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Fintech Boom in Kazakhstan: Opportunities and Risks
Kazakhstan’s financial technology sector has been gaining momentum in recent years, with significant investments pouring into projects in this area. According to Tadviser, fintech projects have attracted $226 billion in funding, a 75% increase year-on-year.
Payments Segment
The payments segment has emerged as a benchmark for fintech development in Kazakhstan, with cashless retail payments accounting for 78% of transactions. The growth of peer-to-peer transfers has also accelerated the adoption of local payment systems, which now account for 85% of transactions.
Digital Lending and Insurance
In the digital lending segment, buy-now-pay-later (BNPL) products have seen a 40% year-on-year increase in six months alone. Meanwhile, the insurance market is witnessing rapid growth, driven by the emergence of new products such as online subscription-based insurance policies.
Challenges and Risks
However, despite these positives, fintech in Kazakhstan also poses significant risks, particularly in terms of financial crime and regulatory challenges. The country’s rigid regulatory environment has led to a dependence on banks for money holding, e-money emission, and personal data processing.
Government Initiatives
In an effort to mitigate these risks, the government has introduced initiatives such as stricter regulations on payments between individuals and the state’s plan to transition to a single form of QR payments, which is expected to facilitate competition in the market.
Expert Insights
Experts believe that fintech has immense potential in Kazakhstan, driven by its geographical position as a potential regional hub in Central Asia. The country’s ranking 15th globally in terms of digitalization also provides an opportunity for proactive growth in the fintech sector.
However, low transparency and limited venture investors in the second and third rounds are major hurdles that need to be addressed. Efforts to develop these aspects are being actively worked on by both the Astana International Financial Center (AIFC) and market players.
Partnership with Crypto-Companies
The growth of fintech in Kazakhstan is also expected to be driven by its partnership with crypto-market giants Binance and ByBit, which could lead to the introduction of a crypto-card. The GovTech field has also facilitated the advancement of fintech services through accessible government services and integration with third-party services.
Conclusion
Kazakhstan’s fintech sector is poised for growth, driven by significant investments, competitive players, and government initiatives. However, the sector also poses risks, particularly in terms of financial crime and regulatory challenges. As the country navigates these challenges, experts believe that fintech has immense potential to become a major hub for financial technology in Central Asia.
Experts’ View
- “Fintech is a promising area for Kazakhstan, given the presence of regionally competitive players in the payment and lending segments,” said Olga Zagidullina, CFA, Director of M&A and Research at Baker Tilly Qazaqstan Advisory.
- “Fintech has immense potential in Kazakhstan, driven by its geographical position as a potential regional hub in Central Asia,” added Daria Samodurova, M&A and Research consultant at Baker Tilly Qazaqstan Advisory.