Recent Interest Hike Erodes KCB M-PESA Customer Loyalty

KCB CEO Joshua Oigara

KCB CEO Joshua Oigara

Mobile loans and mobile loans apps have been making a killing in the Kenyan over the last couple of years. Their growth has been linked to two primary factors: ease of access as lenders do not need paperwork to approve a loan, hence the speed of disbursing is markedly higher than traditional banks, which, by the way, have been forced to take a similar trend with their custom mobile money products; and secondly, mobile money, mainly M-PESA that allows those apps to deposit funds directly to their users’ wallets.

Of course, people who use the services know one thing: the products attract a higher interest because there is no collateral besides them using loan collectors to compel defaulters to pay up. Mobile loans have also been accused of being exploitative, and some of them have snuck their products to app stores where users can download them to get access to credit.

However, Kenya’s Central Bank Governor Patrick Njoroge has since cautioned businesses that give loans to customers without subscribing to the established laws, although the framework has not incorporated a legal structure as to how mobile loans should serve customers while adhering to finance rules. The CBK, in the long run, intends to regulate the space because the Digital Lenders Association of Kenya has been accused of not doing enough to manage online lending companies.

According to Ajua, an Integrated Customer Experience platform that has since released its Q3 2019 Customer Loyalty Report, the level of customer experience of people using digital loan services dropped from 25 in Q2 to 20 in Q3. At the moment, M-Shwari and KCB-MPESA have the best level of customer experience because of their manageable interest rates compared to other lenders. The repayment process is also easy and does not attract fees (other loan apps use pay bill services during repayments, and that costs customers some money, which is also how the apps make revenue).

Ajua says that KCB M-PESA customers have not been happy in the quarter after the product hiked interest rates from 4.08% to 7.05%, hence the highest decrease in the level of customer experience.

The Net Promoter Score (NPS) for KCB M-PESA dropped sharply from 41 in Q2 to 23 in Q3, 2019 (Source: Ajua)

Branch was the second-best performing brand due to its faster growth in limit and a flexible repayment plan. Tala scooped the third position in a top-three ranking that did not feature an app affiliated to any local banks.