Digitization of financial sector is the real deal
By Liz Nkukuu
The financial world like most other sectors has significantly adopted
technology which is now one of the key drivers of change and growth.
The innovation around the digital world affects both the product offerings and the processes used.
According to the Ernest and Young global fintech adoption (2019), some of the sectors that have seen significant adoption of fintech include Money transfer (96%), Insurance (86%), Savings and Investments (78%), Borrowing (76%) and Budgeting and Financial planning (71%).
Some countries are however more advanced in fintech adoption with China leading the pack globally, and South Africa being the lead in Africa. Kenya has seen significant growth in mobile money transfers with the total number of registered mobile accounts at 67 million and they transacted a monthly average of Ksh549 billion in the first five months of 2021, which is a rise from the Ksh234 billion monthly average transacted in 2015.
However, despite having a large penetration, despite significant growth in
fintech there is a lot that needs streamlining. This shall include some changes in laws and regulations to reflect the new reality.
The insurance sector is yet to gain significantly from the fintech wave in Kenya, but we have seen intermediaries coming up with applications that are meant to help with online quote generations and help compare the offering from the various providers.
Various studies now show that investments still lag behind the fintech wave and there is still a lot of room to be covered. The acceptance of digital cash such as cryptocurrencies as a medium of exchange will continue to propel further growth of the fintech space.
There has been a key focus on the digitizing of the product distribution processes to help increase access to investment products. To this end, we have seen the launch of mobile investments by various fund managers with the aim of digitizing the investment offering in the country.
Some stockbrokers now allow investors to place trade orders from their mobile applications. However, there is still a need for significant integration of various investments and the banking sector for this to grow further, and we also expect to see possible changes in the regulations to accommodate innovation around the various financial sub-sectors.
As we push for the adoption of fintech across the various financial sub-sectors factors that shall lead to even faster adoption shall include the following:
- The transaction costs need to make
sense and have to be lower than otherwise using the traditional methods;
- There needs to be significant convenience brought about by using the
service and we have seen banks reap big
from this, as people transact online leading to fewer people visiting the banking halls;
- The ability to compare product features and products is key as the people want to feel empowered to make decisions;
- The flexibility of the product features as
one can easily get the best according to
their specific characteristics eg one can
access different amounts on Fuliza depending on how you have been transacting on M-pesa;
- Reliability and access of the system all through. One needs not feel the need to hold hard cash since when there is a well-functioning fintech ecosystem one can be able to access it at any point of
Finance being a significantly trust driven business some of the challenges that the players need to work around to ensure
- Investments in knowledge. One of the biggest challenges is that if people do not understand what is being done they perceive the ventures as being risky. It is therefore the job of the various players to
work on education especially in the various sub-sectors that are yet to achieve a lot of growth like investments and insurance;
- Grow Trust: Despite the growth in technology financial services remains a sticky service with most people still preferring to trade with the firms they already have a relationship with. It is therefore important for anyone looking at offering products in the fintech space to partner with already established brands or work on creating sufficient positive brand awareness;
- Bundle various products: If one creates an all in one-stop-shop for financial products and give the very best in terms of services and products, they are more likely to have sticky clients and this will
further, propel the growth of other products.
Despite the significant growth we have seen in fintech there is a lot that needs streamlining. This shall include some changes in laws and regulations to reflect the new reality. Companies shall also need to review their processes to ensure there are no more additional risks being introduced with matters regarding fraud and data protection.
The review of new products that can be offered due to the current changes in technology is a moving constant and we all need to adapt to the new realities.
-The writer is a personal finance advisor.