Strategy Note /

The ultimate guide to Kenya fintech

  • Kenya’s fintech sophistication is at a par with other EMs; fintechs’ density and scale are better, funding access lags

  • Fintechs already have high market share. Incumbents are fighting back via technology investment and aggressive pricing

  • Strategic priorities include cross-border expansion. Regulations, Covid-19 and funding access are key growth constraints

The ultimate guide to Kenya fintech
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
30 December 2020
Published byTellimer Research

This 13-page report, part of our series on the risks and opportunities in the key emerging fintech markets, evaluates Kenya by drawing on the results of three detailed proprietary surveys of 11 local fintechs, 6 incumbent firms and 100 consumers, allied to desk research into 203 local fintech firms.

Our key findings

  • Kenya’s fintech sophistication score is in line with other large emerging markets. Fintechs’ density and scale are better, while access to funding is worse.

  • Kenya’s fintech ecosystem has a higher concentration of lending and blockchain firms compared to other EMs, while investech and insurtech are less developed than elsewhere.

  • Key values that fintech firms provide to their customers are product quality and security.

  • Major success drivers for individual fintechs are product quality, innovation and operating efficiency.

  • The main strategic priorities for fintech firms are technology investment and geographical expansion.

  • Fintechs are targeting innovations in the areas of digital banking and chatbots/virtual assistants.

  • Kenyan fintechs have a much stronger market presence than fintechs in other EMs. In contrast to other markets, consumers expect fintechs to lose market share to traditional financial institutions, largely due to the latter’s focus on technology to improve delivery.

  • Regulations (like data protection and KYC/AML), the long-term effect of Covid-19 and limited funding access are key growth constraints for Kenyan fintechs.

  • Incumbents are competing with fintechs primarily by investing in technology, but also by lowering prices.

  • Highlighted innovative firms include CarePay (which has developed a health benefit wallet) and Cellulant (which has developed an augmented reality-powered try-on experience on Facebook Messenger).

Kenya’s fintech landscape

Source: Tellimer Research


We outline the current fintech landscape in Kenya, including companies' success factors, future strategies, innovations and growth constraints, and gauge the impact of fintechs on their customers. We also evaluate the country’s listed financials, telecoms and technology sector incumbents to assess how they are responding to the fintech threat. In addition, we analyse the results of our survey of Kenya consumers to ascertain their current financial product provider preferences and future expectations, and what that means for Kenyan fintechs. Lastly, we highlight some interesting innovations from selected local fintech firms.

Regarding our fintech sophistication score, Kenya's ecosystem is broadly on a par with global EM peers. The country’s fintech density and the scale of individual firms is better than elsewhere, but access to funding is more limited. The top values Kenyan fintechs believe they deliver to their customers are product quality and security. Local fintechs attribute their success largely to product quality, innovation and operating efficiency.

Kenyan fintechs have already carved out a much stronger market presence than in most other emerging markets. However, consumers expect fintechs to lose 4ppts market share in the next three years (compared to an average global EM fintech gain of 5ppts); traditional firms are expected to expand their presence as they improve their ability to use alternative delivery channels. The top strategic priorities for Kenyan fintechs are increased technology investment and geographical expansion. Fintech innovations are likely to be concentrated in the areas of digital banking and chatbots/virtual assistants.

Constraints that Kenyan fintechs face include regulations (like data protection and KYC/AML), the long-term effects of Covid-19 and access to funding. The regulatory environment is in a state of flux, with particular areas of concern being consumer protection, partnership agreements and capital requirements.

Technology investment is at the forefront of Kenyan incumbents’ actions to fight the fintech threat, followed by lowering product prices. Our previous surveys have clearly shown that pricing is an important decision-making factor for consumers.

Kenya’s fintech landscape has a high concentration of lending and blockchain firms

Relative to other emerging markets, the fintech landscape in Kenya has a higher concentration of lending firms (30% of the total universe, versus the global EM average of 25%) and blockchain fintechs (15% compared to 9% for other EMs). Interestingly, despite the dominance of MPesa, Kenya still has a vibrant universe of payments fintechs. In contrast, investech and insurtech have less of a presence than elsewhere, perhaps due to lower per capita income (cUS$2,000 compared to our EM sample average of US$6,000) and a lower savings/ GDP ratio (9% versus 23%), which limits the potential revenue pool for these products.

