A History of Digital Banking in Kenya: From ATMs to Mobile Apps
Read Time:3 Minute, 47 Second
The evolution of digital banking in Kenya spans more than a century, tracing a path from early banking halls to today’s mobile-first financial ecosystem. It is a story of technological adoption, financial innovation, and expanding access to banking services for millions of Kenyans.
Kenya’s banking sector began in 1904, when the National Bank of India opened its first branch in Mombasa to serve the colonial economy. After independence in 1963, the financial system entered a new phase with the creation of the Central Bank of Kenya (CBK) in 1966 to regulate and supervise commercial banks.
At the time, a few foreign-owned institutions dominated the market, and banking services were concentrated in urban centers.
The journey toward digitalization started in the late 1960s. In June 1968, National and Grindlays Bank installed a 16K ICL mainframe computer in Nairobi for centralized processing, marking one of the earliest applications of computing in Kenyan banking.
In the 1980s, Barclays Bank of Kenya became the first bank in the country to fully computerize its operations. These steps laid the foundation for the gradual shift from manual processes to electronic banking.
A major turning point came in 1989 when Standard Chartered Bank Kenya introduced the first two Automated Teller Machines (ATMs) in Kenya at its Moi Avenue branch in Nairobi. This milestone allowed customers to withdraw cash outside traditional banking hours, offering unprecedented convenience at the time.
Debit cards were introduced soon after, enabling electronic transactions, but the reach remained limited. By the early 1990s, ATM networks had expanded in major towns, though only a small share of Kenyans held bank accounts.
The mid-1990s marked the next wave of innovation. In 1996, Barclays launched the first electronic banking services in the country, offering basic online functions. Internet banking became more viable in the early 2000s as broadband connectivity improved.
In 2002, the Kenswitch consortium was formed, linking over 20 banks and enabling shared EFT payments through the Automated Clearing House. This allowed customers to access their funds through different banks’ ATM networks.
In 1998, the Nairobi Clearing House was automated using MICR technology, reducing delays in cheque processing and improving transaction efficiency.
Mobile technology transformed this trajectory. In 2004, Co-operative Bank of Kenya launched Kenya’s first SMS-based mobile banking service, allowing customers to check balances and transfer funds using basic feature phones.
Three years later, on March 6, 2007, Safaricom, backed by Vodafone, introduced M-Pesa. Initially developed in 2005 to address financial exclusion among unbanked populations, M-Pesa enabled peer-to-peer transfers, bill payments, and microloans through USSD codes. It required no smartphone or bank account, making it accessible to rural communities.
By 2008, M-Pesa had grown to 4 million users. Today, it processes transactions worth over 50% of Kenya’s GDP annually.
The relationship between banks and M-Pesa was not initially smooth. Many banks resisted the service, arguing it was unregulated. But CBK’s supportive regulatory approach helped M-Pesa flourish, pushing financial institutions to adapt.
The 2010s saw a fusion between traditional banking and mobile money services. In 2010, mobile wallets and bank accounts became interoperable, allowing customers to move money between accounts seamlessly.
In 2011, cheque truncation was introduced, enabling image-based clearing of cheques and shortening settlement times from three days (T+3) to one day (T+1) by 2013. In 2016, PesaLink under Kenswitch launched real-time interbank transfers, allowing users to send money directly between bank accounts within seconds.
The rapid adoption of smartphones further accelerated digital transformation. Smartphone penetration rose from 10% in 2010 to 60% in 2020, driving a shift toward app-based banking.
Banks invested in mobile apps that allowed customers to check balances, pay bills, transfer funds, apply for loans, and invest without visiting branches. Services like Equitel from Equity Bank Kenya (launched in 2015) and KCB M-Pesa offered a full suite of financial services.
At the same time, fintech firms such as Tala and Branch emerged, providing instant credit through mobile apps using data-driven credit scoring.
By 2025, digital financial services had reached 85% of Kenyan adults, a sharp increase from 26% in 2006. This expansion improved access to formal financial services for millions of people, including those in rural and low-income areas.
The digital finance market in Kenya is projected to grow at 14% annually, reaching an estimated value of $14.5 billion by 2028.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.
Happy
0 %
Sad
0 %
Excited
0 %
Sleepy
0 %
Angry
0 %
Surprise
0 %
0
0
Average Rating