Focus of the Week Summary Note: Technology and Investments

Technology has continued to be a disruption in the investment industry, both in Kenya and globally.

One of the most tangible disruptions is that technology makes it easier to invest and access funds. From the comfort of your phone, you can now access an investment company’s website or application, make an investment or withdraw an investment.

This was not possible a few years ago where you had to visit a brick and mortar branch to create and manage an investment account. All these aspects of modern investing are relatively recent disruptive innovations being used by firms to remain competitive in a market where clients are not only more knowledgeable but need things done much faster and more efficiently.

Below are the three key factors that are shaping the Kenyan investment landscape:

A. Mobile Phone and Internet Penetration: Some of the investment companies in Kenya e.g. Britam, Cytonn, CIC Group to mention a few have capitalized on this disruption to improve how they interact with their clients.

They have done this through interactive mobile applications that enable their clients to invest, withdraw and transfer funds easily without manual intervention.

B. Mobile Money Penetration: Investment firms in Kenya are adapting their investing methods to allow mobile money options due to increased adoption.

This makes it flexible for investors to invest and withdraw money easily. M-Akiba (M – mobile, Akiba – savings in Kiswahili), is a Kenyan government bond launched in 2017 and accessible through the mobile phone and using mobile payments as a way of clients investing money.

C. Big Data and Research: With big data, firms can get insights into their client datasets as well as customize products, facilitate loss prevention and improve their pricing accuracy.

Big data is helpful in segmenting the clients, identifying and preventing fraud, risk modelling, client retention and identifying the main channels of transactions.
Technology and evolving customer behaviors are driving change across all financial services.

In the Kenyan investments’ environment, remaining competitive means adapting to these changes, embracing new thinking, and leading the charge to innovate.

Below are the technology areas we feel will drive the investment market in Kenya:

i. Improved Client Experience: This will remain a priority for investment firms. Removing any friction process that involves manual work will be a key focus. Allowing clients to set up accounts in seconds, invest and withdraw anytime, as well as offering value-added services on mobile will be a key differentiator.

ii. Digital and Mobile Experience: We expect to see innovations in mobile services as investment firms adopt the “digital-first” strategy. In the next few years, if an investment firm does not embrace a digital structure, its business model will surely fail.

iii. Change in Company Structures: More investment firms are making big bets on technology innovation while bracing for the impact of the growing FinTech sector. These shakedowns will continue happening as investment firms balance between investment analysts and technologists in decision-making.

iv. Artificial Intelligence (AI) and Robotics: Investment firms already have huge chunks of data that their existing employees can do little about. Cognitive technology can handle these large chunks of data easily and provide business insights by creating connections amongst the data sets. Just like all innovations, AI poses a threat and opportunity.

v. Internet of Things (IoT): The integration of IoT capabilities within the financial services industry is still in its early stages in Kenya, but many believe digital applications represent the future of investing. Investment firms who will deploy IoT shall allow their clients to make contactless investments and track their returns with greater accuracy while giving the investment firms huge client data sets that they can analyze to predict trends.

vi. Cybersecurity: The development of data science and data mining technology has driven an evolving debate on protection and privacy, which has increasingly translated into legislation. Enabling innovation and constructive use of data and protecting citizens from breaches or cybercrime linked to weak data laws are fine balances that investment firms have to consider even as they create their competitive edge riding on technological advancements.

In conclusion, we expect the investment industry to continue adopting new technologies into their process and create a competitive advantage in the market as they strive to give their clients above-average market returns.

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