EUR 257.37 For Business Accounts Only

Kenya Fintech Report – Era of the Digital Banks

We view that the evolving operating environment is favorable for the formal banks that have heavily adopted Fintech such as Equity Group, KCB Group and CBA Group. This is because;

1. Regulation will level the playing field since standalone credit apps currently have a competitive advantage (faster loan disbursement, free loan pricing)
2. Banks backed by digital platforms are offering larger loan sizes (e.g. Eazzy loan’s upper limit of KES 3Mn compared to the standalone apps’ limit of KES 50,000) and broader product offering (e.g. micro-insurance, savings, share trading), commercial banks, through sustained marketing can compete effectively with and even outperform the current standalone credit apps
3. Formal banks are adopting Fintech at a fast rate, and with a large capital backing, coupled with regulation of the standalone credit apps, the playing field will be levelled, with possibilities of acquiring the standalone apps to enhance their competitiveness with other digital banks
4. The standalone apps seem more ‘popular’ with the general populace despite their higher cost of credit than banks with digital platforms. This is due to the banking apps being tied to their existing bank eco-systems, which rely on their existing customers. However, some banks like Equity have ventured out of their platform through mKey to address new customers. This is opening up a way for other commercial banks to venture and compete with the standalone apps

Banks: A plot twist in the making. The disruption in financial services caused by the standalone credit apps is quickly being adopted by traditional lenders. This, coupled with regulation, should present significant concern for standalone credit apps. We expect the traditional lenders to leverage on their capital strength, huge customer base and a diversified product offering. Equity bank is leading in innovation with its mKey product and we expect KCB and CBA to follow similar course in terms of expanding their network. We believe these banks are aligning their models competitively with Fintech and in due course should weed out the standalone credit apps. Hence, these banks present a valuable investment opportunity as the Fintech space will inevitably be masked under the banking ambit.