KCB Group, one of East Africa’s most formidable banking institutions, has executed another decisive move in its transformation from a traditional lender into a comprehensive financial technology powerhouse. In a public announcement dated October 31, 2025, the lender confirmed it has “entered into an agreement to acquire a minority stake in Pesapal Limited,” marking the second major fintech acquisition this year and signaling an aggressive strategic push to construct a “full-stack” financial ecosystem specifically designed for small and medium-sized enterprises.
Pesapal, founded in 2009 by Agosta Liko, has established itself as a household name for thousands of small businesses across Kenya, Uganda, Tanzania, and Rwanda. The company provides the critical payment infrastructure—including point-of-sale (POS) terminals and e-commerce checkout solutions—that powers daily sales for merchants throughout the region. Currently processing approximately 12 million transactions monthly, Pesapal represents a strategic asset that could fundamentally reshape KCB’s relationship with the SME sector.
Build the future you deserve. Get started with our top-tier Online courses: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Let Serrari Ed guide your path to success. Enroll today.
The Second Act in a Calculated Fintech Strategy
This acquisition arrives just eight months after KCB acquired a 75 percent majority stake in Riverbank Solutions in March 2025, a backend fintech company that provides core banking infrastructure and payment solutions. Riverbank Solutions, which has maintained a business relationship with KCB since 2013 by providing agency banking solutions, specializes in the technical “plumbing” that enables digital financial services to function seamlessly across borders.
When viewed together, these two acquisitions reveal a meticulously orchestrated strategy rather than opportunistic deal-making. KCB is systematically purchasing complementary pieces of the fintech ecosystem: Riverbank provides the backend infrastructure (the technical foundation and processing capabilities), while Pesapal delivers the frontend merchant-facing systems (POS terminals, e-commerce gateways, and customer touchpoints). This dual-pronged approach creates the potential for a vertically integrated, self-contained financial ecosystem where KCB controls every layer of the technology stack.
Paul Russo, KCB Group’s CEO who assumed leadership in 2022, has been explicit about the bank’s transformation ambitions. When announcing the Riverbank acquisition, Russo stated the goal was to “offer a full stack of solutions” and “step up the delivery of our value proposition to MSMEs,” with particular emphasis on “instant digitised lending.” The Pesapal deal represents the logical and powerful next step in actualizing that vision, providing the customer-facing layer that complements Riverbank’s backend capabilities.
The Hidden Value: A Data-Fueled Lending Machine
Beyond the surface-level benefits of expanded payment processing capabilities, the Pesapal acquisition provides KCB with something far more valuable in the modern banking landscape: real-time, granular merchant transaction data. This information represents a goldmine for a bank that has positioned itself as one of the region’s largest lenders to small and medium-sized enterprises.
Pesapal’s role as a payment processor gives it an unfiltered view into the daily cash flow of thousands of businesses. Every transaction processed through a Pesapal terminal generates data about sales volumes, transaction frequencies, seasonal patterns, customer payment behaviors, and overall business health. By acquiring a stake in Pesapal, KCB gains direct access to this real-time merchant intelligence—information that traditional banks struggle to obtain through conventional means.
This new capability could fundamentally disrupt and modernize the traditional, paper-intensive loan application process that has long plagued small business lending in East Africa. Currently, SMEs seeking credit must typically compile months of bank statements, tax records, inventory lists, and other documentation to prove their creditworthiness—a process that can take weeks or months and often results in rejection due to inadequate documentation rather than actual business viability.
Imagine instead a merchant using a Pesapal POS terminal at their retail shop. With KCB’s new access to payment data, the bank can observe that merchant’s sales performance in real-time: daily revenue, weekly trends, monthly growth patterns, and seasonal fluctuations. Armed with this information, KCB can bypass the traditional application process entirely and proactively offer pre-approved credit products.
