Safaricom and Kenyan commercial banks are voicing strong concerns over the Central Bank of Kenya’s (CBK) proposal to create a Fast Payment System (FPS), a project estimated to cost $200 million and take up to four years to implement.
While the FPS aims to enhance interoperability across payment platforms and reduce transaction costs, critics argue that it could duplicate existing systems, stifle innovation, and create inefficiencies in Kenya’s already advanced financial sector.
In a joint report, Safaricom and the Kenya Bankers Association (KBA) questioned the necessity of building an entirely new infrastructure when existing solutions could achieve similar goals at a significantly lower cost. Specifically, they recommend enhancing systems such as Pesalink, which facilitates peer-to-peer payments between banks, instead of creating a new payment system.
The report also raised concerns about the proposed Special Purpose Vehicle (SPV) that would manage and operate the FPS. The SPV is estimated to require a $30 million initial investment and legislative changes to multiple laws, including the Central Bank of Kenya Act and the National Payment Systems Act. Ownership of the SPV would be split between CBK (60%), Safaricom (20%), and commercial banks (20%).
Critics argue that the creation of the SPV could lead to inefficiencies, as it might result in a state-controlled enterprise with potential bureaucratic delays. The report states, “The creation of an SPV may mean that streamlining regulations that would deliver immediate benefits within the current payment landscape may be delayed until the SPV and FPS are operationalized.”
Kenya’s payments ecosystem is heavily mobile-based, with platforms like M-Pesa and Airtel Money seeing billions of dollars in transactions annually. Given the dominance of mobile money, Safaricom and KBA warn that the FPS model, which has been implemented in markets dominated by cash and card payments, might not suit Kenya’s unique payment environment. “It is a high-risk approach in a market where payments are predominantly digital and mobile-based,” the report notes.
Instead of introducing a new system, Safaricom and KBA advocate for upgrading existing infrastructure, such as M-Pesa or Pesalink. They suggest broadening ownership of these systems to include CBK, SACCOs, micro-finance banks, and other payment service providers, similar to strategies in countries like Zimbabwe, where existing systems have been leveraged to build new payment frameworks.
Kenya’s payment ecosystem is fragmented, with mobile money platforms, such as M-Pesa, disconnected from banks and other financial institutions. Pesalink, for instance, currently only serves banks, leaving out SACCOs and other important players. While the FPS could potentially unify these platforms and reduce transaction costs, experts emphasize that careful implementation is key to ensuring its success and avoiding disruption in an already robust digital payment environment.
The CBK has yet to finalize its decision on whether to proceed with the FPS or enhance existing systems like Pesalink and M-Pesa. Industry experts, such as Alfred Ongere, former CTO of Payless Africa, see both opportunities and risks in the FPS proposal. Ongere notes, “It will create opportunities for smaller players but could also raise entry barriers for them. It will drive innovation in Kenya’s payments industry, with both small and large service providers pushed to offer better solutions.”
As the debate continues, the future of Kenya’s payment landscape hangs in the balance, with stakeholders urging a more measured approach to fostering innovation and improving financial inclusion.
