Branch Sets Off Digital Banking Disruption In Century MFB Acquisition

 

By Kepha Muiruri For Citizen Digital

Digital lender Branch International has set off a digital disruption of the banking sector in its acquisition of the Century Microfinance Bank.

Started first as a digital only lender, Branch has now officially become a bank after taking an 85 per cent stake in the micro-bank in what is a first for a financial technology company (fintech) in the region.

Traditionally, banks have always been the ones to acquire fintechs and not the viceversa.

Branch now says it is positioning itself to offer more than just lending services to customers having issued over 20 million loans in Kenya over its last seven years of operations.

“As Branch, we needed to position ourselves in a place where we can do much more than just digital lending. Physcologically, we are looking at this acquisition as a partnership,” said Branch East Africa Managing Director Rose Muturi.

On his part, Branch International founder Matt Flannery says the company will now be able to roll out new solutions in savings and investments in the country after its acquisition of a micro-lending license.

The company has already been implementing various solutions in its other markets including Tanzania, Nigeria and India.

Even as Branch eyes to become a Pan-African digital bank, Mr. Flannery has played down the pre-empted disruption in legacy banking services.

“We don’t set out to disrupt anything, we just follow our customers and try to serve them better. With technology, it enables us to do that in a way that most banks cannot do and hopefully we can set an example they can follow,” he said.

“It takes decades to build a bank and we are under no illusions about that. It is not a winner take it all market.”

Branch is betting on its current strategy to use micro-lending as a customer acquisition tool across the region

The now fintech bank does not expect to open physical branches beyond the three held by Century MFB but says it will only do so out of compelling reasons.

“We want to offer more services within the same digital context. The number of physical branches therefore does not become the most important thing we look at,” added Rose Muturi.

Last month, the CBK announced the acquisition of Century MFB after giving its nod.

A week earlier, the National Treasury gave the green light to the deal when it allowed Branch International to hold a stake greater than 25 per cent in the microlender.