The Central Bank of Kenya's 2025 Bank Supervision Annual Report reveals a significant shift in the country's banking sector. Banks are evolving into data companies, AI shops, and cybersecurity operations that also offer traditional banking services. This transformation is driven by the adoption of fintech, with most banks describing themselves as trying to become "better banks" by leveraging technology to upgrade their services.
The report highlights the growing importance of innovation teams, with two-thirds of banks now having a dedicated team focused on innovation. Additionally, 96% of banks have some form of mobile banking app or USSD service. However, the adoption of digital lending is not uniform, with over a third of banks still considering lending to be the least digitized part of their business.
The use of Application Programming Interfaces (APIs) has become widespread, with 84% of commercial banks and 79% of microfinance banks adopting the technology. Cloud computing, big data analytics, and biometric authentication are also gaining traction, with adoption rates ranging from 45% to 79%. However, the increased use of technology has also raised concerns about cyber risk, which is now the top concern for 82% of commercial banks and 93% of microfinance banks.
A separate survey on AI found that half of all surveyed institutions have adopted some form of AI, with 66% of commercial banks, 57% of microfinance banks, and 43% of digital credit providers using the technology. AI is primarily being used for credit risk assessment, cybersecurity, and customer service. However, there is a significant gap between the adoption of AI and the development of formal AI strategies, with only 30% of institutions having a clear strategy in place.
The Central Bank of Kenya is taking steps to address the challenges associated with AI adoption, including a lack of skilled staff, high implementation costs, and uncertainty around data governance rules. In March 2025, the bank ran an AI hackathon, which attracted 272 applications from teams across eight African countries. The bank is also considering issuing formal AI guidance to help institutions navigate the risks and opportunities associated with AI.
Kenyan banks are increasingly relying on outside vendors for technology services, with every commercial bank and microfinance bank surveyed using external vendors for at least part of their operations. However, this has also raised concerns about cybersecurity and data privacy, with 38 of 52 respondents citing these as major challenges. In response, banks are establishing formal governance structures to manage third-party risk.
The digital lending sector in Kenya experienced significant growth in 2025, with outstanding loans from digital credit providers nearly doubling to KES 110.1 billion. The number of active loan accounts also grew by 71% to 6.74 million. However, mobile money transactions declined by 30% in 2025, which the Central Bank of Kenya attributes to consolidation and a shift towards larger, fewer transactions.
Key points
- Kenyan banks are increasingly adopting fintech and AI to transform their services.
- The Central Bank of Kenya is taking steps to address the challenges associated with AI adoption and fintech growth.
- Digital lending in Kenya experienced significant growth in 2025, while mobile money transactions declined due to consolidation.
