According to the bank supervision annual report 2017, the Central Bank of Kenya (CBK) says it is open to emerging technologies while a number of Kenyan banks have engaged the regulator on the application of blockchain technology in settling payments.
“Banks that will embrace innovation and adopt new technologies will have unprecedented opportunities to change and improve how they provide financial services and products. At the same time, they must manage the risks created by the new digital economy,” CBK says in the report.
The potential use cases that the CBK has received from Kenyan banks for approval include technologies such as blockchain technology, chatbots for customer service delivery, video teller machines, and psychometric credit scores by the Credit Reference Bureau.
However, CBK notes that emerging technologies such as cryptocurrencies pose certain risks to consumers because of their anonymous nature.
“CBK is of the opinion that despite the ubiquitous positive influence of technology, there lies a potential of great risk in the event that the technology fails or is misused by unscrupulous individuals. There is thus the need to ensure that robust controls are in place to ensure that the risks and opportunities associated with emerging technologies are balanced,” the report states.
This year, the CBK issued a circular to all Kenyan banks requiring them to refrain from doing business with crypto-based companies.
“There are risks associated with cryptocurrency particularly on consumer protection, fraud, hacking and loss of data and they are prone to be used as pyramid schemes,” CBK’s governor Dr Njoroge said.
So far, Kenya is making progress towards the adoption blockchain technology through the establishment of the AI and blockchain taskforce as the capital markets regulator plans to promote fintechs through the creation of a regulatory sandbox.
Going forward, the CBK says it “will remain open to emerging technologies with an underlying philosophy of maximizing opportunities while minimising risk.”