Kenya’s digital payments landscape’s digital payments landscape may be experiencing a significant shift as Safaricom and the Kenya Bankers Association (KBA) propose an industry-led approach to streamlining transactions. The two entities have submitted a proposal recommending Pesalink as the country’s preferred fast payment system (FPS), arguing that its existing infrastructure makes it the most viable option.
Rather than building an entirely new FPS or relying on multiple private switches, the proposal suggests enhancing Pesalink; an initiative operated by KBA’s fintech arm, Integrated Payment Services Limited (IPSL).
Currently, Pesalink facilitates transactions worth $8.5 billion (KES1.1 trillion) annually, making it a significant player in Kenya’s financial ecosystem.
“In this scenario, CBK, banks, mobile money operators, switches, SACCOs, and fintechs use an existing industry player,” stated Safaricom and KBA in the proposal. “In effect, the existing industry player, in this case IPSL, is designated as the FPS, making the required changes to meet the requirements for neutrality.”
This proposal comes as Kenya’s payments ecosystem becomes increasingly complex. Various financial entities including banks, SACCOs, and fintech firms operate through private agreements to connect with mobile money platforms. This will result in a fragmented system with varying transaction costs and service inconsistencies.
Building a new FPS from scratch is estimated to cost at least $200 million (KES 25.9 billion) and could take up to four years to implement. Upgrading Pesalink, on the other hand, would require fewer resources and allow for a faster rollout of an improved payment system.
However, for Pesalink to serve as Kenya’s national FPS, it must undergo major upgrades. Safaricom and KBA emphasize Pesalink’s ability to process up to 6,000 transactions per second, ensuring better security, risk management, and cross-platform. The suggestion would also mean that pre-existing industry players such as mobile money operators, banks, and fintech companies should be able to use the upgraded platform, making the payment landscape more unified and efficient.
While Safaricom and KBA see this as the most efficient approach, they acknowledge that other models exist. One alternative is Colombia’s multi-switch system, where multiple private payment networks operate under a central regulator such as the Central Bank of Kenya (CBK).
As the CBK reviews the proposal, industry players anticipate the regulator’s decision. If approved, Pesalink could soon become the backbone of Kenya’s digital payments, enabling seamless transactions between mobile money providers, banks, and fintech firms.
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