BANKING | Kenyan Banks Call for PesaLink Expansion Over Fears of the Proposed Fast Payment System by CBK

According to local reports, Kenyan banks are calling for the upgrade of the existing PesaLink system over a proposed plan by the Central Bank of Kenya (CBK) to build a fast payment system.

PesaLink is the existing real-time interbank money transfer service established by the Kenya Bankers Association (KBA) under the company Integrated Payments Service Limited (IPSL).

The system provides real-time payment services for the banking industry in Kenya. The ecosystem, today, consists of banks, payment service providers (PSPs) and savings and credit cooperative societies (SACCOs), and a telco.

However, it has significant limitations in integrating with fintechs and mobile money providers. For instance, PesaLink users are unable to make payments to mobile money wallets, which hinders its potential as a fully comprehensive digital payment solution.

The bankers association, chaired by John Gachora, CEO of NCBA Bank, wants an improvement of the PesaLink with the inclusion of more stakeholders including the Central Bank of Kenya.

“This would see IPSL transition to a national switch, with substantive changes in ownership, governance, technology, and business model to include CBK, banks, Safaricom, Kenswitch, and other licensed payment participants that the CBK would like incorporated,” said John Gachora, KBA chairman and CEO of NCBA Bank.

The bank also cautioned that a new system and the work to integrate it would present challenges related to time, costs, and other disruptions.

“In setting up a successful FPS, due consideration will need to be given to: the speed of execution to create the FPS and connect all players in the market, the costs to create it, and for the various players to configure their systems and operations to enable seamless transactions,” Gachora said.

In October 2024, CBK revealed its plans for a fast payments system (FPS), a system aimed at facilitating instant transactions across all financial institutions, including banks and licensed payment service providers.

Although CBK has yet to set a launch date, commercial banks are advocating for a rapid implementation, emphasizing that speed and cost-efficiency are essential for its success.