Financial technology companies (Fintechs) are seeking to partner with commercial banks in order to get around the challenges of regulation they are facing with Central Bank of Kenya (CBK), the sector’s umbrella has said.

Ali Hussein, Fintech Association of Kenya chairman said members are looking at partnerships with traditional brick and mortar banks to boost their credibility and avoid blacklisting by the regulator.

Policy makers

“We are currently working with certain partners I will not mention that are regulated in conjunction with policy makers and that will solve a lot of problems,” he said during the Africarena startup pitching competition at iHub in Nairobi.

This comes at a time CBK is yet to license several well-known digital lenders while picking up a fight with Nigeria-based fintechs such as Flutterwave and Chippercash.

The banking sector regulator has so far cleared just three per cent of the 288 applications eyeing the digital loans market, underlying the rigorous licensing process that promises to lock out hundreds of applicants from the lucrative industry.

CBK said it had granted licenses to 10 players who have been in operation for just over a year, leaving market leaders scrambling to explain their deferred approvals. “We shall be seeking a seat at the table and drive the view that regulation comes after innovation and answers simply need to be natured,” he said.

Industry leaders including Tala, Zenka and Oye mobile are yet to receive the regulatory nod but CBK says it has allowed all applicants to continue operating pending the conclusion of the process.

Players such as Branch purchased smaller banks in the recent months to deal with the regulatory headwinds, something that most fintechs cannot afford to undertake.

The deadline for applications closed on September 17, which means that only those that have applied will continue operating. Any new entrants will now be forced to wait for licenses to start operations.

Additionally, the central bank has already ordered banks and microfinance organisations to stop doing business with the payment technology companies Flutterwave and Chipper Cash.

The regulator has instructed banks to cut ties with the rapidly expanding payment startups in a letter to bank CEOs. This might include cancelling all accounts and freezing the money. Within seven days, the lenders must submit a follow-up report to Central Bank of Kenya.

Remittance services

This occurs only days after the CBK informed media present at the Monetary Policy Committee (MPC) meeting that the two companies lack the necessary authorisation to offer payment and remittance services in the nation.

It said it has learned that Flutterwave Payments Technology Ltd and Chipper Technologies Ltd have been operating in the money transfer industry without authorisation or licence. Chipper Cash is also a cross-border payments company with operations in Nigeria, Ghana, Uganda, Nigeria, Tanzania, Rwanda and South Africa.

The Central Bank of Kenya Act and the 2013 Money Remittance Regulations govern money transfer services in Kenya. Additionally, the National Payment System Act and the National Payment System Regulations, 2014 govern money transfer services in Kenya.