By Allan Olingo

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Hello Allan! I am Leo, and I can help you send money, top-up, check your balance and more. Let me know your country so I can serve you better.”

This is a chat I am having with Leo, a chatbot from UBA Kenya, on Facebook.

“Kenya,” I reply.

“What would you like to begin with? You may type 'Help' to see my commands.”

“Send money,” I tell the virtual banker.

“We'll need a few details and security checks before you can send money.

“Do you have a UBA bank account?”

“No, I don’t,” I type back.

The Lagos-based banking multinational has revolutionised its interactions with its customers, allowing them to use social media to do basic banking on the go, thereby boosting efficiency.

Clients can open bank accounts, request mini-statements, top up airtime and transfer money. The app can also log and track complaints.

“Consumers spend 80 per cent of their time on three apps: Facebook, WhatsApp and YouTube so we have decided to follow them where they are, ” said UBA East and Southern Africa executive director Emeke Iwer.

Since Leo was launched in January, UBA has had 35 million conversations with customers and carried out over 500,000 financial transactions for more than 300,000 users.

Two years ago, Barclays Africa also unveiled a similar chatbot to facilitate two-way communication with its customers.

Last July, US research firm Jupiter predicted that chatbots, through artificial intelligence programmes, would eventually replace many tasks performed by workers.

“Chatbots are becoming increasingly influential in day-to-day life.... We forecast they will be responsible for cost savings of over $8 billion per annum by 2022, up from $20 million this year,” the research firm said.
But as banks go increasingly digital, human interactions are becoming minimal, increasing the potential of job losses.

In East Africa, top lenders Equity Bank, Co-operative Bank of Kenya and KCB have migrated over 85 per cent of their transactions from banking halls to digital channels, with employees left to handle complex tasks.

Loan applications and payments for example, are now being exclusively done on mobile phones.

Other services that have migrated to digital platforms include queries on account balances, account details and account opening.

While releasing its half-year financial results and indicators recently, KCB Group said the shift away from branches was in line with the bank’s digital transformation strategy.

“Non-branch transactions, mobile, agency banking, point of sale terminals and ATMs stood at 87 per cent of total volumes,” said group CEO Joshua Oigara.

Efficiency

On average, a physical bank requires eight tellers putting in seven hours daily to serve close to 900 customers. Banks serve almost a similar number via digital platforms, which are more efficient and cost-effective.

Equity Bank chief executive James Mwangi said the use of third-party infrastructure and self-service devices have transformed the banking business model from a fixed to a variable cost.

“Banking is no longer about a place you go to but something you do on your devices,” said Mr Mwangi.

In the first six months of this year, Equity carried out 97 per cent of its transactions outside the branch, with mobile devices processing 78 per cent of them, while agents processed 12 per cent.

However, these innovations have also come at cost, with the Kenyan banking sector shedding 2,792 jobs last year, most of them support, clerical and secretarial staff.

The Central Bank’s 2017 Annual Supervision Report released in July shows that the sector now has 30,903 jobs, from 33,695 in 2016, an 8.3 per cent drop. Banks also closed 39 branches as employers shifted to advanced technologies.

“All staff levels recorded a decrease. This is an indicator of the consistent improvement in banks’ efficiency as a result of a review of business models, automation of processes and the shift from brick and mortar to alternative digital channels,” said CBK.

Habil Olaka, chief executive of Kenya Bankers Association, said that cost reduction and efficiency were the top reasons pushing banks to digital platforms.

“We shall eventually see the benefits of cost reduction on physical branches transferred to consumers who will now pay less on banking transactions while benefiting from efficient services,” Mr Olaka said in a past interview.

CBK said that digital banking will also boost the economy by promoting financial inclusion.

“The impact of digital banking on financial inclusion is phenomenal but the values are not really substantial,” said CBK Governor Patrick Njoroge.