FinTech Revolution in Kenya: Disrupting Traditional Finance Models with Technological Innovations

The FinTech revolution in Kenya is among the best in Africa. We pride ourselves on creating the first peer-to-peer mobile money system, which has made credit accessible. M-Pesa has given rise to more ideas within the payment space. People can now pay for goods, services and even manage their businesses without touching physical money. The banks, which are legally mandated to hold money, are finding other ways to maintain their role within the process. 


The sector has more opportunities as the economy grows its asset base. For instance, companies are finding other ways to tap into the informal market by introducing platforms that legitimize the unbanked. Chamas and other informal businesses still use M-Pesa as the preferred mode of payment. If well utilized, it will create a valuable product that will play a significant role in the country’s financial growth.


1. Easy Credit Access

Before the FinTech revolution in Kenya became a concern to traditional banking, credit and money supply was the preserve of banks. They immersed a lot of resources as they controlled who got the money and how fast the process rolled out. M-Pesa came into the space after 2010 and changed the money supply matrix. Players in the credit space tapped into its distribution model and gave out unsecured loans to users based on their transaction history on M-Pesa. 


It made the application, approval and disbursement process easy. Banks had to tap into this process to remain afloat, which changed how the traditional model in Kenya worked. The system has now spread to other countries, with Ethiopia being the latest to welcome the innovation into its economy.  


2. Banking the Unbanked

Nearly half of all Kenyans do not own or operate a bank account. However, they use money in their daily endeavours and have an informal way of saving and purchasing items. The FinTech revolution in Kenya naturally includes them in the national statistics since all M-Pesa transactions are recorded. With more M-Pesa products coming into the fold, this unbanked population can increase our money supply, strategically anchoring the economy among the fast-growing developing nations in the world. In other words, FinTech has brought the rural economy to the fold through organized systems.


3. Collaborations

M-Pesa has persuaded the traditional banking sector to review the banking model to accommodate low-end consumers. Since it is not a financial institution, all transactions must have a supporting bank account, which brings like minds to the fore. Revisiting the banking model seeks to entrench complementary services, i.e., banks and mobile money services, into the economy as a money supply option. It might appear simple to Kenyans since they are already used to it, but it has far-reaching economic implications. 


More entrepreneurs can join the race by developing a process that taps into the financial space. It starts as simple as choosing a brand name and going through domain registration in Kenya. There are plugins and software that integrate the M-Pesa payment system with the company’s financial models to offer automated payment services.


4. Healthy Competition

Challenging traditional banks in the money supply business creates favourable customer prices. As more banks join the field, the price becomes more liberal. M-Pesa controls the peer-to-peer money supply in Kenya more than all the banks collectively. Such statistics come in handy with banks finding innovative ways to retain their leadership in the sector. What follows is price wars, from which the consumer ultimately benefits. 


5. Funds Pooling

Tontine and chamas grow their resources through fund pooling. They lend at affordable and flexible rates, allowing members to develop in the long run. It is a growing subsector within the cooperative space and is tagged among the most informal but innovative ways to foster financial inclusivity. Most of them do not have transactions exceeding Kes 5 million in a financial year, but with limited resources, they have built an economic war chest that supports rural economies. 


6. Remote Banking

You do not have to go to a physical bank branch to transact. Banks have developed mobile applications to move funds to and from your bank account. Others like KCB and NCBA do not require one to open a bank account to save or withdraw funds. Products like KCB M-Pesa and M-shwari foster remote banking and lending services among people without knowledge of the banking system. Ideally, the FinTech revolution in Kenya has put everyone with a phone on the same pedestal in financial inclusivity in Kenya. 

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