Unpacking Kenya’s new open banking strategy

The Central Bank of Kenya is working on a five-year payments system strategy aimed at building a robust and secure payment system in the country. This strategy has significant implications for digital payments and the broader financial sector in Kenya. In a recent interview with CNBC Africa, Ken Gichinga, Chief Economist at Mentoria Economics, shed light on the potential of open banking and how it aligns with Kenya's national payment strategy. Open banking, a concept that involves sharing customer data with third parties through APIs, has been a topic of discussion within the banking sector. The belief is that access to data is essential for fostering innovation, especially for startups. The central bank's focus on open banking is seen as a move to drive innovation and boost the economy through secure and inclusive strategies. Ken Gichinga highlighted the importance of digital and mobile payments in Kenya, emphasizing the government's push towards a more controlled and innovative payment system. However, concerns around privacy and data security remain prevalent, particularly in a region where cybersecurity measures are still developing. Despite the potential risks, the government advocates for open banking to promote innovation while ensuring data privacy and security. Kenya's position in the fintech space has been noteworthy, with significant investments in the sector. The country's growing fintech industry has attracted substantial funding, reflecting the high investor interest in innovative financial solutions. However, there is a need to enhance legislation concerning data privacy and security to align with global standards and safeguard consumer information effectively. The introduction of open banking could introduce more competition in the financial sector, potentially impacting key players like Safari Com. While Safari Com may face increased competition, its established presence in the market and extensive agent network provide a competitive edge. The long-term effects of open banking on Safari Com's revenues will depend on its ability to innovate and adapt to evolving market dynamics. The COVID-19 pandemic accelerated the shift towards mobile and digital payments in Kenya, driven by health concerns and the convenience of digital transactions. Post-pandemic, this trend is expected to continue, with consumers increasingly opting for digital payment methods. However, alongside the demand for innovation, there is a growing emphasis on data security and responsible data handling. Companies operating in the digital payment space must strike a balance between innovation and ensuring robust data protection standards to meet consumer expectations and regulatory requirements.