Financial technology (Fintech) has been a key driver of growth in the face of the ravages of Covid-19. As countries move past the economic downturn brought about by the pandemic, fintechs have improved access to financial services to the unbanked and underbanked.
The pandemic exposed and perhaps exacerbated the financial inclusion gaps among the underprivileged who lack access to financial services, with statistics showing that close to two billion people worldwide do not have access to financial institutions.
However, according to the International Finance Corporation (IFC), growth in digital financial services in sub-Saharan Africa has led to a sharp increase in the number of people enjoying access to digital financial services in the region — almost half of 700 million individual users worldwide.
The rapid adoption of mobile technologies is enabling tech innovators to build an infrastructure that is offering the potential of changing how payments are made forever.
A 2020 survey by the Central Bank of Kenya (CBK) shows that digital and mobile innovations will remain critical in responding to the Covid-19 pandemic.
This is especially true now that the demand for inexpensive, secure and convenient financial services is rising across Africa and the world.
From a consumer perspective, fintechs offer financial flexibility through the provision of critical mobile payment solutions that make it easy to transfer money or get loans through mobile devices.
This kind of flexibility has significantly reduced money handling costs such as fees and interest rates for money transfers and small business loans. This has made e-payments more affordable.
While large organisations such as banks can take months or even years to get innovations into the market, fintechs are now developing rapid solutions for building modern financial structures.
To encourage the growth of fintech start-ups in growing young economies like Kenya, incentivisation will facilitate steady undisrupted growth from early stages of these businesses.
Also, regulators such as CBK, Capital Markets Authority (CMA), and Communications Authority (CA) could provide unrestrictive policies that make it easy for fintech start-ups to innovate and grow.
Licensing and regulation is key to safeguarding consumer interests but also critical to the rapid churn of innovation.
Fintechs especially are banking on the government to ease market entry and to some extent play the role of an enabler in doing business.
In addition, fintechs should seek to make important allies for their growth, profitability, and enhanced customer experience.
As such, more strategic partnerships between fintechs, banks and payment gateways will offer opportunities to compete in niche markets like the payments solutions space.
In the long run, supporting the growth of digital financial services will be pivotal for unlocking the local market economic opportunities.
It will be interesting to see how the coming innovations and solutions will lead to a more digitised and inclusive economy in Kenya.