Integrated digital payments and the Switch technology
Sometime back while in Kisii town, I went to a KCB machine to get some money but the ATM was not working. While coming out I met a lady who asked whether the ATM was working and when I told her that it was not she got sad, very sad. You see, the lady needed money to send to her daughter for school fees. The daughter at the time was camping outside the school waiting for her school fees to be sent to her. The time was around 5.30 pm, so there was no question of going to the bank to get the money through the counter. We all felt for her but then I remembered the PesaPoint ATMs which enable different ATM cards to be used in their ATM machines. After explaining to her that there is another way, as long as she could find the PesaPoint ATM within the town, she got excited saying that she had seen one somewhere. Borderless ATM technology saved the day for her and me on that day. I became a fan of the Switch technology being deployed in financial sector from that day onwards.
So when Interswitch, a Nigerian company bought Paynet, I followed the development closely. Unfortunately, as with many other deals in Kenya, those involved declined to reveal the amount Interswitch paid and the new share structures. That’s a full story for another day but seriously Kenyan companies need to start being open about the acquisition deals. If you read our article last week, we discussed Interswitch and how they took the control of Paynet but the main point here is to look at some of the Interswitch products including the switch technology and the ATM machine systems.
Interswitch describes itself as an Africa-focused integrated digital payments and commerce company that facilitates the electronic circulation of money as well as the exchange of value between individuals and organizations on a timely and consistent basis. What they mean is that Interswitch Kenya runs its own Switch and a server environment that offers banks a chance to fully outsource their switch and ATM fleet management, including all associated vendor management.
In simple terms, Interswitch Kenya enables people to do ATM transactions with different cards from different banks. For example, if you KCB ATM but there is no KCB ATM machine you would still walk in the Interswitch ATM machine and withdraw the money. It makes sense why many banks would want to work with Interswitch instead of trying to build their own ATM networks. After taking over Paynet, they now manage the PesaPoint network, which is considered the largest offsite ATM network in the region.
It is important to mention that even banks don’t find managing their ATM networks easy. According to reliable sources, only one bank runs profitable ATM network in Kenya. So all the ATMs you see around are all loss making ventures and it is the reason why a system that can aggregate their functions is welcomed by many banks around. It also explains why many banks looked at MPESA initially as a threat but now doing all they can to integrate it or compete it.
The difficulties of running ATM Machines remind me of the article I wrote back in 2010 when Mkesho was launched by Equity and Safaricom. The predictions I made then about mobile bank transaction marking the beginning of the end of the ATMs are coming to pass one by one… Take a look at
M-Kesho fell by wayside but like many other ground breaking technologies before it, it paved way to numerous mobile banking systems used in Keya these days.
So during the Media briefing by the InterSwitch management I asked them what is their strategy to move with the changing technology, considering the fact that mobile transactions are taking over from the cards and ATM Transactions. Believe it or not, these guys are far ahead of the curve, they are the ones behind majority of the mobile banking systems used by the Banks in Kenya. So when you use KCB mobile banking for example, they are the ones behind the system integrating with the MPESA.
On top of ATM machines, Interswitch Kenya also has a card product called the Verve. Interswitch Kenya basically operates what they call B2B2C (Business to Business to Consumers). The verve cards are given to the bank which brand them and give them to consumers. The verve is the largest card brand in Nigeria ( 50 Million cards) and Interswitch Kenya is aiming to have the same effect in Kenya in coming years.