Kenya's fintech product mix

Kenya is in line with global emerging market peers for fintech sophistication

To evaluate the sophistication of Kenya’s fintech sector, we assessed the country relative to six other emerging markets (Brazil, China, Indonesia, India, Mexico, South Africa) across a range of metrics (fintech density; scale of individual firms; ecosystem diversity & profitability; funding access; firms’ positioning and strategy).

Kenya’s fintechs rank in the middle of the pack. Areas of strength include fintech density and individual firms’ scale. Kenya has a higher number of fintechs per capita than elsewhere, and these firms tend to be larger than we have observed in other emerging markets. On the flip side, funding access is very limited; Kenyan fintechs lag global peers in attracting international funding flows.

Fintech sophistication score

Funding analysis

Africa has weaker fintech funding access compared to Asia and Latin America. However, within the continent, Kenya ranked second, after Nigeria, in terms of total fintech funding flows in 2019; the country’s fintechs raised around US$300mn last year across 26 deals. Top deals included Tala (lending), Branch (lending) and CarePay (payments).

Top fintech funding deals in Kenya

The fintech value-proposition to its customers: product quality and security

According to Kenyan fintechs, the top values they deliver to their customers are product quality and security. Relative to fintechs elsewhere, those in Kenya are more focused on security and less on transaction speed. Compared to consumers' expectations, our data indicates Kenyan fintechs focus excessively on security and insufficiently on pricing.

Product quality is a broad term that includes factors like ease-of-use, product innovation, seamless execution and speed of service. This may explain why it is mentioned as one of the top values by both fintechs and consumers, not only in Kenya but in most of our surveyed markets. Some Kenyan fintechs highlighting this as their key value proposition include Cellulant (payments) and Tala (lending).

Security: Cybersecurity is a key concern for the digital financial services industry and requires continuous investment to protect consumer data. Fintechs that cite security as their key customer value include Moripesh (investech) and BrilliantPay (payments).

Key fintech values

Key factors for fintech success: Product quality, innovation and operational efficiency

The top success factors cited by Kenyan fintechs are product quality, innovation and operating efficiency. Compared to other emerging markets, product quality is a more important success driver for Kenya fintechs, access to funding less so.

Product quality: As discussed earlier, this is a broad term including a variety of factors. Since fintech density is higher in Kenya relative to other EMs, fintechs need to deliver quality services to be able to compete effectively. Some Kenyan fintechs that think the quality of their product has been a key driver of their success to date include Cellulant (payments) and Umba (lending).

Innovation in service offerings enables fintechs to reach their customers in more cost-effective ways. It also helps fintechs to be more relevant to their customers, for example by offering them greater convenience and/or a better user experience. Fintechs that cite innovation as their key success driver include Pesapal (payments) and Chamasoft (investech).

Operating efficiency: Fintechs, particularly in the areas of payments and lending, consider operating efficiency as a key success driver. Automation saves costs and facilitates faster customer service. For example, BitPesa is a digital foreign exchange and payments platform that uses blockchain settlement to significantly lower its operating costs and accelerate the speed of business payments. Other fintechs that cite operating efficiency as their key success factor include Zainfu (lending) and Mlinzi (payments).

Key fintech success factors

Fintechs’ plans: Technology investment and geographical expansion

Our survey shows that the top strategies for Kenya fintechs are technology investment and geographical expansion. Compared with those in other emerging markets, Kenyan fintechs are more focused on fund-raising and less obsessed with enhancing management expertise.

Technology investment: Technology, such as machine learning and artificial intelligence, can improve the speed, cost and quality with which services are delivered to consumers. Moripesh (investech) and Cellulant (payments) are among the Kenyan fintechs planning more technology investment.

Expanding into new countries: The strong local penetration of fintechs, combined with the relatively small size of the Kenyan economy, means successful Kenyan firms are keen to increase their geographical reach. Note that this goal can be achieved in various ways, such as through strategic partnerships or launching own-branded, greenfield services. Fintech firms looking to grow abroad include Finserve (lending) and Mifos (lending).

Fintechs’ plans

Fintech innovations: Digital banking and chatbots

Considering their innovation plans over the next three years, Kenyan fintechs are focused most on digital banking and chatbots/virtual assistants. Compared to fintechs in other EMs, Kenyan companies are more focused on digital banking and less on cloud technology and quantum computing.

