Kenya’s banking landscape has undergone a significant transformation since the introduction of NCBA Loop, a digital bank launched in 2017. Loop has introduced a revolutionary model in neobanking through the integration of embedded finance, where banking services, such as credit and payments, are seamlessly merged within everyday commercial activities. This innovative approach spares users from the hassle of dealing with these processes separately. As a result, Loop’s customers can now take loans and make purchases simultaneously, streamlining transactions in the banking sector by making credit an integrated component of payments.
Integration of Credit and Payments
Embedded finance in Loop’s model has effectively transformed the traditional banking experience by making loan and purchase processes concurrent. This concept is not entirely new to Kenyan consumers, who are familiar with Safaricom’s M-Pesa overdraft facility, Fuliza, and the increasingly popular Buy Now, Pay Later (BNPL) trend. However, Loop’s approach uniquely enhances this concept by leveraging advanced digital banking technologies to offer a more cohesive user experience. CEO Eric Muriuki explains that Loop is dedicated not only to creating forward-thinking solutions but also to closely monitoring local and global trends to remain competitive and relevant in the fast-evolving banking landscape.
Despite heightened competition from new entrants like Fingo, Branch MFB, Umba, and Payless, Loop is successfully pivoting towards becoming a more comprehensive financial infrastructure that supports both payments and short-term credit simultaneously. This strategic shift indicates a change in how financial transactions are perceived and executed, suggesting that the future of banking lies in the seamless integration of various financial services. This model presents significant advantages for businesses, especially those involved in trade and commerce, as it facilitates payment transactions that include embedded credit structures, simplifying the overall process and improving cash flow management.
Broadening Financial Infrastructure
The trend towards embedding financial services into diverse industries has gained momentum, thanks to advancements in application programming interfaces (APIs) and improved internet accessibility. This development is reshaping various sectors, including agriculture, healthcare, and education, by enabling companies to offer financial services as part of their core operations. For instance, an agri-tech company can integrate financial services into their platform to manage payments and credits for farmers more efficiently. Such integration empowers businesses to streamline their financial operations and align them with their commercial activities, creating a more cohesive and sustainable ecosystem.
Muriuki predicts that the divide between neobanks and traditional banks will gradually diminish, with digital platforms claiming a larger market share, particularly among digitally native consumers who prefer using multiple financial service providers via apps. While traditional banks will continue to play a crucial role due to regulatory constraints related to deposit protection, corporate clients’ financial operations will increasingly become integrated with digital platforms. This integration will enable businesses to manage their finances more effectively, fostering a more dynamic and interconnected financial environment.
The Future of Banking in Kenya
Kenya’s banking landscape has experienced a substantial evolution since the debut of NCBA Loop, a digital bank that was launched in 2017. Loop has completely reshaped neobanking by incorporating embedded finance, where banking services like credit and payments are seamlessly integrated into everyday commercial activities. This pioneering method eliminates the inconvenience of handling these aspects separately. Consequently, Loop’s users enjoy the convenience of taking loans and making purchases simultaneously, which significantly simplifies transactions within the banking industry by making credit an intrinsic part of the payment process.
Furthermore, NCBA Loop’s ability to integrate various banking services within daily transactions underscores its commitment to innovation and customer convenience. By reducing the need for multiple steps to access credit or complete payments, Loop has set a new standard in digital banking. This approach not only enhances user experience but also represents a forward-thinking shift, reflecting the growing emphasis on efficiency and seamlessness in the financial services sector.