Instant, Data-Driven Credit: The B2B BNPL Revolution
The merchant might receive a notification directly on their Pesapal terminal: “You’ve processed KES 500,000 in sales this month with consistent daily revenue. Click here to access instant inventory financing of KES 100,000 at competitive rates.” This represents a fundamental reimagining of business lending—transforming it from a reactive, application-based model to a proactive, data-driven offer system.
This approach mirrors the “Buy Now, Pay Later” (BNPL) model that has disrupted consumer finance globally, but adapts it for business-to-business lending. Merchants could access working capital instantly for inventory purchases, equipment upgrades, or operational expenses, with repayment automatically structured around their demonstrated cash flow patterns. The credit decision is informed by actual business performance rather than historical financial statements or credit scores that may not accurately reflect an informal sector business’s true capacity.
For KCB, this data-driven lending model offers multiple advantages. First, it dramatically reduces underwriting costs by automating credit assessment. Second, it minimizes default risk by basing lending decisions on current business performance rather than backward-looking documentation. Third, it creates a powerful customer acquisition and retention tool—merchants who receive convenient, fairly-priced credit through their payment terminal are unlikely to switch to competing payment providers or banks.
The timing is particularly strategic given Kenya’s evolving financial services landscape. The Central Bank of Kenya has been actively promoting digital financial inclusion and has authorized numerous payment service providers under the National Payment System Act 2011 and National Payment System Regulations 2014. However, most payment providers focus purely on transaction processing without offering integrated credit products—a gap KCB is positioned to exploit.
Building the Bank-Led Super App
This comprehensive strategy suggests KCB has grown weary of playing defensive against more agile fintech competitors and mobile network operator-led financial services. Rather than ceding ground to disruptors, the bank is now constructing its own “bank-led” challenger platform that can compete directly with dominant players like Safaricom’s M-Pesa and bank-agnostic international gateways such as Flutterwave and Paystack.
By combining its own banking license and substantial loan book (KCB Group reported assets of approximately KSh 2.0 trillion as of recent financials) with Riverbank’s backend infrastructure and Pesapal’s extensive merchant network, KCB can create a “closed-loop” financial ecosystem. Within this system, KCB controls the payment rails (how money moves), the transaction data (understanding business performance), and the resulting credit products (providing financing based on that data).
This full-stack control provides KCB with significant competitive advantages. Traditional banks must coordinate with external payment processors, integrate disparate data systems, and navigate complex partnerships to deliver comparable services. KCB’s vertically integrated approach allows it to build and deploy new financial products with the speed and agility of a technology company rather than being constrained by the bureaucratic processes typical of large financial institutions.
Consider the possibilities this ecosystem enables: A merchant signs up for a Pesapal payment terminal, which is provided through KCB’s distribution network. They process payments using Pesapal’s technology, which runs on Riverbank’s infrastructure. KCB observes their transaction patterns and offers tailored credit products. The merchant accepts financing, which is disbursed instantly through the same payment terminal. Repayments are automatically deducted from daily sales processed through the terminal. Insurance products, savings accounts, investment opportunities, and other financial services can be layered into this same ecosystem.
For Pesapal, which had previously secured VAT exemption from the Kenyan High Court in September 2025—a ruling that recognized it as a licensed payment service provider rather than merely a technology platform—this partnership provides substantial strategic benefits. The company gains the regulatory backing, deep financial resources, and established distribution network of a Tier 1 banking institution.
This support provides Pesapal with serious competitive ammunition in its ongoing battles against both regional competitors (such as Kenya’s JamboPay, iPay Africa, and KopoKopo) and international payment platforms (including Flutterwave, Paystack, and others) that have been expanding aggressively into East African markets. The backing of KCB could enable Pesapal to offer more competitive pricing, invest more heavily in technology development, and expand more rapidly into underserved market segments.
One decision can change your entire career. Take that step with our Online courses in ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Join Serrari Ed and start building your brighter future today.
