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How Kenya Has Become A Hub for Global Fintech Innovation

All about Fintech and how it is changing the perspective of businesses.

America has been the global leading innovator for FinTech ever since its inception. However,  over the course of the past decade, the position of global leader has been taken over by China through the increase in accessibility to digital management through multiple apps. Yet China’s hold of the title may also soon be lost as a surge of FinTech development and activity has been taking place in Kenya. The strides made by taking advantage of familiar technologies have quickly began to push the boundaries for financial inclusion, 

The country is using its accessible and inexpensive technology to allow consumers to go mobile, leading to numerous success within the FinTech industry, Although it was one of the most explosive industries as well, with governments, finance firms, and venture capitalists all contributing to this meteoric growth, the developments seen in Kenya are leading to a new wave of innovation which, upon taking a closer look at, can allow the rest of the world to follow suit and catch.

How Did FinTech Get to Where It Is Today?

Although the term FinTech may have first been coined in the 1990s, the application of such technology began much sooner than that.  In the 1950s and 1960s, the introduction of credit cards and automated deposit machines, which would lead to the creation of ATM machines, have both been examples of the ways in which the banking and financial detectors have been able to make use of emerging technology to automate and simplify their processes.

In the 2000s, there was a rise in many similar physical innovations. But it was not until the rise of smartphone apps that FinTech became something that even the average smartphone user has been able to help accelerate. Digital marketplaces in China, such as Alibaba, quickly began putting out updated forms of this technology, such as the implementation of QR codes. Yet the biggest aspect has been mobile banking services.

While African countries, Kenya included, were not able to maximize on FinTech’s early booms, they are more than making up for it now by building it up through the use of mobile phones, allowing them to join the movement without the need for an internet connection. The telecommunication company Safaricom’s M-Pesa money transfer service allows their customers to take advantage of technological services but while still tremianign connected to an agent who conducts the transfers for them in person, and this model has seen rapid success.

These limits on financial inclusion are being pushed even further by Equitel, a competitor to M-Pesa, by offering their customers a new model, which provides full banking services on mobile devices. They had sent out their agents throughout the country to demonstrate its usage, and in just five years Equitel has captured 22% of the mobile money market by targeting and focusing their attention on local markets.

Today, the innovation in financial inclusion in Kenya has led to 83% of the population having access to, at the very least, basic financial services. Two dozen other countries have taken it upon themselves to begin following Kenya’s model. By examining the vast expansion of FinTech throughout Kenya, companies all over the globe can pull up alongside the country and catch up to its progress.

What Can the Rest of the World Learn From Kenya?

There are a few keynotes from looking at Kenya’s FinTech advancements which companies should take into consideration.

Firstly, finance at its core is about trust. Yet although traditional brick-and-mortar banks may provide this for the customers, it does not translate into trust when it comes to new services or products. While a majority of FinTech firms are still young, and do not have the same form of trust that is built of the sort of reputation that comes with being in the industry for decades, they are able to offer their customers that agility that they have been missing out on. Kenya’s FinTech companies’ success was largely due to the way they are ability to combine innovative services with trust. Equitel was able to do this by borrowing credibility from established brands such as Airtel and Equity Bank, and then retaining the customers gained from that partnership by providing them with their own unique advantages.

In addition to this, financial literacy must be taken into consideration. Only 24% of American millennials are financially literate, and while the younger generations may be more accustomed to having their money in virtual spaces, actual knowledge on just what financial products have to offer is very limited. Kenyan companies was able to overcome this by having their agents give demonstrations and lessons to their customers, who went on to teach their peers; the propensity to create viral trends also attributed to the spread of such information as well.

Finally, Kenya is a great example of how oftentimes, the technology that enables mass expansion is often old, existing models and technology; they are simply taking underused resources and coming up with a fresh way to apply them. Safaricom uses in-person agents who communicate through a text message style medium, and also had them physically visit potential customers, and this ended up being the impetus for their service’s boom.


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