Strategic Responses to Environmental Challenges and Competitive Advantage of Fintech Firms in Kenya

Abstract

Fintech companies major in the solving of financial problems by use of technology and hence they majorly invest in new ways of lending money to consumers and news ways of making or receiving payments. Rapid change in technology in the payments sector has changed the trend in the usage of the traditional banking models, by increasing financial inclusion as well as efficiency and effectiveness in financial services delivery. The objectives of the study were to identify the environmental challenges faced by Fintech companies in Kenya; to determine the response strategies adopted by Fintech companies in Kenya to the environmental challenges in the payment industry; and to examine if these response strategies adopted by the Fintech firms affect their competitive advantage. This study adopted a descriptive research design and the target population was the 114 departmental heads in the marketing, finance and product development departments in the thirty eight (38) Fintech companies in Kenya. A census was conducted. The study used primary data that was collected by use of a questionnaire. Thematic content analysis was used in the analysis of qualitative data. In addition, inferential statistics and descriptive statistics were utilized in the analysis of quantitative data. Quantitative data analysis was done with the help of SPSS) version 21. Descriptive statistics comprises of standard deviation, mean, frequencies and percentages. The study found that political factors, economic factors, technological factors and regulatory factors were affecting Fintech companies. However, business environment factors and social factors were not significantly affecting Fintech companies. The study also established that Fintech companies were using strategic responses such as cost leadership strategy, differentiation strategy and strategic alliances. Differentiation, cost leadership and merger and acquisitions strategies had a positive and a significant effect on the competitive advantage of Fintech companies in Kenya. However, focus and strategic alliance strategies had no significant effect on the competitive advantage of Fintech companies in Kenya. The study recommends that the government of Kenya should come up with strong monetary policies to reduce inflation and interest rates and at the same time reduce the foreign exchange rates. The study also recommends that the government of Kenya should ensure that the security and political environment calmness so as to create an appropriate business environment Fintech companies as well as other companies in Kenya.