Pressure is piling on banks to make drastic strategic shifts as the capped interest rates era threatens to erode their profitability.

The lenders are changing tack amid dwindling fortunes since Parliament passed the Banking (Amendment) Bill, 2015 in August that sought to cap interest rates on loans at four percentage points above the prevailing Central Bank Rate.

Analysts foresee most banks making less profit in full-year results compared to previous years, forcing them to leverage on cost-cutting and mobile and Internet banking platforms.

“We see a case where many banks will not make the kind of profits they have been posting,” says University of Nairobi economics lecturer Samuel Nyandemo. “The only way for them is to invest in high-level automation which will lead to mass unemployment,” he adds.

Already, Equity Bank is about to shed off around 400 employees despite posting 18 per cent after-tax profit for the nine months to September, after letting go 600 workers last year, citing natural attrition in what pointed to a gloomy outlook for the sector. Already, there are job concerns at EcoBank, Family Bank, Sidian Bank and First Community Bank.

A leaked internal memo at First Community shows the lender plans to lay off an undisclosed number of staff by next week after the enforcement of the law that capped interest at 14 per cent. “In the last 18 months, we have seen many changes in the banking industry.

Most recently, the Banking (Amendment) Act 2015 was signed into law,” the memo read, adding that the bank had hired a consultant to “review and identify areas where staff reductions can be made without hurting the bank’s operations”.

Last week, Ecobank Kenya announced it had embarked on its strategic plan to focus on innovation and technology as it embraces the digital platform as the next banking frontier.

The lender is now pegging its fortunes on a mobile banking platform to grow its customer base rather than the traditional brick and mortar channel. Its new Ecobank Mobile App is set to be rolled out in Kenya before the end of this month after Nigeria. The Bank has also boosted its alternative channels such as Automated Teller Machines (ATMs), Internet banking, credit and debit cards.

“We are focusing more on innovation and technology for delivery of our products and services to customers in an easy and convenient way whenever and wherever they are,” said Ecobank Kenya managing director Sam Adjei.

Family Bank and Sidian Bank have also both indicated change in tack amid indications of layoffs. Sidian has announced plans to shed 20 per cent of staff and deploy technology while Family is said to be on the cusp of retrenching an unknown number of employees.

Analysts say banks want to leverage on efficiency which seems to be all that matters now while price seems to be no longer an issue.

Sterling Investment executive director John Kirimi says banks have to shed overheads immediately, opting for mobile and Internet banking. “Capping of interest rates has hastened the process,” he says, adding that most banks are leveraging on ICT to enhance efficiency.

He cites Equitel as one of Equity Bank’s fastest-growing streams of cash. Equity Bank has made a move to propagate its Eazzy Banking platform with a target of a million new merchants in the next three years.

The bank has an eye on shops, supermarkets, petrol stations, schools, canteens, hotels and airlines with at least 1,000 merchants to be recruited per day.

Kirimi says banks are also suffering because they seem to have reduced the number of loan approvals, citing low interest rates that may not be viable in case of massive defaults, especially in unsecured lending segment. He said the current operating environment may affect regional expansion.

“As opposed to having many branches, they could also opt for agents and other channels leveraging on ICT,” he said.