The Regional Context: East Africa’s Fintech Battlefield
The competitive dynamics driving KCB’s strategy extend across East Africa’s rapidly evolving fintech landscape. Kenya, in particular, has emerged as a global leader in mobile money adoption, with Safaricom’s M-Pesa processing billions of dollars in transactions annually and serving as the primary financial infrastructure for millions of Kenyans. However, M-Pesa’s dominance has historically been in person-to-person transfers and basic bill payments rather than comprehensive merchant services.
This has created an opening for payment processors like Pesapal that specialize in merchant services—accepting card payments, providing e-commerce integration, offering inventory management tools, and delivering business analytics. According to industry data, approximately 69 percent of Kenyan businesses report significant benefits from adopting digital payments, including easier financial tracking, quicker transactions, and reduced errors from cash handling.
Yet despite this adoption, many small businesses remain underserved by comprehensive financial services. They can accept digital payments but struggle to access credit, manage cash flow, obtain insurance, or access other financial products that could accelerate their growth. KCB’s integrated ecosystem approach directly addresses this gap by bundling payments, data, credit, and other services into a unified platform.
Internationally, similar strategies have proven successful. In China, Ant Financial (now Ant Group) leveraged its Alipay payment platform to build an enormous financial services empire offering everything from payments and lending to wealth management and insurance. In Latin America, companies like Nu pay and MercadoLibre have combined payments, lending, and other financial services to serve previously underbanked populations. In Africa, companies like Interswitch in Nigeria have built substantial businesses by controlling payment infrastructure and layering financial services on top.
Regulatory Approval: The Critical Hurdle
Despite the strategic logic, the Pesapal acquisition remains subject to completion conditions, most critically “regulatory approvals from the Central Bank of Kenya.” The CBK has been actively working to balance financial innovation with consumer protection and system stability, particularly as fintech companies increasingly blur the traditional boundaries between banking and non-banking financial services.
The central bank’s regulatory approach has evolved considerably in recent years. The National Payment System Act 2011 and its accompanying regulations provide a framework for authorizing and overseeing payment service providers, but questions remain about how such regulations apply when traditional banks acquire significant stakes in fintech companies. Will the combined entity face enhanced scrutiny? Will there be conditions on data sharing or customer protection? Could the central bank require structural separations between banking and payment processing activities?
These questions are not merely academic. Kenya has witnessed several fintech regulatory interventions in recent years, including the controversial interest rate cap that was imposed and later repealed, regulations around digital credit providers, and ongoing debates about mobile money interconnection and interoperability. The CBK has demonstrated a willingness to intervene when it perceives risks to consumers or threats to financial stability.
However, the regulator has also shown interest in promoting innovation and competition. The bank has authorized numerous payment service providers, supported digital financial inclusion initiatives, and worked to create an environment where both traditional banks and fintech companies can operate. KCB’s acquisition of Pesapal, if structured appropriately, could be viewed as beneficial consolidation that brings greater resources and stability to a critical payment service provider.
The approval process will likely examine several key factors. First, does the transaction create unhealthy market concentration? KCB is already one of the largest banks in East Africa, and Pesapal is a significant payment processor—their combination might raise competition concerns if it’s perceived to limit choices for merchants or create barriers for competing payment providers.
Second, how will customer data be managed and protected? The ability to link payment transaction data with banking relationships raises privacy questions that regulators increasingly prioritize. The CBK will want assurance that merchants’ transaction data is handled appropriately, used only for legitimate purposes, and protected from misuse.
Third, does the transaction create new systemic risks? If a significant portion of merchant payments flows through KCB-controlled infrastructure, what happens if technical failures, cyber-attacks, or operational problems occur? The regulator will want confidence that appropriate risk management, business continuity, and disaster recovery measures are in place.
The Competitive Response: How Will Rivals React?
As KCB’s strategy becomes clearer, competing banks and fintech companies will inevitably respond. Several Kenyan banks have been developing their own digital strategies, though perhaps less comprehensively than KCB’s full-stack approach.
