Emerging Technologies in Kenya’s Financial Sector, Myths Versus Reality

Abstract

This study explores the myths and realities surrounding emerging technologies in Kenya's financial sector, focusing on Artificial Intelligence (AI), Cloud Computing, Blockchain, and Big Data Analytics. The financial sector, a vital driver of economic growth, has experienced transformative advancements through the integration of these technologies. While AI enhances fraud detection, customer service, and operational efficiency, Cloud Computing optimizes business operations and risk management. Blockchain promises decentralized, efficient peer-to-peer transactions, and Big Data Analytics enables predictive maintenance and improved customer experiences. However, misconceptions and exaggerated claims often overshadow their practical applications, creating unrealistic expectations among stakeholders. This research critically evaluates these technologies, identifying their genuine potential and limitations within the Kenyan context. By analyzing applications in fraud detection, credit scoring, financial inclusivity, and operational efficiency, the study demystifies myths and provides evidence-based insights. The findings aim to empower financial institutions, policymakers, and investors with actionable knowledge to guide the integration of emerging technologies. By addressing misconceptions and evaluating true capabilities, the study highlights opportunities for informed decision-making, resource allocation, and sustainable innovation in Kenya's financial sector. The study utilized an exploratory research design aimed at gaining initial insights and understanding of the selected topic. This research targeted key players in Kenya's financial and banking services sector. The population included a diverse range of participants from individuals working in various roles within the financial sector to regular technology users who are either customers or partners of financial services. The aim was to gather data from approximately 100 participants via Google Forms to collect both quantitative and qualitative information. The findings reveal that Artificial Intelligence (AI) is widely regarded as an asset in Kenya’s financial sector, particularly in enhancing fraud detection and customer service. However, there are prevalent misconceptions about AI’s abilities, with some respondents believing it could achieve consciousness or entirely prevent fraud. This indicates a gap in understanding AI’s current limitations. Additionally, smaller financial institutions face significant barriers to AI adoption, mainly due to cost constraints and a lack of technical expertise. Cloud computing, meanwhile, is recognized for its potential to reduce operational costs and increase efficiency. Despite these advantages, concerns about data security and regulatory compliance have limited its widespread adoption. There is a consensus that cloud computing plays a crucial role in advancing financial inclusivity, but its benefits are often more accessible to urban financial institutions, underscoring the need for solutions that address urban-rural disparities. Blockchain technology is seen as a promising tool for enhancing transparency and security within the sector. However, adoption remains low due to technical complexity and regulatory challenges. Some respondents view blockchain as overhyped, reflecting a lack of understanding of its practical applications. These perceptions highlight the importance of further education and demonstration projects to showcase blockchain’s potential benefits. Big Data Analytics has gained recognition for improving decision-making processes and credit scoring accuracy. However, the high costs, privacy concerns, and potential biases associated with data analytics pose challenges.