The Post Office Savings Bank of Kenya (PostBank) has emerged as one of the beneficiaries of increasing branch closures by commercial banks, giving it a new revenue stream through agency banking offerings.
Managing Director Raphael Lekolool said the state-owned savings bank saw revenue growth from the services it offered in 97 branches on behalf of other banks.
Commercial banks have closed 59 branches and 430 automated teller machines (ATMs) in the five years to 2021, according to the latest statistics by the Central Bank of Kenya.
The shift has been fueled by a widespread digital revolution that has seen banks invest heavily in online and mobile service delivery infrastructure.
“We have seen an increase in other bank customers coming to our branch to continue doing business. When you look at the amount we serve, it has increased because of the agreement we have signed with commercial banks,” Mr Lekolool said in an interview.
“We expect this to become the norm because most banks, as they eliminate some of their branches, have created a need in our branches for them to serve their customers.”
Struggling PostBank has a partnership offering where it offers agency banking services such as cash withdrawals, deposits and account balance inquiries in its wide network of branches on behalf of commercial banks.
The partnership under an undisclosed revenue sharing framework also allows the bank to process bulk payments such as salaries, dividend payments and loans at PostBank branches.
PostBank plans to maintain its branch network, citing cooperation with the government under a social welfare program that distributes stipends to the elderly. “Also, as we continue to be involved in the social payments we make on behalf of the government, we need to maintain the branch,” said Mr Lekolool.
“This is because for them [elderly] customers, we have to use biometrics and — apart from PoS [points of sale] that we implement — recruitment and enrollment, as well as distribution, need to be coordinated from one point.”
The savings bank has for more than a decade set its sights on entering the lucrative commercial lending space in line with global banking trends. The plan, however, has been hampered by strict regulatory requirements including at least Sh1 billion of core capital and capping property investment holdings at 20 per cent of the capital base.
PostBank’s transition to a commercial bank has lagged behind its counterparts in Tanzania and Uganda, which operate as fully commercial lenders. This is despite the oldest having commenced operations in 1910 unlike peers Tanzania (1925) and Uganda (1926)
TPB Tanzania June last year was rebranded to Tanzania Commercial Bank after a series of reforms that began gathering steam in 2015 and involved a merger and acquisition deal for three other banks.
PostBank Uganda also became a full commercial bank last December after a restructuring process involving recapitalization by the government.
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