Kenya’s fintech industry is thriving

By Francis Wainaina, Senior Product Manager at SEACOM East Africa.

Every industry across the globe is experiencing rapid digital transformation, and the world of finance is no exception. Technology advancements have given rise to new kinds of financial institutions and fintech companies that want to deliver the next generation of digital banking and payment services. Today, Kenya has one of the most developed fintech ecosystems in Africa, and the country is fast-becoming an international hub for fintech innovation.

But how did we get here? And how can we make the most of our booming fintech industry?

The rise of fintech

On a broad scale, fintech refers to companies that use technology to improve products and services, processes, or business models within the finance industry. If you’ve ever paid for something with your phone or checked your bank statement online, you’ve used fintech.

The services have come a long way since the term was first use in the ’60s. From ATMs and online banking, fintech now follows a considered customer-oriented approach. It focuses on the improvement of customer experience in banking services, novel integrations of financial services across industries, mobile and cashless payment platforms, personal wealth management and credit, and even cryptocurrencies and blockchain-based transactions.

The advent of the Internet and advances in data science have been the biggest contributors to the rise of fintech, with big data and AI paving the way. For people who didn’t have access to traditional banking services, fintech is meeting needs and changing lives.

Kenya’s legacy on the continent

Since mobile money platform M-PESA was launched in 2007, the app has grown to host more than 24.5 million users – representing over 70% of the mobile money market in Kenya. The rapid growth of the fintech industry has driven significant economic growth across Africa and, according to IMF estimates, “four of the top five highest GDP growth rates in the world are in African countries benefitting from this boom”.

There are advantages for society, too. Today, Kenya’s financial inclusion rate is at 83%, largely due to the advent of mobile banking data to build personal credit scores. It's estimated that M-PESA alone lifted 2% of Kenyan households out of poverty by 2016 and helped thousands of women move from agricultural employment to begin careers in entrepreneurship or retail.

How do we drive further growth?

Technological infrastructure and connectivity are the most critical enablers of Kenya’s fintech ecosystem. With an Internet penetration rate of 40%, more can be done to allow every Kenyan citizen to participate in today’s digital economy and benefit from fintech services. Policymakers must recognise the socioeconomic impact of fintech and financial inclusion, modernise financial regulatory frameworks, and incentivise nationwide technological adoption.

In 2020, venture capital funding for African fintech start-ups rose by 51% for virtual banking projects, consumer credit checks, and finance apps. We need to support this local start-up ecosystem through tech hubs and skills development programmes. Because trust is such an essential element in the industry, partnerships should be made between agile new businesses and long-established companies, so customers know their money is in safe hands. By building relationships and leveraging infrastructure, we can deliver omnichannel experiences, bundled features, or more advanced services.

A hub for fintech innovation

In Kenya, the industry has lifted people out of poverty and, with widespread access to connectivity for businesses and citizens, will continue to do so. While China and India are the current global leaders in fintech, it may not be long before we enable every African to participate in the digital economy and unlock our continent’s true economic potential. Contact us to find out how we can work together to drive the industry forward.