As Kenya’s Banks and Markets Depend on the Same Tech, Regulators Start Asking Who Holds the Switch
The regulators gathered to talk about growth but found themselves confronting how intertwined the nation’s finance has become with private tech.
Kenya’s top financial regulators have warned that the financial system’s growing reliance on a handful of large technology providers has become a structural weakness — one that could magnify any operational failure into a system-wide disruption.
The concern was raised at the 16th Annual Board Retreat of the Joint Financial Sector Regulators Forum (JFSRF), held in Naivasha, under the theme “Fostering Financial Stability and Resilience Amid Emerging Risks and Regulatory Reforms.” The gathering brought together the Central Bank of Kenya, Capital Markets Authority, Insurance Regulatory Authority, Retirement Benefits Authority, Sacco Societies Regulatory Authority, Kenya Deposit Insurance Corporation, and the Policyholders Compensation Fund.
The Forum agreed to a coordinated review of the financial system’s dependence on third-party technology providers — an increasingly visible fault line in an economy where nearly all financial operations now rest on shared digital infrastructure.
Mapping the Infrastructure Behind Financial Stability
At the center of the discussion was the recognition that banks, insurers, pension schemes, mobile money platforms, and capital market intermediaries increasingly depend on the same cloud, data, and switching service providers.
The regulators acknowledged that a failure, cyber incident, or prolonged outage at a single vendor could paralyze multiple institutions at once. To contain that risk, the Forum endorsed an accelerated mapping of concentration risk — identifying where third-party exposures converge — and directed that supervisory tools be updated to mitigate single points of failure.
This systemic mapping will feed into the redesign of Kenya’s Crisis Management and Resolution Frameworks, aligning them with international best practice. Among the proposals are stronger emergency liquidity assistance mechanisms for distressed firms and adequately funded resolution structures to protect consumers without destabilizing the market.
Balancing Innovation and Vigilance
The Naivasha retreat also examined how technology-driven financial innovations — from virtual assets to bundled digital products — are transforming access and efficiency but also introducing new regulatory blind spots.
Regulators agreed that targeted research is needed to assess how these innovations affect financial stability and to design tools that sustain innovation without undermining resilience. The conversation reflected a broader global tension: financial inclusion and convenience are accelerating faster than supervisory capacity can adapt.
Oversight Extends to Artificial Intelligence
The Forum went further to address the rapid adoption of artificial intelligence and machine learning in financial services. AI has already enhanced fraud detection, credit scoring, and customer engagement, but its opacity, bias risks, and uneven deployment across market players have raised new challenges for fairness and accountability.
To address this, the regulators agreed to develop a sector-wide AI strategy. It will establish clearer governance standards around algorithmic transparency, data protection, and human oversight — a move designed to ensure that efficiency gains do not come at the expense of consumer trust or regulatory clarity.
Strengthening Integrity and Consumer Protection
The regulators also advanced a plan to bolster supervision of Anti-Money Laundering, Countering the Financing of Terrorism, and Counter-Proliferation Financing (AML/CFT/CPF) frameworks, positioning Kenya as a secure destination for business and investment.
On consumer protection, the Forum highlighted the urgency of updating disclosure requirements for digital financial products — ensuring transparent pricing, fair terms, and consistent treatment of customers amid the rapid expansion of mobile and online services.
Building Evidence for a More Resilient Sector
A key outcome of the meeting was the launch of the FinAccess Sectoral Reports, an extension of the FinAccess Surveys covering data from 2006 to 2024. These reports offer a long-term empirical view of Kenya’s financial landscape — tracking how access, product usage, and institutional market share have evolved over nearly two decades.
For the regulators, this data will form the backbone of future policy design: a way to understand how technology, innovation, and regulation interact over time. As the financial system grows more digital and interconnected, its stability may hinge less on any single reform than on how well these multiple safeguards are built to hold together.
Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent.
Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke
