The Central Bank of Kenya (CBK) has announced its plans to develop a new instant payment system which will be the biggest advance the country’s money transfer network has seen so far. The Fast Payment System enables instant transaction settlements across all financial organisations like banks, fintechs and other payment service providers (PSPs).
With this system, Kenyans will be able to pay bills, send money and receive regardless of their bank therefore fixing the interoperability problem that has long plagued payment systems in the country.
Plans for the FPS began way back in 2014 when the CBK kickstarted talks with the industry’s players, forming a working group to research and develop it.
“Existing forms of interoperability have major challenges. They lack a centralised switching mechanism, use costly bilateral arrangements, and are closed in nature. This has prevented players in the payments ecosystem from participating in an open and fully integrated system. These challenges lead to additional cost and inconvenience to customers and has affected Kenya’s global standing as a leader in payments innovation and financial inclusion,” CBK said in a statement.
“CBK and industry leaders are aligned on the need to address these challenges to mitigate the risk of duplication, reliance on fragmented domestic and international payment systems and lay the foundation for an open and fully interoperable Digital Public Infrastructure (DPI).”
This is expected to affect one particular player, Pesalink, a payment switch by Kenyan financial institutions designed to facilitate electronic transactions to fix these interoperability issues.
It will also be interesting to see how mobile money services like M-PESA stand once FPS is activated since they acted as a good alternative for P2P payments that couldn’t be done between banks quickly enough.
