and EMV standards for

credit cards, in order to tackle card fraud. Moreover, the introduction of transaction alerts via SMS and the

adoption of stronger authentication methods for online transactions are expected go some way to helping

combat fraud over the forecast period. As of 2012, the value of card fraud in Kenya was KESX.X billion

(US$XX.X million), representing a review-period CAGR of XX.XX%.

MARKET ATTRACTIVENESS AND FUTURE PROSPECTS OF

CARDS AND PAYMENTS INDUSTRY



2 Market Attractiveness and Future Prospects of Cards and Payments

Industry

Kenya’s cards and payments industry has expanded rapidly. The emergence of mobile money (M-PESA) in

2007, and its rapid acceptance rate, shows the attitude of Kenyan residents towards innovative payment

channels. The introduction of plastic cards was received well by citizens however, their reliance on cash and

M-PESA is still significant. In 2012, the Kenya banker association initiated a project, converting all payment

cards into secured EMV cards to control the increasing levels of fraud in the country.

The industry is expected to register a CAGR of XX.XX% over the forecast period to reach KESX.X trillion

(US$XX.X billion) by the end of 2017. Given this growth rate, the industry provides card issuers with growth

opportunities. Over the forecast period, prepaid cards are expected to grow at a CAGR of XX.XX% as a result

of the growth in the debit card segment which is projected to grow at a CAGR of XX.XX%, to reach KESX.X

trillion (US$XX.X billion) in 2017. The credit cards category is expected to grow at a CAGR of XX.XX%.

Figure 1: Current and Future Prospects of Various Cards in Kenya

Source: Timetric analysis © Timetric

MARKET ATTRACTIVENESS AND FUTURE PROSPECTS OF

CARDS AND PAYMENTS INDUSTRY



In Kenya, mobile commerce, corporate procurement, gift cards, travel and government welfare schemes

possess positive levels of growth potential in terms of prepaid card opportunities. Prepaid travel cards are a

key growth area as an increasingly the nation’s population are taking leisure vacations and business trips. In

terms of debit cards, retail sales, utility bill payments and entertainment are some of the main areas of usage.

Credit and charge cards have limited growth potential as government regulations restrict their issuance and

usage. At a corporate level, charge cards may be used to meet a firm’s purchasing needs as such cards have

a fixed payment timeline.

Figure 2: Kenyan Growth Potential of the Cards and Payments Industry by Area of Usage


ANALYSIS OF CARDS AND PAYMENTS MARKET DRIVERS



3 Analysis of Kenya Cards and Payments Industry Drivers

3.1 Infrastructure Drivers

3.1.1 Opportunity in mobile payments


and most remote places in the world. Its m-payments channel is considered to be in the same league as

Korea and Japan.

Over KESXXX billion (US$X.X billion) worth of m-payments were made in 2011, equivalent to XX% of the

country’s GDP. With plans to form a currency bloc between Uganda, Tanzania, Burundi and Rwanda by 2012,

Kenya could be the launch pad for a boom in electronic payments across East Africa.

As mobile phone use rises, banks and governments in economies with less-developed payments

infrastructures may be able to bypass investment in areas such as bank branches and ATMs. Instead, they

can concentrate on tailoring their systems to benefit from the ever-increasing technology and popularity of

mobile phones as payment devices.

In total XX% of Kenya’s population own a mobile phone, compared to the XX% that have access to formal

banking arrangements.

The opportunities appear even greater in Tanzania, where just XX% of its XX.X million population have

access to financial services. Around XX% of Tanzania’s population is classed as "financially excluded" and its

mobile penetration is only slightly lower than Kenya, at around XX%. Uganda, with a population of

XX.Xmillion, is another country which has much to gain from the rise of m-payments.

As the economies of the east African bloc integrate their electronic payment infrastructures, it should become

easier to make transactions between and within these countries.

"This paradigm shift, a change in technology that is enabling people to conduct business in a different way, is

not replacing existing infrastructure like branches and bricks-and-mortar," said Mark Richards, a partner at

private equity house Actis, which specializes in Africa finance.

"In many places the infrastructure simply does not exist. If you had never built these bank branches and the

rest of it you would do transactions a different way given the technology that’s available today."

