Paynet Plans New Banking Service

May 2005

Technology firm Paynet Kenya, is to begin work on a new ATM service.
PesaPoint, a third-party independent ATM network, will be the largest in the country, the company says.

The concept is to offer all financial institutions access to the network so that their cardholders can benefit from a wide footprint of ATMs.

PesaPoint is a separate company to Paynet, but the latter will provide all the management services and PesaPoint will use the Paynet Outsourced service to run the network.

The only fee payable to PesaPoint is by a transaction charge per withdrawal through the ATMs by bank cardholders. The fee is fixed at Kshs. 22 shillings which is expected to be marked-up by the financial institution before being passed to the cardholder.

From a location perspective, the company intends to install the ATMs in both rural and urban with particular emphasis to where people work, shop and live.

The company says the services will be available all financial institutions, including microfinance firms, savings and credit cooperative societies, building societies and banks. "What we do need is an electronic link to the institution to authorize any withdrawals, said Mr. Matthewman. For those that do not have centralized, computer based financial systems, Paynet will find ways of helping them, one of which might be in partnership with a bank.

The company's first customer, NIC Bank, is acquiring transactions at their Move ATM's, but not point of sale transactions from merchants. The ATM transactions are fast, said Mr. Matthewman, adding that NIC has outstanding upload times which is good news for any Visa card holder who wishes to use their ATM's. The projected investment in the project at this, point is around Sh600 million, said Mr. Matthewman.

From the merchant perspective, the firm provides 24-hour card authorizations services, which should help with authorizations for merchants when their links are down.

The company has also installed all the technology to provide a complete back office for credit and debit cards. This ranges from credit processing is a well defined business model. We scoring at the take-up stage, to the final production believe being positioned within Kenya will make of statements on a monthly basis.

The advantage for a bank is that it does not to go through the capital expense and time to set up their own processing centre.

Paynet hopes to attract financial institutions in two aspects. First, it suits those that start with low volumes as their corresponding processing and capital costs stay down. Secondly, it reduces the overheads and management time required to run a processing centre.

Paynet uses the CTL Prime, Online and Fraud Guard systems that are the most advanced in the market.

Paynet is targeting a wide range of banks from those starting up card operations to those with mature processing centers wishing to reduce costs.

Regionally, Paynet is eyeing institutions that have not yet issued credit or debit cards, but have a number of significant prospects: "Offshore card processing is a well defined business model. We believe being positioned within Kenya will make us more attractive to regional banks than similar centers based in Europe or Asia," Mr. Matthew man said.

The rising cases of credit card fraud is a matter of concern to the company. However, Paynet says its Fraud Guard system plays a major role in detection. “Credit card fraud is a growing issue and we are extremely vigilant within our processes to minimize the impact of this," he said.

For credit card processing, Paynet will maintain full back office so any technical requirement for the bank is unnecessary. And for debit cards, the technical criteria is the same as for PesaPoint. Finally. Paynet needs to certify with the institution to ensure the whole process is working as it should.

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