Fintech 2025

KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Sara Ndei, Cliffe Dekker Hofmeyr incorporating Kieti Law LLP

1. Fintech Market 1.1 Evolution of the Fintech Market Kenya’s fintech market has solidified its posi - tion as a leader in Africa, driven by innovation, regulatory advancements and increased adop - tion of digital financial services. Over the past 12 months, the sector has experienced significant developments, shaping its trajectory and setting the stage for future growth. Key Developments The following key developments have shaped the Kenyan fintech landscape over the last 12 months. Mobile money dominance Mobile money continues to dominate Kenya’s financial ecosystem, with transactions surging to a record KES7.2 trillion (approximately USD55.81 billion) in the first ten months of 2024, according to the 2024 FinAccess Household Survey under - taken by Central Bank of Kenya (CBK). Registered mobile accounts rose to 81 million, driven by the convenience of mobile banking apps and USSD-based transactions, which account for 45.7% and 38.2% of digital pay - ments, respectively. This rapid growth has been fuelled by regulatory changes, including higher transaction limits, and the lasting impact of the COVID-19 pandemic, which accelerated the shift to digital payments. In contrast, card payments have declined to a six-year low of KES465.4 billion (approximately USD3.61 billion), down from KES533.4 billion (USD4.14 billion) in 2023, reflecting the prefer - ence for mobile money and cash transactions. Point-of-sale card usage remains minimal at just 1.5%, further underscoring the shift away from traditional banking infrastructure.

Growth of digital lending Digital lending has continued to expand, with the CBK licensing 27 additional digital credit provid - ers, bringing the total number of licensed provid - ers to 85. These lenders leverage data analytics and alternative credit scoring models to provide faster, more accessible loans to individuals and small businesses. However, the CBK’s slow licensing process, with over 200 pending applications, has created uncertainty for unlicensed operators. This regu - latory bottleneck highlights the need for a more streamlined approval process to foster innova - tion while ensuring consumer protection. Adoption of the Global Messaging Standard The CBK migrated from the Kenya Electronic Payment and Settlement System (KEPSS) to the Global Messaging Standard (ISO 20022) in 2024. This transition facilitates faster settlement times, improved liquidity management and enhanced fraud detection for financial institutions. The move aligns with Kenya’s vision of becoming a global financial hub and underscores the impor - tance of modernising payment infrastructure to meet evolving economic needs. Looking Forward: The Regulatory Spotlight The next 12 months will likely see intensified efforts to regulate key areas of the fintech mar - ket, with a particular focus on cryptocurrencies and digital assets. In January 2025, Kenya’s National Treasury released draft framework documents for public consultation, aimed at overseeing and develop - ing the virtual assets sector. The National Policy on Virtual Assets and Virtual Asset Service Pro - viders (VASPs) outlines a strategic approach to regulating the ecosystem, while the Virtual Assets Service Providers Bill, 2025 (VASPs Bill)

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