When depositing money in your bank account, how does it feel? Good, right? Or getting a message that money has been debited to your account. It’s a pretty great feeling.

But how safe do you think your hard-earned money is in your bank account?

Banks handle large deposits and, therefore, play a critical role in safeguarding customers’ funds.

So, what measures have they taken to protect your money and maintain the integrity of financial transactions?

First, the Kenya Depository Insurance Corporation (KDIC), a state corporation, is mandated to protect deposits in banks.

KDIC provides depositors with a Deposit Guarantee Scheme to protect their savings held in bank accounts in case of bank failure.

The scheme is funded through an annual payment made by banks to a pooled fund that is used to compensate depositors as well as support other resolution processes.

Being a Resolution Authority, KDIC is mandated to provide deposit insurance and ensure financial stability in the banking sector.

So, what is deposit insurance? It is a mechanism implemented by a country to protect bank depositors—in full or in part—from losses caused by a bank that has been placed under liquidation by the Central Bank of Kenya due to its inability to meet its financial obligations.

KDIC protects depositors of banks licensed and regulated by the Central Bank of Kenya (CBK).

Currently, the covered institutions comprise 39 commercial banks, one mortgage finance bank, and 14 micro-finance banks.

The scheme covers depositors’ accounts classified into the following categories; Current Accounts, Savings Accounts, Fixed Deposit Accounts, Foreign Currency Deposits, and Trust Accounts.

Currently, the protection or coverage limit is KSh500,000. This money is only paid out to depositors when a bank is placed under liquidation by the Central Bank of Kenya.

The balance above the protected limit is made to depositors upon recovery of assets of the failed bank.

When a bank is placed under receivership, the payment still can’t be made as the regulators still have prospects that the challenges facing the bank will be resolved.

Receivership is a legal process in which a court appoints an independent “receiver” or trustee to manage all aspects of a troubled company’s business, in this case, a bank.

An example where KDIC paid out money to depositors was when Imperial Bank was placed under receivership in 2015.

The process to pay the bank’s protected deposits started in December 2021 when the Central Bank of Kenya directed its liquidation after an advisory from KDIC.

Aside from deposit insurance, there are other ways that banks safeguard your money.

In the digital era, mobile banking has become prevalent. However, it has attracted unwanted threats from cybercriminals, so banks have taken measures to safeguard your money in the digital space.

Kenyan banks often use encryption technology to ensure the security of online transactions and personal information. They also use secure connections (https) to protect data when you access online banking platforms.

Many banks in Kenya employ multi-factor authentication (MFA), requiring customers to provide multiple forms of verification (such as passwords, PINs, security questions, or biometric data) to access their accounts. This adds an extra layer of security beyond just a password.

Banks also offer transaction alert services via SMS or email to notify customers of any activity on their accounts, such as withdrawals, deposits, or transfers. This allows you to quickly identify and report any unauthorised transactions.

In conclusion, the safety of your money in the bank is not left to chance. However, as a customer, you also have a role to play in safeguarding your money in the bank by not sharing your password, monitoring your account regularly, and promptly reporting any suspicious activity to your bank.