Kenyan commercial banks are pushing back against the Central Bank of Kenya’s (CBK) proposal to build a new real-time payment system from scratch. Instead, they are urging an upgrade to the existing Pesalink platform, citing time and cost savings, as well as reduced disruptions.
In a letter dated October 25, 2024, the Kenya Bankers Association (KBA) proposed that the CBK leverage Pesalink, which is owned by the association’s fintech subsidiary, Integrated Payment Services Limited (IPSL). The KBA argues that building on Pesalink would allow the CBK to quickly and cost-effectively achieve its goal of a seamless Fast Payment System (FPS).
“This upgrade would see IPSL transition into a national switch, with changes in ownership, governance, and technology, incorporating CBK, banks, Safaricom, Kenswitch, and other licensed payment participants,” said John Gachora, KBA chairman and CEO of NCBA Bank.
CBK’s FPS Plan
The CBK announced plans for a new FPS on October 18, 2024, designed to enable instant transactions across banks and licensed payment service providers. Although no launch date has been set, commercial banks are advocating for a rapid rollout, emphasizing the importance of speed and cost-efficiency.
“A successful FPS requires careful consideration of execution speed and costs, ensuring all market players are seamlessly connected,” Gachora explained.
Kenya’s Fragmented Payments Landscape
Kenya’s current payment ecosystem is fragmented, with mobile money platforms like M-Pesa and Airtel Money operating separately from traditional banks. While mobile money allows for instant transfers between banks and wallets, it remains restricted to institutions with specific agreements. For example, some banks do not support transfers to Airtel Money wallets, creating challenges for customers.
Pesalink, used by 39 KBA member banks, offers person-to-person (P2P) transfers, but it has limited integration with mobile money platforms and fintechs. As a result, Pesalink users cannot transfer funds to mobile wallets, reducing its potential as a comprehensive payment solution.
Businesses also struggle with this fragmentation, as they must manage multiple systems for card payments, mobile wallets, and bank transfers. A unified payment system like the FPS could streamline these processes, allowing businesses to accept all forms of digital payments into a single account.
Mobile Money’s Dominance
Despite these challenges, mobile money remains the dominant payment method in Kenya. In 2024, mobile money processed over $300 billion, far exceeding traditional methods like cheques ($15.4 billion) and the Real-Time Gross Payment System ($21.6 billion).
CBK’s proposed FPS could revolutionize Kenya’s payments system by offering real-time, cross-platform payments that connect banks, mobile wallets, and fintechs, significantly improving the country’s financial ecosystem.
In Ghana, it is the Ghana Interbank Payment and Settlement Systems, a wholly owned subsidiary of the Bank of Ghana that provides the real time payment platform for the financial institutions to serve their customers.