Digital banking encompasses the full suite of products offered by traditional banks, but via digital channels. By adopting this approach, fintechs are simultaneously trying to capture a greater share of existing customers’ wallets and attract new customers to their franchise. Fintech companies with digital banking in their innovation plans include Tala (lending) and Pesapal (payments).

Chatbots and virtual assistants help improve the customer experience by automating customer service/education and at the same time allow fintechs to reduce their operating costs by limiting the staffing needs for handling customer queries. Fintech companies with plans in this area include Finserve (lending) and BrilliantPay (payments).

Targeted fintech innovations

Kenya fintechs have high market share, but could lose out to traditional firms

We asked Kenyan consumers which types of providers were meeting their current financial services needs for different products, and which provider types they expect to be using in three years. We used this data to estimate current and likely shifts in share of wallet for different types of firms. Currently, fintechs in Kenya have 36% market share of the overall financial services industry, which is well above the 26% level for global EMs, and the highest in our seven sampled emerging markets. Looking ahead, Kenya fintechs are likely to lose around 4ppts market share, a big turnaround compared to 5ppts average gain expected in global EMs. Consumers think formal financial institutions in Kenya are likely to gain market share over the coming years as they improve their ability to deliver services through alternative channels. Financial exclusion is expected to reduce significantly.

Note that these responses are unweighted; we think fintechs would have a lower share if our survey were volume-weighted.

Financial services provider market shares

Key constraints to fintechs’ growth: regulations, Covid-19 and funding

Regulations, Covid-19’s long-term effects and funding are the three biggest growth constraints faced by Kenyan fintechs. Compared to fintechs in other EMs, regulations and Covid-19 are bigger challenges in Kenya, while overall market size and growth are less of a concern.

Regulations: Fintech operations differ considerably from those of incumbents and are continuously evolving. Regulatory oversight also tends to rise as fintechs grow larger. Due to these factors, fintechs are often subject to considerable regulatory uncertainty, which can act as a barrier to investment. Kenya Fintechs that think regulations are a constraint to their growth include Zainfu (lending) and Mlinzi (payments).

The long-term effects of Covid-19 can be detrimental to the overall growth of the economy and hence can negatively impact the fintech sector, although some sub-sectors, like payments, have benefitted from Covid-19 lockdowns. Companies citing Covid-19 as a growth constraint include Tala (lending) and Umba (lending).

Funding/capital: Depending on the business model they employ, funding is essentially the lifeblood of lending fintechs, but it is also important for fintechs active in payments, investech and insurtech. Fintechs citing this constraint include Moripesh (investech) and Mifos (lending).

Key constraints to fintech growth

Fintech regulatory hurdles: Data protection and KYC/AML

According to our survey, data protection and Know Your Customer/ Anti-Money Laundering rules are the key regulatory hurdles that Kenya fintechs face. Relative to other emerging markets, KYC/AML is more of an issue for Kenya fintechs, while deposit insurance is less of a concern.

Data protection requirements: One way fintechs can generate a competitive advantage is through the collection and utilisation of customer data. Data protection regulations play a key role in determining the extent to which these companies can obtain and use such information, and the processes they must follow to protect it. Fintechs citing data protection regulations as a hurdle to their growth include Cellulant (payments) and Moripesh (investech).

KYC/AML regulations: KYC/AML can be tougher in countries with a significant undocumented economy (at least relative to informal providers). BrilliantPay (payments) and Tala (lending) have cited this as a major challenge to their operations.

Fintech regulatory hurdles

How incumbents are fighting the fintech threat: technology, cost-cutting and competitive pricing

Technology investment is at the forefront of Kenyan incumbents’ actions to fight the fintech threat, followed by lowering product prices and cost-cutting. Compared to other EM fintechs, data analysis is a less-targeted strategy in Kenya, while the focus on technology investment is much greater.

Investment in technology/automation: To boost process efficiency, financial institutions are adopting SaaS applications in areas such as accounting, human resources and KYC verification. They are also using cloud technology for data storage and security. Co-operative Bank and Equity Bank are among the incumbent firms boosting technology investment.

Lowering product prices: Our consumer survey indicates product pricing is more important for consumers than financial services providers think. Kenyan incumbents focusing on lowering product prices include Scangroup.

Incumbents’ actions to counter the fintech threat

Innovative fintech practices

In the table below we highlight some innovative approaches highlighted by our desk research:

Kenya fintech innovative practices