Kazakhstan’s Fintech Sector: A Model for Developing Economies
Kazakhstan, the largest landlocked country in the world, has been making significant strides in the fintech sector, emerging as a leader in Central Asia. This ascent has been facilitated by government policies that have accelerated developments in the country. While cybersecurity threats present challenges, they are by no means insurmountable.
With over 50% of Central Asia’s GDP and the highest internet usage proportionate to its population in the region, Kazakhstan has positioned itself as a frontrunner in financial technology. This unexpected emergence can be attributed to the country’s digital infrastructure investment, focus on digital inclusion, and forward-thinking policies, making it an ideal testing ground for digital solutions.
The deliberate focus on digital inclusion and infrastructure investment in Kazakhstan has paved the way for the country to become a prime example of how developing economies can leverage fintech to address longstanding challenges and create new opportunities.
Laying the Groundwork for Fintech Success
Kazakhstan’s journey as a fintech hub began with investments in robust digital infrastructure and the promotion of digital literacy among its population. By 2023, internet penetration in the country had reached an impressive 92.88%, comparable to countries like Germany and Finland. The adoption of mobile technology has also been high, with over 91% of Kazakhstani aged 15 and older having access to a mobile phone with internet capabilities.
The financial sector in Kazakhstan has also seen significant digitalization, with active online banking users surging nearly five-fold between 2019 and 2023. Cashless transactions have seen a substantial increase, reaching $158 billion in 2022 from $5 billion in 2017, with a 98% compound annual growth rate. Legislative initiatives, such as the 2023 Digital Assets Law, have created a supportive regulatory environment for the banking sector to embrace fintech advancements.
By 2024, 31% of financial institutions in Kazakhstan had implemented artificial intelligence technologies for fraud prevention, cybersecurity, and service personalization. Major banks have been acquiring promising startups to enhance their digital capabilities, with virtual cards comprising 37% of total card issuance and 90% of transactions being cashless.
Reaching the Unreachable: Innovating for Financial Inclusion
Kazakhstan faced the challenge of providing financial services to its rural population, leading to innovative solutions in the fintech sector. In 2023, the country launched the world’s first digital tenge payment card in partnership with Visa, the National Payment Corporation, and leading banks. This technology enabled individuals in remote areas to access financial services without the need for physical bank branches.
Other initiatives, such as the development of biometric identification systems and mobile payment solutions, have further promoted financial inclusion by bridging the gap for those in geographically isolated regions. These innovations have provided secure and convenient access to digital financial services for underserved populations.
Policies Paving the Way
Government policy decisions have played a crucial role in shaping Kazakhstan’s fintech landscape. The “Digital Kazakhstan” program introduced in 2017 focused on digital literacy and laid the foundation for further fintech developments. The government’s “Digital Transformation Concept” in 2023 provided a roadmap for fostering digital and financial advancements, with initiatives like a regulatory sandbox for testing innovative financial products.
The establishment of the Astana International Financial Centre (AIFC) in 2018, offering a special legal regime for fintech companies, has attracted international investors and signaled Kazakhstan’s openness to business. The fintech sector in Kazakhstan has attracted significant venture capital investment, with a notable increase in funding in recent years.
The Dual Challenge of Growth and Security
As Kazakhstan’s fintech sector has grown, so have the cybersecurity risks associated with it. The country has been proactive in addressing these threats through initiatives like “Cybershield Kazakhstan,” a national program aimed at strengthening digital defenses and training security specialists. Collaboration with neighboring countries and international financial centers has further bolstered Kazakhstan’s position as a regional leader in fintech.
By balancing growth with security concerns and building regional alliances, Kazakhstan has set an example of sustainable digital economy growth. The country’s journey from a resource-dependent economy to a fintech leader offers valuable lessons for developing nations worldwide, emphasizing the importance of targeted innovation in driving economic and social empowerment.
Developing economies have the advantage of not being burdened by outdated infrastructures, making them well-positioned to embrace digitalization and innovation. Kazakhstan’s experience serves as a model for how developing nations can leverage fintech to address challenges, create opportunities, and drive economic growth in the digital age.
