Commercial banks’ ability to offer diversified products on their digital platforms is likely to push them ahead of stand-alone mobile credit apps in the race for customers as competition in the sector is increasingly driven by customer satisfaction.
Analysts at investment bank Genghis capital say the impending move to regulate the digital lending sector, through the Financial Markets Conduct Bill 2018, will also hurt the non-bank lenders by standardising loan rates.
“The evolving operating environment is favourable for the formal banks that have adopted Fintech, because regulation will level the playing field since stand-alone credit apps currently have a competitive advantage through faster loan disbursement and free loan pricing,” say Genghis analysts Gerald Muriuki and Patrick Mumu in the report.
Banks are also learning to cope with the disruption factor brought by stand-alone credit apps, adopting some of the practices in their own offerings.
“This, coupled with regulation, should present significant concern for stand-alone credit apps. We expect the traditional lenders to leverage on their capital strength, huge customer base and a diversified product offering,” they said.
The mobile lending space has recently grown quickly, with stand-alone apps such as Branch, Tala, Jambo Loans and Inua Jamii Loans gaining popularity due to ease of accessing loans and ability to lend small amounts.
Banks are largely limited to lending their existing customers, while the other apps are not discriminatory due to easier know-your-customer rules.
The Genghis analysts say, however, that as the segment increasingly formalises and adoption by customers grows, the ability to lend large amounts will be key in growth, giving large lenders with access to bigger capital the advantage.
Banks are offering larger loan sizes of up to Sh3 million on their mobile platforms, compared to most of the stand-alone apps’ Sh50,000 limit.
They are also able to offer a broader variety of products on their platforms, including micro-insurance, savings and share trading.
The adoption of mobile money service usage has grown rapidly in the country in the last decade, with Kenyans now transacting on average Sh10.97 billion a day.