Driving this paradigm shift is Africa’s biggest m-payments firm, M-Pesa. The business was initially established

by DFID, the UK’s Department for International Development and Vodafone subsidiary Safaricom.

The CBK has also played a role in the development. Its strategy has been based on promoting the uptake of

mobile-based financial services to its rural, unbanked population.

It all points to a clear economic rationale for the development of m-payments in Kenya and beyond. M-Pesa

and South Africa-based m-payments provider MTN expanded in Uganda and other east African markets.

They are banking on the economies becoming more closely integrated and payment volumes increasing.

3.1.2 Evolution in M-Pesa

Kenyan mobile phone-based money transfer service M-Pesa continued to go from strength-to-strength in

2009, ending the year with Xmillion users, equivalent to XX% of the country’s population.

A joint venture between UK mobile network operator (MNO) Vodafone and Kenyan MNO Safaricom, M-Pesa

appears to build on its success in 2010 thanks to a number of innovative service enhancements. The latest of

these follows an agreement with Kenya’s ATM and electronic POS network operator Kenswitch to allow bank

customers to send money to M-Pesa accounts by means of an ATM transaction.

Family Bank has become the first Kenyan bank to announce its participation in the new service, Chapaa Chap

Chap (CCC), which costs KESX.XX (US$X.XX). Kenswitch, which is owned by a consortium of Kenyan

banks, provides switching services for some XXX ATMs.




A significant enhancement brought about by the CCC service will be consumer convenience, in that it

eliminates the need for bank customers to withdraw cash at an ATM and then seek an M-Pesa agent to make

a deposit before undertaking a transfer. The CCC service also enables bank customers who are not M-Pesa

account holders to make transfers to M-Pesa accounts.

This CCC service also overcomes one of the problems faced by M-Pesa: cash flow constraints experienced

by some of its XX,XXXagents in Kenya, especially in rural areas where consumers more frequently make

cash withdrawals than cash deposits. According to Safaricom, M-Pesa’s monthly person-to-person transaction

volumes in September 2009 totaled US$XXX million, up from US$XXXmillion in January 2009.

The CCC service follows another significant breakthrough made by M-Pesa in October 2009, when it

launched a mobile phone remittance service between the UK and Kenya. First mooted in March 2008, the

launch was delayed by regulatory hurdles which were resolved following negotiations – including those

relating to foreign exchange issues between the Bank of England and the Central Bank of Kenya.

3.1.3 Internet banking

Internet banking mechanisms are globally recognized and have played a significant role in the payment

system of emerging economies. Nonetheless, the internet payment methods have not been fully utilized in

Kenya, due to the low internet penetration levels and the emergence of mobile payment services.

Furthermore, over half of Kenya’s population lives in rural areas and urbanization growth rates have been

weak. However, there exists high interest among younger consumers and increasing internet penetration

levels are expected to support internet banking over the forecast period. Internet penetration rates grew from

X.X% in 2007 to XX.X% in 2011.

3.1.4 Emergence of contactless and NFC payments in Kenya

Kenya’s payment cards underwent a process of evolution during the review period, due in part to the launch of

contactless and NFC-based payments from banks and mobile operators. In February 2011, Airtel Africa

launched NFC services in Kenya, Tanzania, Gabon and nine other African countries in partnership with

Oberthur Technologies. In a similar move, Google introduced a contactless prepaid card in Kenya in June

2012. The Beba card can be loaded with up to KESXX,XXX (US$XXX) to make payments on Nairobi's Citi

Hoppa buses.

3.2 Card Fraud Statistics

The adoption and acceptance of payment cards in Kenya increased significantly during the review period with

the volume of cards growing at a review period CAGR of XX.XX%. In terms of value, the industry grew at a

CAGR of XX.XX% during the review period driven by the value of credit and debit card categories that

recorded respective CAGRs of XX.XX% and XX.XX%.

It is now emerging that despite the growth of the less expensive platforms, companies have not taken

measures to protect consumer information. Consequently, credit and ATM cardholders in Kenya are losing

cash to people entrusted to serve them in banks.

