Financial Crime World

Kazakhstan Fintech Market Sees Explosive Growth Amidst Financial Crime Risks

A Major Player in Central Asia

Kazakhstan’s fintech industry has emerged as a major player in Central Asia, with a growth rate that rivals some of the fastest-growing markets in Asia. The country’s high levels of account ownership and widespread internet access have created a fertile ground for digital payment methods to flourish.

Balancing Innovation with Financial Crime Prevention

However, amidst this rapid growth, concerns about financial crime risks are also on the rise. The country’s authorities must balance the need to support innovation with the need to prevent and detect financial crimes such as money laundering and terrorist financing.

Key Factors Contributing to Fintech Success

Several key factors have contributed to Kazakhstan’s fintech success story:

  • A favorable business environment
  • Robust banking infrastructure
  • Supportive government policies
  • Traditional banks adopting digital technologies
  • Fintech companies experimenting with new products and services

Digital Payments and E-Commerce

The volume of cashless transactions has increased by 98% over the past five years, driven by technological advancements, regulatory changes, and high demand. Internet and mobile banking have dominated cashless payments, accounting for a substantial 82% of all such transactions.

Open Banking Implementation

The government has launched initiatives such as the “Smart Bridge” payment gateway and the “Open Government” portal, which demonstrate its commitment to digital transformation. Mandating open banking implementation aims to create a more integrated financial ecosystem.

Rise of Ecosystems and Super-Apps

Ecosystems offer a range of services through a single application, combining financial and non-banking services such as online payments, mobile banking, e-commerce, investment, insurance, and lifestyle. Kaspi.kz has been a pioneer in this area since 2014, with over 12.6 million monthly active users.

Digital SMEs

Small and medium-ized businesses are leveraging digital channels to promote their products and services, and financial institutions are tapping into non-traditional data sources to enhance credit scoring models.

Wealthtech and Digital Trading Platforms

Wealthtech and digital trading platforms have recorded sustained growth, driven by legislative changes and technological advancements. The democratization of capital markets has made it easier for retail investors to access the stock market, with mobile investment apps playing a key role in simplifying remote business relationships.

Central Bank Digital Currency (CBDC)

Kazakhstan’s National Bank is actively developing a CBDC known as the Digital Tenge. This initiative aims to provide a new payment option, with plans for phased implementation in 2023.

Financial Crime Risks

While the fintech market in Kazakhstan presents many opportunities for growth and innovation, it also poses significant financial crime risks. The country’s authorities must ensure that they have adequate measures in place to prevent and detect financial crimes such as money laundering and terrorist financing.