Fintech on the rise in Kazakhstan driven by digital payments and the use of super apps

In Kazakhstan, the fintech industry is growing at a rapid pace, driven by rapid adoption of digital payments, ecosystem services and super-apps, among other digital financial services, says a new report from Fintech Consult, MOST Ventures and RISE. Going forward, supportive government initiatives and infrastructure improvement efforts are expected to further drive innovation and adoption in the sector.

These are among the key insights gleaned from the Fintech in Kazakhstan report, an industry report released on April 14, 2023 that looks at the state of the domestic fintech ecosystem and points to booming use of fintech services and a rapid move towards digital payments.

According to the report, digital transactions are growing rapidly. Since 2017, the volume of cashless transactions has doubled every year, from just USD 5 billion in 2017 to USD 158 billion in 2022, data from the National Bank of Kazakhstan (NBK) show.

Volume of cashless transactions, 2017-2022, billion USD, Source: Fintech in Kazakhstan, Fintech Consult, MOST Ventures and RISE, April 2023

At the same time, merchants are deploying point-of-sale (POS) terminals at a steady pace to adapt to changing consumer behavior. In 2017, only 108,000 POS devices were operating in Kazakhstan, a number that rose to 831,000 in 2023. The figures suggest a 70%+ annual growth in the number of POS terminals deployed in the country.

Number of Point of Sale (POS) devices in Kazakhstan, Source: Fintech in Kazakhstan, Fintech Consult, MOST Ventures and RISE, April 2023

Several trends are driving this growth, the report says, including booming e-commerce activity and new infrastructure solutions launched by the central bank.

In June 2022, NBK launched its Instant Payment System into operation, which allows consumers to make instant interbank transfers 24/7 using only a mobile phone number and a QR code. The effort is part of a wider ambition to renew the entire payment system and develop a strong technological infrastructure for digital financial services.

The rise of super apps

Another trend outlined in the report is the rise of fintech ecosystems and super-apps. These platforms, which combine various financial and non-banking services including online payment, mobile banking, e-commerce and lifestyle, are gaining momentum in Kazakhstan and are witnessing booming consumer adoption.

A pioneer in the field since 2014, Kaspi.kz has seen its customer base grow to 12.6 million monthly active users, a number that represents approximately 65% ​​of Kazakhstan’s total population.

The company offers an integrated consumer-focused ecosystem that offers loans, deposits and money transfer services, as well as e-commerce, location services, a rewards program and a messaging function.

Kaspi.kz’s digital ecosystem, Source: Fintech in Kazakhstan, Fintech Consult, MOST Ventures and RISE, April 2023

Founded in 2008 and headquartered in Almaty, Kaspi.kz is reportedly preparing for a U.S. listing that could come this year, the company told Axios earlier this month.

To keep up with the trend, established banks are actively developing and deploying their own fintech ecosystems and super-apps.

For example, Halyk Bank, the largest financial group in Kazakhstan, has built a digital ecosystem accessible through a mobile app that offers standard banking products such as payment services, transfers and cards, as well as lifestyle services including cinema, weather, shopping and travel. .

8 million private customers reportedly use Halyk Bank’s online banking system Homebank and 273,000 corporate and small and medium-sized business (SME) customers use the online banking portal, the bank said in its 2021 annual financial report.

Halyk Bank’s Digital Ecosystem, Source: Fintech in Kazakhstan, Fintech Consult, MOST Ventures and RISE, April 2023

Besides digital payments and super apps, the report notes that wealth technology and digital trading platforms have registered sustained growth in recent years, on the back of legislative changes and technological advances.

Mobile investment apps now play a critical role in democratizing stock trading by improving accessibility through lower fees, lower capital requirements as well as intuitive and seamless digital user experiences, the report said. This is evidenced by the growth in the number of private investor accounts in Kazakhstan, which grew almost fivefold from just 119,000 in 2019 to 581,000 in 2022.

Buy now, pay later (BNPL) is another fintech trend that has taken off in Kazakhstan, the report said. The trend was led by Kaspi.kz before other players started entering the market and started offering similar services.

Facilitating government initiatives

Government efforts to encourage innovation and digital reforms have played a crucial role in the growth of fintech in Kazakhstan, the report said. New infrastructure projects are currently in the works and should further drive the domestic fintech sector.

In February, NBK outlined in a paper its vision for the future of financial services, setting out its ambition to develop “a sustainable digital financial ecosystem”.

To achieve these goals, the central bank said it is implementing a number of infrastructure solutions intended to increase financial stability, offer a level playing field for all industry participants and develop healthy competition.

These infrastructure solutions include the so-called National Payment System, digital biometric identification, a platform for the secure exchange of data based on open programming interfaces (open APIs) and a solution for know-your-customer (KYC) procedures.

NBK is also working on a digital central bank currency (CBDC), Digital Tenge, which will be piloted with consumers and sellers this year, the report says.

The CBDC will use an open source distributed ledger and will be issued in token form. The system will support payment options including NFC, QR code payments, biometrics and offline payments, it said.

According to the report, Kazakhstan is currently home to more than 150 fintech companies, with payments, transfers and mobile wallets being the largest vertical. The segment accounts for 20% of all fintech companies in the country, followed by financial software/back and middle office solutions, with 18% market share, e-commerce and e-marketplace, at 15%, and savings and investments, at 11%.

Between 2018-2022, fintech accounted for 12% of all venture capital deals in Kazakhstan, making it the second largest sector in the country by deal after marketplace and e-commerce sectors.

Fintech companies in Kazakhstan (non-exhaustive list), Source: Fintech in Kazakhstan, Fintech Consult, MOST Ventures and RISE, April 2023

This article first appeared on fintechnews.ch

Featured Image Credit: Edited from Freepik