Equity Bank, another major regional player, has made significant investments in digital channels and fintech services, including its Equitel mobile virtual network operator initiative and various agency banking partnerships. Co-operative Bank has developed merchant payment services and digital platforms. Absa Bank Kenya and Standard Chartered have leveraged their international parent companies’ technology investments to enhance digital offerings.
These banks may feel pressure to pursue similar acquisition strategies or partnerships to avoid being left behind as KCB builds its integrated ecosystem. This could trigger a wave of consolidation in Kenya’s fintech sector, with traditional banks acquiring payment processors, lending platforms, and other fintech companies to assemble comparable full-stack capabilities.
International fintech companies operating in Kenya may also need to reassess their strategies. Flutterwave, which received regulatory name approval from the Central Bank of Kenya in 2023 and committed approximately KSh 7.3 billion to expand operations in Kenya, offers comprehensive payment services that compete directly with Pesapal. Paystack, acquired by Stripe and focused on merchant services across Africa, similarly competes for the same merchant customers.
These international players have advantages in terms of cross-border capabilities, connections to global payment networks, and access to sophisticated technology. However, KCB’s advantage lies in its local market knowledge, existing customer relationships, physical distribution network, and—crucially—its banking license, which allows it to offer credit products that pure-play fintech companies cannot provide without partnering with licensed financial institutions.
The mobile network operators represent another set of formidable competitors. Safaricom’s M-Pesa has begun moving beyond simple person-to-person transfers into merchant services, business payments, and even lending through partnerships with banks. Airtel Money and other mobile money providers are following similar paths. These telco-led platforms have massive user bases, strong brand recognition, and extensive agent networks—assets that could be leveraged to build comprehensive financial service offerings.
The Path Forward: From Deal to Delivery
The market signal from KCB’s announcement is unambiguous: the bank isn’t merely acquiring fintech companies for defensive purposes or to appear innovative. Rather, it’s systematically absorbing complementary capabilities to construct a powerful new financial infrastructure designed specifically for the small business segment.
If successfully integrated, the combination of KCB’s banking capabilities, Riverbank’s backend infrastructure, and Pesapal’s merchant network could create a genuinely differentiated offering in East Africa’s competitive financial services market. The ability to provide seamless payments, instant credit, business management tools, and other services through a unified platform addresses real pain points that small businesses currently face when navigating fragmented financial services providers.
Success, however, is far from guaranteed. Integrating acquired companies is notoriously difficult, particularly when they operate in different segments with distinct cultures, technologies, and business models. KCB will need to navigate numerous challenges:
Technology integration: Connecting Riverbank’s systems, Pesapal’s platform, and KCB’s core banking infrastructure into a seamless ecosystem will require significant technical effort. APIs must be built, data formats standardized, and security protocols harmonized.
Cultural alignment: Banks and fintech companies typically operate with very different organizational cultures, decision-making processes, and risk tolerances. Merging these cultures while retaining the agility and innovation that made the fintech companies attractive acquisition targets is a delicate balance.
Regulatory compliance: Ensuring that the combined entity meets all regulatory requirements across banking, payments, data protection, and consumer protection domains will require careful coordination and potentially significant compliance investments.
Talent retention: The key personnel at Riverbank and Pesapal—including founders, senior executives, and critical technical staff—must be retained and motivated to continue building the business rather than departing for new ventures.
Customer communication: Existing customers of both KCB and Pesapal will need to understand how the relationship benefits them, what changes to expect, and why they should remain engaged with the combined platform rather than exploring alternatives.
The Broader Implications: Reshaping African Banking
Beyond the immediate business implications, KCB’s strategy offers insights into how traditional banking institutions across Africa might respond to fintech disruption. For years, the narrative has been that agile, technology-native fintech startups would steadily erode traditional banks’ market share, particularly in payments and lending to underserved segments.
However, KCB’s approach demonstrates an alternative path: rather than competing with fintech companies, traditional banks can acquire them, integrate their capabilities, and leverage the bank’s existing advantages—regulatory licenses, established customer relationships, large balance sheets, and physical distribution networks—to create hybrid institutions that combine the best of both worlds.
