RISE Research, in collaboration with the National Payments Corporation of Kazakhstan, Mastercard, and Tarlan Payments, has conducted a comprehensive analysis of Kazakhstan's fintech market.
Industry Overview & Digital Infrastructure
Kazakhstan is the largest economy by GDP in the Central Asian and Caucasus region, with a nominal GDP of $255bn in 2023. Key economic indicators include a real GDP growth forecast of 4.1% for 2024, an inflation rate of 10.0% in 2023, a population of 20 million in 2023, and a population average growth rate of 1.2% from 2018 to 2023. In terms of urbanization and digital penetration, 58% of the population lived in urban areas in 2022. Banking penetration was at 81% in 2021, internet penetration is projected to reach 92% by 2024, the share of cashless payments was 89% in May 2024, and smartphone adoption was at 83% in 2023.
Key Takeaways
Between 2019 and 2023, the number of active online banking users in Kazakhstan increased 4.6 times, driven by technological improvements, regulatory support, high demand, market competition, and greater internet and cashless payment adoption. The user base expanded from 5 mn to 23.1 mn. Despite banks leading the fintech market, the number of fintech startups in Kazakhstan surged from around 50 in 2018 to over 200 by 2024. Fintech now dominates venture capital deals in the country, accompanied by a noticeable rise in "bank+fintech startups" partnerships.
Market Trends
Market leaders identified seven key trends driving the fintech ecosystem in Kazakhstan: digital products and services for SMEs, Govtech and fintech synergy, digital assets, financial APIs, buy now, pay later (BNPL), artificial intelligence, and central bank digital currencies (CBDC).
Efficiency in Digital Financial Services
Kazakhstan's digital financial services are recognized for their speed and cost-effectiveness. The average time to open a bank account online is less than three minutes, while online lending approvals take about two minutes. Providing composite services online, such as purchasing and re-registering a car, takes less than an hour, as does the settlement of international transfers.
Fintech Market Potential
Kazakhstan's fintech market is expected to continue expanding with double-digit CAGR across various sectors from 2022 to 2027. B2C payments are projected to reach $63 bn by 2027, with a penetration of 29.2% of GDP and a CAGR of 14%. B2B payments are expected to grow to $19bn by 2027, with a penetration of 7.6% of GDP and a CAGR of 10%. Consumer loans are anticipated to hit $11bn by 2027, with a penetration of 6.8% of GDP and a CAGR of 20%.
Digital Transformation in Payments
Non-cash payments in Kazakhstan surged at an 81% CAGR over the past seven years, now comprising 89% of all transactions. The transformation is driven by several factors, including favorable demographics, growing digital readiness, increased e-commerce, improved banking accessibility, infrastructural developments such as local payment systems and QR codes, the launch of major digital wallets like Apple Pay and Google Pay, and government initiatives.
Retail E-commerce Growth
The retail e-commerce market in Kazakhstan has shown strong growth both in monetary terms and the number of purchases over the past five years. The market size increased from $1.4 bn to $5.3 bn between 2019 and 2023, a 3.7% CAGR. E-commerce penetration was 12.6% of total retail trade in 2023, with an average check of $58.7 in 2023, a 1.5x growth from 2019.
Since 2018, the number of fintech startups has multiplied, exceeding 200 by 2024. This expansion is driven by a supportive regulatory environment and escalating demand for digital financial services.
In tandem with this startup boom, Kazakhstan's banking sector maintains a commanding presence, with two major banks controlling nearly 78% of the market for transfers and payments. This concentration underscores the pivotal role traditional financial institutions play in shaping and supporting the fintech ecosystem's development.
Financially, Kazakhstan's fintech industry boasts an impressive return on equity (ROE) of 37% in 2024, significantly outstripping the global average of 13%. This profitability not only attracts domestic investment but also serves as a magnet for international capital seeking high-yield opportunities in emerging markets.
Technological adoption in Kazakhstan's financial markets is progressing, with 31% of market participants employing artificial intelligence (AI) in their operations—slightly below the global average of 43%. Initiatives such as open banking trials and innovations in digital payments underscore the sector's commitment to harnessing advanced technologies for improved customer experiences and operational efficiency.
Venture capital plays a pivotal role in fueling fintech growth, with substantial investments pouring into the sector. Strategic acquisitions and partnerships between traditional banks and fintech startups illustrate a concerted effort to integrate innovative solutions and expand service offerings.
Collaboration remains a cornerstone of Kazakhstan's fintech strategy. Initiatives like the Elevandi Hub aim to bolster connectivity within the local fintech ecosystem, facilitating innovation and attracting global investment. Such efforts are important as Kazakhstan seeks to sustain momentum, foster innovation, and meet evolving consumer and business demands in an increasingly digital world.
Adoption and Implementation of AI: The financial sector in Kazakhstan is progressively integrating AI into operations, with significant focus areas including risk management, cybersecurity, client support, fraud detection, and customer satisfaction analysis. Despite a growing awareness and partial implementation, full AI integration remains limited, with only 4% of organizations achieving full deployment.
GovTech and Fintech Synergy
Kazakhstan is advancing rapidly in GovTech, leveraging digital government solutions to enhance public services and export GovTech innovations to neighboring countries like Tajikistan. The integration of digital government documents into banking apps exemplifies efforts towards an "Invisible Government," aiming to streamline citizen services efficiently.
SME Digitalization
Small and medium-sized enterprises (SMEs) are pivotal in Kazakhstan's economic landscape, with banks and fintechs increasingly offering digital solutions like online onboarding, digital lending, and comprehensive payment technologies. The emergence of bank marketplaces and BNPL (Buy Now, Pay Later) options underscores efforts to support SME growth through enhanced digital access and financial services.
Central Bank Digital Currency (CBDC)
Kazakhstan's development of the Digital Tenge represents a significant stride towards a digital economy, facilitating payments and transactions through pilot phases with second-tier banks and initiatives like digital vouchers and stablecoin frameworks. This initiative aims to modernize financial infrastructure and promote financial inclusion.
Digital Assets and Open Banking
The integration of digital assets through AIFC (Astana International Financial Centre) crypto exchanges and the development of Open Banking and Open API frameworks highlight Kazakhstan's commitment to fostering innovation and competition within its financial sector. These initiatives enable personalized financial services and facilitate broader financial ecosystem integration.
Comments (0)