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Safaricom, Kenyan banks claim Central Bank's new payment system could cost $200m

Safaricom, Kenyan banks claim Central Bank’s new payment system could cost $200m


Safaricom and Kenyan commercial banks claim the Central Bank’s (CBK) plan to build a fast payment system (FPS) could cost at least $200 million (KES25.9 billion) and take up to four years to complete. 

The FPS aims to enhance interoperability across the payments landscape and reduce transaction costs, but Safaricom and the Kenyan Bankers Association (KBA) argue that it could duplicate existing infrastructure and lead to inefficiencies that could slow innovation in Kenya’s financial sector.

In their joint report, Safaricom and the Kenya Bankers Association (KBA) recommended that the CBK should instead enhance existing payment systems such as Pesalink—already used for peer-to-peer payments between banks—rather than creating a costly new system from scratch. While acknowledging the potential benefits of FPS, both organisations question the $200 million price tag and lengthy timeline. 

A key concern raised by KBA and Safaricom is the Special Purpose Vehicle (SPV) proposed to manage and operate the FPS. The SPV would be owned by the CBK (60%), Safaricom (20%), and commercial banks  (20%). It would require legislative amendments, including amendments to the Central Bank of Kenya Act, the National Payment Systems Act, the National Payment Systems Regulations of 2014, the e-money Regulations of 2013 and an initial investment of $30 million.

The proposed SPV structure would make the FPS a state-owned enterprise under the CBK’s majority control. According to the report, this could introduce bureaucratic delays, slowing innovation.

 “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 operationalised,” the proposal said.

While the CBK has not disclosed whether it will pursue the SPV model or upgrade existing infrastructure like Pesalink or M-Pesa, Safaricom and the KBA suggest enhancing existing infrastructure is a cheaper, timely option.

The CBK did not respond to multiple requests for comments.

Not suitable for mobile money market

Another significant concern is the mobile market in Kenya, one of the most advanced in the world. Platforms like M-Pesa and Airtel Money dominate the landscape, reporting billions of dollars in transaction value annually. According to Safaricom and the KBA, the proposed FPS model may not be suited to a mobile money-oriented market.

“It is a high-risk approach as it is an unproven model in a market where payments are predominantly digital and mobile-based. Most FPS implementations from other markets started when cash and/or card payments were dominant,” said the Safaricom and KBA report.

While the report does not address the views of other payment service providers (PSPs), Safaricom and KBA advocated upgrading existing payment systems, a model adopted by Zimbabwe. This would mean designating an existing system, such as M-Pesa or Pesalink, as the primary operator of the FPS.

Instead of creating a new system, Safaricom and KBA propose broadening the ownership of the existing system to include CBK and other payment service providers, SACCOs, micro-finance banks, and other players who may wish to take a direct stake.

Whatever the route CBK takes, payment experts believe that the FPS will lower transaction costs and ease funds transfer across different platforms.

“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,” said Alfred Ongere, former Payless Africa chief technology officer.

The existing payment infrastructure is fragmented, with mobile money platforms operating in silos from other financial institutions. Banks, Saving and Credit Cooperative Organisations (SACCOs) and other payment providers need separate agreements to plug into mobile platforms like M-Pesa and Airtel Money. 

At the moment, Pesalink only caters to banks, locking out other financial institutions. 

The CBK is expected to issue further guidelines in the coming months. However, the debate over an optimal payment system highlights the delicate balance to maintain Kenya’s progress in mobile and digital payments.

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