This “bank-led fintech” model could become increasingly common across Africa as traditional financial institutions seek to defend and expand market share. Rather than the predicted disruption where fintechs replace banks, we may instead see consolidation where banks absorb fintech capabilities and redeploy them at scale using banking infrastructure.
For African fintech startups, this trend presents both opportunities and challenges. On one hand, the prospect of acquisition by major banks provides potential exit opportunities for founders and investors. On the other hand, competition becomes more difficult when well-capitalized banks enter fintech domains with acquired capabilities and integrated offerings.
For consumers and small businesses—the ultimate stakeholders—the outcome will depend on whether these integrated platforms actually deliver better services at competitive prices, or whether consolidation reduces competition and innovation. Regulatory bodies like the Central Bank of Kenya will play a crucial role in ensuring that market power is not abused and that customers benefit from innovation.
Conclusion: The War for Africa’s SME Wallet Intensifies
KCB Group’s acquisition of a minority stake in Pesapal, following its earlier majority acquisition of Riverbank Solutions, represents far more than isolated business transactions. These deals signal a comprehensive strategic repositioning of one of East Africa’s largest banks—transforming from a traditional lender into an integrated financial technology platform specifically designed to serve small and medium-sized enterprises.
The combination of payment infrastructure (Pesapal), backend technology (Riverbank), and banking services (KCB) creates the foundation for a powerful ecosystem where merchants can access everything from payment processing and working capital to inventory management and business analytics through a unified platform. The real strategic asset is the data generated by this ecosystem—real-time merchant transaction information that enables precise, instant credit decisioning and proactive financial product offerings.
While regulatory approval from the Central Bank of Kenya remains pending, and integration challenges lie ahead, the strategic intent is unmistakable. KCB is not merely defending its existing business against fintech disruption; it’s actively absorbing fintech capabilities to build a challenger platform that can compete directly with mobile money operators, international payment gateways, and other digital financial service providers.
For the thousands of small businesses across Kenya and East Africa that struggle to access appropriate financial services—businesses that can accept digital payments but can’t access credit, or that can obtain loans but lack sophisticated cash flow management tools—KCB’s integrated platform could genuinely improve their access to financial services. The question is whether the bank can successfully execute this ambitious vision and deliver on the promise of seamless, data-driven financial services at scale.
As Mark Mwongela Ngungi, former Pesapal CEO who was appointed as KCB’s first Group Director of Strategy and Innovation in June 2025, works to implement the group’s strategy and drive innovation across the business, the war for the African SME’s wallet has intensified dramatically. Traditional boundaries between banks, payment processors, and fintech companies are dissolving, replaced by integrated platforms competing to own the entire customer relationship.
The coming months will reveal whether KCB’s bold strategy succeeds in creating a genuinely differentiated platform, or whether the challenges of integration, regulation, and competition prove too difficult to overcome. But regardless of the outcome, the bank’s aggressive moves have fundamentally altered East Africa’s financial services landscape—and forced every competitor to reconsider their own strategies for serving the region’s millions of small businesses.
Ready to take your career to the next level? Join our Online courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨
Track GDP, Inflation and Central Bank rates for top African markets with Serrari’s comparator tool.
See today’s Treasury bonds and Money market funds movement across financial service providers in Kenya, using Serrari’s comparator tools.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
3rd November, 2025
Article, Financial and News Disclaimer
The Value of a Financial Advisor
While this article offers valuable insights, it is essential to recognize that personal finance can be highly complex and unique to each individual. A financial advisor provides professional expertise and personalized guidance to help you make well-informed decisions tailored to your specific circumstances and goals.
Beyond offering knowledge, a financial advisor serves as a trusted partner to help you stay disciplined, avoid common pitfalls, and remain focused on your long-term objectives. Their perspective and experience can complement your own efforts, enhancing your financial well-being and ensuring a more confident approach to managing your finances.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to consult a licensed financial advisor to obtain guidance specific to their financial situation.
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an as-is basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2025
