Customers of the largest bank in Kuwait were surprised by a message on their phones stating that a fee of 1 dinar will be applied to every local transfer made by individuals electronically, starting from the 1st of next June.
This opened a hypothetical public talk with everyone criticizing and attacking the decision to the extent it prompted the Central Bank of Kuwait to intervene and stop the fee.
Of course, the heated debate in this regard makes the question legitimate, what prompted the National Bank of Kuwait to take the decision, since it constitute one of the pillars of digital transformation in banking and advocate the expansion of investment in its infrastructure, and if they actually implement this, and did they do so without supervisory permission?
Initially, the Governor of the Central Bank of Kuwait, Basil Al-Haroun, said that the banks’ collection of fees for local transfers through electronic channels requires obtaining a new written approval by submitting an application giving justifications for charging the fee and the actual cost.
In a letter addressed to the Federation of Banks, the regulatory authority clarified that the request should be accompanied by a comprehensive study explaining the feasibility and global banking practices in this field within the framework of a balanced relationship between banks and their customers in a way that supports trends towards digital transformation, and urges customers to use electronic channels.
Al-Haroun pointed out that the previous approvals given by the CBK regarding transfers, the banking and financial work witnessed radical developments towards digital transformation and electronic channels, and changes in the infrastructure contributed to enhancing the efficiency and effectiveness of transfers, which had actual repercussions on the cost of those operations.
In principle, it should be clarified that the dinar fee that was supposed to be applied does not apply to what is known as ‘link’ transfers, as well as internal transfers (that is, from a customer’s account in the bank to another customer’s account in the same bank), in addition to permanent transfer orders that are made in a sustainable manner.
According to the chronology of events, it can be said that the discussion between banks about imposing the dinar fee on electronic transfers of individuals was floated about four months ago, specifically at the beginning of last February, during a meeting held by the Operations Committee of the Banks Union, but no collective decision was reached.
A few days later, another meeting was called to find out the latest developments in the proposal to implement the proposed fee, and on Feb 13, one of the banks reported electronically that there was nothing to prevent this, and that it actually applies a fee of half a dinar on every local transfer to another bank that is done electronically.
One of the traditional banks responded on the same day that there was nothing to prevent the supervisor from applying the fee, based on the list of fees approved by the CBK and set at a fee of 5 dinars on each transfer of individuals made through the branch to another bank, which removes the need for banks to obtain a new supervisory approval, the matter which has been interpreted by the majority of banks, that this is sufficient for supervision to impose the dinar fee on electronic transfers of individuals from one bank to another.
At the same time, more than one bank expressed its desire to anticipate the opinion of the Compliance Unit in the Federation of Banks, as it is most familiar with the terms and instructions of the CBK in this regard.
On March 28, bank officials met virtually at 10:00 in the morning, and agreed to apply the dinar fee, with the deadline for implementation being June 5, 2022, and any bank can apply the fee before this date.
Meanwhile, one of the traditional banks stated that it would apply the fee before this date, and has already done so since the beginning of last April, while one of the banks rejected the application, while another suggested obtaining the approval of the Central Bank in advance, which means that the decision had the approval of 8 banks out of 10.
According to unofficial banking data, banks annually carry out about 2.5 million electronic transfers of individuals from one bank to another, including about 750,000 made annually by NBK clients, and the same for clients of Kuwait Finance House (KFH), and about one million transfers to the rest of the banks.
And on the basis that the share of “NBK” and “KFH” constitutes 60 percent of the market, this means accounting that this fee will bring banks revenue of about 2.5 million dinars annually out of the 881 million they recorded as profits for the past year.
Regarding the reasons why banks need to apply the dinar fee, banking policy makers refer to their need for this fee for more than one reason, the most important of which are:
1 – Improving maintenance systems
2 – Development of digital infrastructure
3 – Support and enhance cyber security
4 – Develop payment solutions
5 – Covering part of the fees provided by the remittance and payment service providers
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