East Africa’s financial sector is on the brink of yet another revolution that will define the playing field in the next decades to come: financial technology.
Fintech, as it is increasingly being referred to, is taking the industry by storm, causing a major disruption becoming a trailblazer and redefining the financial sector in the region and globally.
In this day of fast paced technological innovations, disruption is the new norm: Uber, Instagram and M-Pesa are all good examples of what technology can do to reconfigure the way we live.
Digital disruption and especially mobile technology in and around Africa, is significantly accelerating towards a revived fintech industry: It began as a form of disruption, a wave, but is now quickly getting organised through consistent support/funding and proposition evolution to an entire new industry, fintech, that is currently transforming how financial services are being offered.
Unfortunately or rather coincidentally this is happening right outside the normal operations of existing and established financial institutions; right outside their high barriers of regulation and in the heart of exceedingly high customer expectation.
For instance barriers that previously existed to manage risk in lending for Banks are now our greatest disadvantage.
Today, most countries have deeper and more stable financial systems, thanks to innovations that have helped Africa leapfrog more traditional banking models.
This technology is fuelling our growth, creating new opportunities and disrupting the way business has traditionally been conducted.
Indeed, the burgeoning middle class and abundance of SMEs in East Africa present great opportunities for financial services companies to provide retail banking services to individuals, as well as trade finance to SMEs.
In Kenya, the introduction of the mobile money transaction platform, M-Pesa in 2005 has been globally acclaimed as one of the most disruptive technologies ever put to good use, having moved monetary transactions into the digital age.
The rate of adoption of digital financing in Kenya is considered among the highest in Africa. Kenya is now recognized as the home of mobile money, reaping the benefits that come along with it.
In Kenya, out of a population of approximately 44 million people, the Communications Authority of Kenya’s (CAK) latest report indicates that the country has 37.8 million active mobile phone numbers with the 21.6 million registered users.
As the speed of technological innovation increases, banks are facing a new challenge as to where to focus their investment and what technology to use.
The evolving competitive environment, coupled with the external developments will require banks to continually rethink their strategies. The future is in digital.
Mr Oigara is KCB Group CEO and MD.