The Three Big Questions from Seamless East Africa

Two days of talks, panels and exhibitions brought together some of the leading minds in payments, banking and FinTech to discuss the opportunities and challenges coming to the fore of our fast-evolving financial services industry.

Pezesha was thrilled to be part of the conversation, and here we report on three of the most pertinent questions raised that we as a FinTech sector are asking ourselves today.

Banks and FinTech: Competition or Collaboration?

Last week, Funding Circle, one of the UK’s leading P2P businesses disclosed plans to become a public company worth over $1.9bn. In the same 7 days, Sir Howard Davies, chairman of the Royal Bank of Scotland was quoted as saying:

“They have the tech, we have the customers — the race is whether we can get the tech faster than they can get the customers.”

But is it a race that we need?

“Together we can go so far” was the message from Pezesha CEO Hilda Moraa, calling for collaboration between FinTech and banks, as she sat alongside Johnson Ondicho (Kenya Commercial Bank) and Teddy Ogallo (Waywaya) on a panel on P2P for Millenials.

Legacy systems are commonly cited as one of the major challenges facing banks today; a concern echoed by Ondicho who brought up a banking regulation which dictates that all onboarding should be done in person, by telling a story of a young man who was taken into a bank by his Dad to open an account, but left when he saw the queues. Just one manifestation of the bureaucracies weighing and slowing down banking operations.

He was however keen to impress that KCB has already adopted FinTech systems as part of its operations.

“In 2014 we were afraid of FinTech. Now we have incorporated it into our model. So the question is more, what kind of service are we presenting to the customer?”

How should FinTech be regulated?

As we see more and more digital lenders entering the market, the question of regulation is becoming increasingly relevant. According to a 2016 study, mobile money has lifted over 200,000 Kenyans out of poverty — progress which some say FinTech has the potential to undermine if laws do not prevent predatory high-interest lending.

There has been concern that regulators typically focus on systemic risks associated with “too big to fail” institutions which overlook issues associated with smaller, decentralised markets, and that many regulations are steeped in a rules-based culture that will struggle to keep up with tech’s rapid rate of change. Perhaps a more dramatic issue is the potential of the tech industry’s “move fast and break things” approach to wreck economies, which should not be overlooked.

Speaking on a panel addressing the new API economy, Pezesha CEO Hilda Moraa suggested a collaborative approach to regulation.

“Let us bring regulators into the room, so that we can share with them what we are doing, what we have learnt, what challenges we are facing, so that regulations can be built around that.”

It was kindly commented by contributors to the discussion that there is no doubt that Pezesha is involved in this sector with honest intentions. And indeed, as a company that is driven as much by social impact as we are by profit, we are keen to work alongside regulators to ensure that measures are taken to facilitate financial security and inclusion for all, and that the greater good is the primary motivator in any conversation.

How does the financial sector incorporate blockchain?

As one of the most hyped-up innovations in recent years, the utility of blockchain in the financial sector is a topic of increasing discussion. Improved infrastructure for cross border transactions, “smart contracts”, and online identity management have been cited as just some of the areas where this technology could be of immeasurable value.

At Seamless EA however, we heard refreshingly honest and humble utterances when this much-hyped topic was raised, with Steward Bank CEO Lance Mambondiani professing:

“Blockchain…Everyone claims to know what it is because everyone else is doing it, but no one really knows how to do it.”

Teddy Ogallo (Wayawaya) was transparent as he confessed that for him blockchain currently remained a “buzzword” and that it is not a huge priority for Waywaya’s development right now, and our Hilda Moraa reiterated the fact that there is still a great amount of learning to be done around the technology.

Nonetheless, there was a clear openness expressed to embrace Blockchain in the future, with Hilda commenting hopefully on the potential for the decentralisation of data to improve trust and security for Pezesha customers. Johnson Ondicho (KCB) also touched on the potential of the technology to solve the issue of identifying fraud: the most common form of fraud in banking.

In short: Yes, we want blockchain, but we want to know what it is first.

These three issues (banks versus FinTechs, regulations, blockchain) are no doubt hot topics in FinTech at the moment. However, as we try to answer these questions, it is pertinent not to lose sight of the most important stakeholders: the customers and society as a whole.

That is why at Pezesha, we view all these issues from the perspective of making the financial sector more responsible, by championing financial education, transparent credit scoring and responsible lending & borrowing.

Join us today as we empower Africans toward a financially secure future.