CBK urges banks to address digital banking challenges

The Central Bank of Kenya (CBK) has called on banks to be more transparent in their pricing as more lenders move to offer digital and mobile banking services.

According to the banking regulator a number of consumer protection challenges have arisen as banks move ahead of regulation to reach customers.

Central Bank of Kenya chairman Mohammed Nyaoga has warned of a scenario where banks do not reveal the terms and conditions of services offered, exposing customers to undue penalties or accrued interest.

“A number of other consumer protection concerns have also emerged, including the lack of safeguards for funds held by non-prudentially regulated providers, limited disclosure of fees, terms and conditions,” Mr Nyaoga said during the launch of Ecobank’s mobile banking app.

With digital and mobile banking services, banks have limited interaction with customers, thus leaving room for where customers may not know the full extent the service they receive.

Commercial Bank of Africa and the KCB Group have both partnered with telecom operator Safaricom to offer banking services.

Through the M-Shwari and KCB M-Pesa accounts, customers never have to visit a bank branch to open an account, instead using the mobile phone for an array of banking services ranging from deposits, withdrawals to loan requests.

Other banks have partnered with telecoms to link the bank accounts to the phone allowing customers to transact.

However with financial technology being a relatively new concept, fast being adopted by the industry, the banking regulator has cautioned against its exploitation.

“Let me emphasize that the role of the regulator in the sector is critical. It is essential that we ensure the innovations in the financial sector are conducted safely, that is, without jeopardizing financial stability and protecting consumers,” Mr Nyaoga stressed.

Banks are increasingly opting for mobile and digital banking services as a means to cut down on high operating costs.

Mr Nyaoga also raised concern over cases where banks irregularly lend to customers, something he has warned lenders against in an effort of ensuring prudent financial management.

“As we embrace new technologies in the provision of financial services it is equally important that such innovations should deal adequately with the risks arising from these financial services,” he said.