How pandemic accelerates the digital economy
With the local banks’ eyes still stuck to the rear view mirror, FinTechs will eat their lunch.
What you need to know:
- The Covid-19 pandemic has unevenly affected the global economy, including the provision of financial services.
- Digital solutions have proven essential in allowing persons to access their funds, while practicing the social distancing guidelines.
It’s no secret that over the past decade, Kenya has positioned itself as a market leader in innovation and technology, which is largely propelled by its progress in financial technology (FinTech)
This is as a result of the continuous innovations relating to mobile money technology as well as agility of Kenya’s mobile banking system. In addition, the penetration of mobile telephony and receptiveness of the nation to technological innovations has placed Kenya among the top financial innovators.
The Covid-19 pandemic has unevenly affected the global economy, including the provision of financial services.
Although the immediate impact of the pandemic has been negative, there seems to be some positive outcome to the new world order, including that the pandemic created opportunities for digital financial services.
This is mainly as a result of the measures to curb the spread of the virus and thereby forcing the public to resort to technological avenues as they enforce social distancing.
The pandemic has drastically increased the demand for contactless financial solutions as the public become more aware of the risk of transacting through physical money that changes hands time and again, and pin pad systems that are touched by hundreds of people. Furthermore, the World Health Organisation has insisted on the use of contactless payments.
Consequently, FinTech companies are generating new and transformative solutions to meet the demand and adopt accordingly in light of the current situation.
For instance, PayPal waived their charges on funds transfers from business accounts to bank accounts while some digital lenders considered hardship plans from their borrowers to allow them to make interest payments only.
Social distancing
In general, the prioritisation of contactless financial solutions has accelerated use of electronic payments and mobile banking facilities, as well as accelerating the spirit of innovation to come up with further solutions.
Statistics have shown that there was an increase in mobile payment transactions and mobile banking by up to 16 per cent as a result, pointing to the fact that the pandemic accelerated consumers’ and banks’ adoption of FinTech payments.
Digital solutions have proven essential in allowing persons to access their funds, while practicing the social distancing guidelines. To this end, the banking industry has also reported that the contribution of FinTech to the effective running of the institutions, especially during the Covid-19 times, is evident.
For instance, some rely on digital transactions as a substitute for traditional banking and the transactions performed digitally rose from 95 per cent to 98 per cent during the second quarter of the year.
It is also apparent that Kenyans continue to take up mobile payments as their preferred means of transacting in comparison to traditional means, such as use of bank cards and hard cash as means of payment.
Over 60 per cent of payment transactions have now moved to be undertaken through mobile payment platforms. This has also resulted in an increase in innovation in the FinTech and digital finance sector, where more platforms are either created or enhanced due to increased demand.
Clearly, the FinTech industry has been critical during the pandemic. Ultimately, the continued rise of the industry will go on to solidify Kenya’s place as a leader of innovation and financial inclusion to the world.