During the review period, the country registered an increase in the volume of card fraud activity. It increased

from KESXXX.X million (US$6.7 million) in 2008 to KESX.X billion (US$XX.X million) in 2012, at a CAGR of

XX.XX%. Fraud at ATMs remains a key concern for financial institutions and card holders. However, Kenya’s

financial institutions are tightening measures to fight card fraud.

Regional card processor and payments services firm Paynet Group upgraded its card issuing and processing

platforms to EMV chips cards. The company has partnered with Family Bank to provide EMV cards, alongside

access to their extensive PesaPoint network.




3.3 Regulatory Framework

3.3.1 Regulations pertaining to M-Pesa

The success of branchless banking schemes in general and M-Pesa in particular, has driven some regulatory

developments. Some of these are based around the view that only a bank should be permitted to offer such

services, which suggests that some regulators do not understand how the same regulatory environment can

apply to non-bank institutions. To some degree, this view is based on a lack of visibility of, and familiarity with,

the capabilities of mobile operators.

In Kenya, the Finance Minister launched an audit of M-Pesa, in order to verify that it cannot be used by money

launderers and pyramid schemes − indeed, the false accusation was made that M-Pesa itself is nothing more

than a ponzi scheme. This move was very unpopular amongst ordinary Kenyans, as can be seen from the

numerous Kenyan media reports and blogs, which appeared to view it as an attempt by the banks – which,

the majority of ordinary Kenyans appear to feel, were never interested in providing services to them anyway –

to shut down M-Pesa. Consult Hyperion were asked to contribute to the response to this audit by carrying out

a new audit of security countermeasures and procedures, and we were again able to certify that M-Pesa

offers bank-grade security and controls to its customers. At the end of the process, M-Pesa was given a clean

bill of health and continues to operate.

It is only a matter of time before M-Pesa is brought under the full regulatory umbrella of Kenya’s laws, and it is

likely to be regulated as an electronic money issuer. This is expected to be some way short of full regulation

as a bank – after all, M-Pesa doesn’t offer credit, and it certainly doesn’t lend out (multiples of) its customers’

funds.

Suitability of KYC regulation under M-Pesa

KYC requirements are undoubtedly holding back the branchless banking sector. Whilst they are, in some

form, absolutely necessary, consideration should be given to whether or not their current application is

appropriate. For example, if a consumer sends US$20 once a week to his relatives up-country, is it really

necessary that the same consumer undergo the same KYC checks as someone who wants to send

$XX,XXX? Perhaps a more limited form of KYC could be applied to the poorest customers – up until the time

when they reach a certain transaction threshold, at which point full KYC would apply. It is difficult to see, for

example, how such a relaxation would increase the risk from terrorist attacks.

EMERGING CONSUMER ATTITUDES AND TRENDS



4 Emerging Consumer Attitudes and Trends

Consumer attitudes and preference play a key role in the success of any product in any industry and so is the

case with the Kenya cards and payments industry. Organizations need to be cautious with regards to the

demographics they target. Precautions need to be taken when determining consumer expectations. The

following section discusses in detail all these factors that can help organizations in the Kenya cards and

payments industry to make effective business decisions.

4.1 Market Segmentation and Targeting

The Kenyan cards and payments industry developed during the review period, growing at a CAGR of XX.XX%

from X.X million cards in 2008, to X.X million cards in 2012. The demand for these cards varies significantly

based on the demographic targeted.

The chart below presents a brief summary of the segments being targeted by the issuers:

Figure 3: Kenyan Cards and Payments Industry Segmentation


EMERGING CONSUMER ATTITUDES AND TRENDS



4.2 Consumer Preference

Consumer preferences such as price, convenience and associated services play a vital role in decisions over

which cards are popular among customers. Notably, the data below shows that, for some cards, consumers

prioritize price over services, while price and all other associated costs play a key role in purchasing the

majority of debit and prepaid cards in the country. Furthermore, in the corporate segment, price is of high

importance when a company is procuring a payroll, travel or entertainment card, while service and

convenience are important factors for all types of cards. In the retail sector, price is a deciding factor for all

cards except HNWI cards.

