South African-based fintech Ukheshe is working with Diamond Trust Bank (DTB) to develop an East African Banking-as-a-Service (BaaS) platform.

The BaaS strategy involves licenced banks directly integrating their digital banking services with the offerings of other non-bank enterprises. 

In this manner, a non-bank firm can provide its consumers with digital banking services such as mobile bank accounts, debit cards, loans, and payment services without the requirement to obtain their own banking licence.

According to Ukheshe, BaaS is predicted to develop at a compound annual growth rate of 25% in some markets, and this collaboration will allow both parties to stay ahead of this high growth curve.

"Ukheshe had been looking for a banking partner in the region, and when we met with DTB to explore these opportunities, several synergies immediately came to light," says Mark Dankworth, president, Business Development, Ukheshe Africa.

According to Dankworth, BaaS collaborations like this are the best answer for both sides, allowing banks and fintechs to compete with East Africa's leading mobile network carriers.

DTB's chief operating officer, Jamie Loden says: “Consumers are becoming more aware of the market's options and are beginning to favour convenience over cost.”

According to Loden, the collaboration is a mutually convenient means for DTB and Ukheshe to improve client acquisition.

"DTB will leverage Ukheshe's technology to drive innovation, improve financial service distribution, and offer services to its customers, while Ukheshe will leverage the bank's position to be able to operate within the market," he says.

According to Dankworth, the partnership will help Ukheshe meet regulatory requirements to expand to new markets, particularly in East Africa. He adds that it will allow the bank to rapidly grow its customer base and onboard fintech partners on DTB’s Astra platform.

The Astra platform has been launched in Kenya, with Uganda and Tanzania to follow in 2024.

It will enable fintechs, edtechs and other technology-enabled entities to work with a sponsoring bank, facilitate regulatory approval, and have access to multiple payment products, such as wallets, QR payments, digital KYC and virtual and physical cards, all through an API layer.

Dankworth says the collaboration with DTB will provide a template for Ukheshe's future market penetration ambitions.

In the long run, the collaboration will spur innovation and growth, he adds. "Driving digital banking services in such a way helps replace physical cash use, improving financial inclusion for end users and the market at large.”