CBK calls for caution as it opens doors for innovations

Central Bank of Kenya (CBK) says it is open to innovation but warned firms against breach of their customers’ data privacy.

Governor Patrick Njoroge said financial innovators must ensure information is not used in any other manner apart from what is permitted by customers.

Speaking yesterday in Nairobi during the second edition of the Euromoney East Africa Conference, Dr Njoroge said as more financial technology (fintech) firms come up with innovations that ride on customer data such as location and financial transactions, they should not do so at the expense of customers’ privacy.

He added that laws to regulate innovations will always be one step behind and it is, therefore, crucial for the entrepreneurs to have market discipline first.

“The entrepreneurs need to embody and understand the concern of the regulator. The key element should be customer-centricity. It is said that laws often come after damage,” he said.

Njoroge gave an example of M-Pesa which ran without regulations in place from 2007 until 2013.

According to the governor, the mobile money transfer service operated like “a particular exemption of CBK” and if the apex bank had waited to have the regulation before allowing the service, its success story could have been delayed.

“There has to be market discipline. Practitioners need to embody privacy,” he said, adding that data breaches that have been reported globally should act as a caution for all fintech sector players.

Potential pitfalls

CBK Deputy Governor Sheila M’Mbijjewe said new technologies such as Blockchain should be embraced cautiously with focus on addressing potential pitfalls.

“I don’t think CBK and banking sector fear near technology, but we must address the risks,” she said.

Ms M’Mbijjewe said there must be a balance between regulating fintechs and encouraging innovation so that the growth does not come with the erosion of public confidence.