Figure 4: Kenyan Consumer Preferences by Card Type


4.2.1 Price

Price, and charges associated with cards, play a significant role in the overall purchasing decisions of

consumers. Credit card companies are offering a transparent mechanism that clearly reflects the interest

charge along with all other fees and charges. Many banks are offering credit cards with minimum joining fees

and zero annual maintenance fees.

The low costs associated with prepaid and debit cards encourage a large proportion of the population to apply

for such products. Debit cards can be acquired when opening a bank account and while some cards have an

associated joining fee of KSFX,XXX, the majority of the country’s leading banks offer debit cards entirely free

of charge. I&MBank Visa debit card come with zero annual fees, while KCB Bank charges a one-time joining

fee of KESX,XXX on its Visa based payroll debit card.

COMPETITIVE LANDSCAPE AND INDUSTRY DYNAMICS



5 Competitive Landscape and Industry Dynamics

Although cash may be the dominant payment method, credit transfers, popularly known as the real-time gross

settlements (RTGSs), accounted for XX.X% of non-cash retail transactions in 2012, according to data from

the central bank.

The value of card-based transactions increased from KESXXX.X billion (US$X.X billion) in 2008 to

KESXXX.Xbillion (US$X.X billion) in 2012, accounting for X.X% of the total market share of non-cash

payments.

Visa is Kenya’s dominant card scheme with an industry share of XX.X% in volume terms. By bank, the cards

and payments industry is controlled by Co-Operative Bank with a market share of 2X.X%.

5.1.1 Cash transactions

Following the automated RTGS system, cash is the second-most popular payment channel in terms of volume

in Kenya. The value of cash transaction grew at a CAGR of XX.XX% during the review period from KES1.0

trillion (US$XX.X billion) in 2008 to KESX.X trillion (US$XX.X billion) in 2012.

5.1.2 Credit transfer

The value of transactions settled through RTGSs grew from KESXX.X trillion (US$ XXX.X trillion) trillion in

2008 to KESXX.X trillion (US$XXX.X billion) in 2012, posting a CAGR of X.XX% during the review period.

5.1.3 Cards payments

Card payments emerged as one of the most popular payment methods in Kenya during the review period.

The value of card payments registered a CAGR of XX.XX% during the review period growing from KES289.0

billion (US$X.X billion) in 2008 to KESXXX.X billion (US$7.9 billion) in 2012.

5.1.4 Check payments

The value of check payments registered a decline in the Kenyan payment market due to the increasing

adoption of RTGS for high volume payments. Consequently, the value of check payment declined at a CAGR

of -X.XX% during the review period from KESXXX.X billion (US$X.X billion) in 2008 to KESXXX.X billion

(US$X.X billion) in 2012.

MARKET SIZE AND GROWTH POTENTIAL OF PAYMENT CARD

INDUSTRY



6 Market Size and Growth Potential of Payment Card Industry

The following section contains an overview of the category size and growth potential of the Kenya cards and

payments industry. The section is divided into six chapters. Chapter one covers category share analysis by

type of card; chapter two discusses the category share and future growth of the overall Kenya card industry by

value and volume; chapter three provides the category size of the country’s debit card category; chapter four

discusses the category size of prepaid cards; chapters five and six cover the category size and growth

potential of the charge card and credit card category respectively.

6.1 Market Share Analysis by Type of Card


and most remote places in the world. Its m-payments industry is considered to be in the same league as those

in Korea and Japan.

Despite the popularity of m-payments, debit remains the most-popular payment with a market share of

XX.X%.

Debit cards recorded remarkable growth during the review period, with cards in issue increasing from

X.Xmillion in 2008 to X.X million in 2012, representing a CAGR of XX.XX%.

6.2 Total Market Size and Forecast of Card Industry

6.2.1 By volume of cards

The volume of cards in Kenya increased significantly during the review period from X.X million cards in 2008

to X.X million cards in 2012, representing a CAGR of XX.XX%. The growth is mainly attributable to the

increasing volume of debit cards which registered a CAGR of XX.XX% during the review period, followed by

prepaid cards with a review period CAGR of XX.XX%.

Driven by the growth in charge, prepaid and credit card categories, the volume of cards in the Kenya cards

and payments industry is expected to reach XX.X million cards by the end of 2017, growing at a CAGR of

X.XX%.

