How tables have turned. In an ideal financial world, it has always been the case that the big moneyed big banks take over the small but scalable rivals.
As such, in Kenya and around the world, mergers and acquisitions have always been a case of the big bank buying off the smaller one or a bank buying off a fintech enterprise.
However, as COVID-19 storm clears and the economy rebounds, fintech Branch International’s recent move to take over Century Microfinance Bank could be a pointer to what might be the start of a shakeup in legacy banking industry.
With offices in San Francisco, Lagos, Nairobi, Mumbai and Bangalore, Branch is a fintech company that uses the power of data science to cut the cost of delivering financial services in emerging markets.
Initially a digital only lender, the fintech which marked its official takeover of Century MFB on Tuesday is set to disrupt traditional banking extending its customer service offering beyond just lending.
“As Branch, we needed to position ourselves at a place where we can do much more than digital lending,” said Branch East Africa Managing Director Rose Muturi.
For Branch, the acquisition of a micro-bank license presents the opportunity for the fintech to use its experience in micro-lending to disrupt banking as we know it.
Branch founder Matt Flannery says the fintech can now roll out some of its new solutions currently in other jurisdictions and under various licenses through its newly gotten mandate.
This includes new savings and investment products, including one presently in Nigeria which offers investment returns of up to 20 percent.
Over the long-term, Branch sees itself as a Pan-African digital bank and is at present taking one step at a time to attaining what will be a rare fete.
As such Matt is not as forthcoming on whether legacy banks are in for a big shock as the new and seemingly agile digital lender seeks to not just eat a piece of their cake but also devour.
“It takes decades to build a bank, we are under no illusions about that. It is not a winner take it all market and we do not set out to disrupt anything. We just follow our customers and try serve them better,” he said.
Branch is set to offer banking services, first in Kenya and then to the rest of the region from a digital context and as such does not see itself leveraging physical branches unless under compelling reasons.
To grow its footprint, Branch is hoping to draw in new customers from its primary operations as a micro-lender.
In just seven years of operations in Kenya for instance, Branch has managed to issue 20 million loans beating the number of the banking sector loan accounts as of the end of 2020 by nearly three times.
Other fintechs including digital lenders may not be far behind and could soon want a share of the disruptive action.
With the continuity of some legacy lenders being an ongoing concern, featuring an emaciated capital base and drying liquidity, fintechs are likely to find easy pickings in their quests to become fully fledged banks.
If this is to be the case, the tables in the banking industry will likely stay turned.