COMPANY PROFILE, PRODUCTS AND MARKETING STRATEGIES



7 Company Profiles, Product, and Marketing Strategies

7.1 Kenya Commercial Bank

Kenya Commercial Bank Ltd provides corporate and retail banking services. It offers various personal banking

products, such as savings and current accounts, personal loans, easy pay loans, salary advances, credit

facilities and Biashara banking products. The company also operates the Biashara Club which offers

workshops on entrepreneurship and capacity building, networking, business advisory services, and business

trips. In addition, it provides corporate banking products, such as custody services, transaction settlements,

corporate action administration, activity reporting, trustee and capital and income services.

7.1.1 Strategies

Figure 5: Cards Offered by Kenya Commercial Bank

Source: Company website and Timetric analysis © Timetric

Offering co-branded cards Kenya Commercial Bank, has partnered with the Serena hotel chain to offer co-branded credit cards on the MasterCard platform.




7.2 Barclays Bank of Kenya Limited

Barclays Bank of Kenya Ltd provides a range of banking, financial and related services for local businesses,

and small-to-medium-sized enterprises. The company provides a range of consumer banking services

comprising savings and transactional accounts, personal and business loans, asset finance and mortgages. It

also offers corporate and investment banking services consisting of transactional banking products, which

include alliance accounts and collection deposit vouchers, check payments, direct debits, electronic banking,

and liquidity management.

7.2.1 Strategies

Figure 6: Cards Offered by Barclays Bank of Kenya Limited


Barclaycard offers variable credit limits

Barclaycards offers variable credit limits depending on the customer’s needs and account type. For example,

the credit limit for a normal Visa Gold and Visa Classic differs from the credit limit on the Barclaycard Visa

Prestige which is targeted at high net worth clients.




7.3 Standard Chartered Bank Ltd

Standard Chartered Bank Kenya Ltd provides various banking products and services to individuals, small and

medium-sized enterprises and corporate customers. It offers deposit products such as current accounts,

savings accounts and fixed deposits, personal unsecured loans and mortgages, debit cards and foreign

currency debit cards,; excel and mobile banking services, and wealth management services. The company

also provides business current accounts, international trade account and business savings accounts. In

addition, it offers wholesale banking services comprising cash management, trade services, securities

services, and RMB settlements, equities, commodities, foreign exchange, Islamic financing, syndicated loans,

bonds and structured products.

7.3.1 Strategies

Figure 7: Cards Offered by Standard Chartered Bank Kenya


APPENDIX



8 Appendix

8.1 Methodology

Timetric’s dedicated research and analysis teams consist of experienced professionals with an industry

background in marketing, market research, consulting and advanced statistical expertise.

Timetric adheres to the Codes of Practice of the Market Research Society (www.mrs.org.uk) and the

Society of Competitive Intelligence Professionals (www.scip.org).

All Timetric databases are continuously updated and revised.

8.1 Contact Us

If you have any queries about this report, or would like any further information, please contact

[email protected].

8.2 About Timetric

Timetric is an independent economic and business research firm that provides critical intelligence on

emerging economies and key global industries. The company offers detailed economic and sector

intelligence, business insights and independent and authoritative commentary.

Underpinning all Timetric’s research services is a belief that data – if gained following the right

technologies and analytic frameworks – can provide unique and powerful economic and business

insights.

The Timetric economic and industry intelligence centers are premium decision tools that provide access

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Each year, Timetric produces hundreds of high-quality research reports across countries, industries

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Access the latest and most useful data sets, indices and forecasts

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Forecast and predict trends more accurately

http://www.scip.org/

mailto:[email protected]

APPENDIX



Economic Research Services

Timetric’s economic research services are founded on three key goals:

1. To provide the strongest base data:

The most accurate data

The most timely and frequently updated data sets

The best data curation methodologies and standardizations

Unique data sets and forward-looking indicators

Industry-specific, premium data sets

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Unique economic indices and data analysis frameworks

Forward-looking indicators

Proprietary indices and surveys

Data analysis frameworks, scorecards and models

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Truly expert, independent economic analysis and commentary

Proprietary analysis techniques and frameworks

Unique forecasts

Timetric believes that world-class content delivery should be the enabling factor across all it does. All its

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