The Central Bank of Kenya (CBK) is spearheading an ambitious initiative to revolutionize the nation’s payment infrastructure with the introduction of the Fast Payment System (FPS). This groundbreaking system aims to facilitate instantaneous financial transactions across a wide array of financial entities, including banks and payment service providers (PSPs). The CBK has yet to announce an official launch date for the FPS.
The FPS is designed to address the long-standing issue of interoperability between different payment systems, enabling Kenyans to effortlessly conduct a variety of transactions such as bill payments and money transfers, irrespective of their banking affiliation.
Previously, in an effort to resolve interoperability challenges, Pesalink was introduced in 2015 as a collaborative payment switch among Kenyan banks and other financial institutions. Pesalink’s role in facilitating electronic transactions across banks, mobile money platforms, and other financial entities has been significant, yet it lacks a dedicated segment for utility payments. The future position of Pesalink in the wake of the FPS rollout remains uncertain.
In February 2024, the CBK initiated discussions with key industry stakeholders to conceptualize a new payment system. This led to the formation of the CBK-Industry Technical Working Group, tasked with the development of the FPS. The CBK envisions the FPS as a system that will integrate various payment services provided by financial institutions, allowing customers to send and receive money instantly from anyone, at any time, and from anywhere, without the constraints of institutional affiliation, as per a statement released to TechCabal.
Discussions on payment system interoperability among East African nations began in 2014, with the CBK making significant strides in 2018 and 2022 by introducing interoperability for person-to-person and merchant payments, respectively. This enabled customers from numerous local banks to settle utility bills and other services without being confined to a single banking payment channel.
Despite these advancements, the CBK acknowledges that the current interoperability solutions face considerable challenges, such as the absence of a centralized switching mechanism, reliance on expensive bilateral agreements, and closed system architectures. The CBK, in conjunction with industry leaders, is committed to overcoming these obstacles.
Their goal is to prevent redundant systems, reduce dependence on fragmented domestic and international payment systems, and establish a robust, open, and fully interoperable Digital Public Infrastructure (DPI). The successful implementation of the FPS is expected to significantly enhance the accessibility of financial services for Kenyans, boost economic activity, and expedite the velocity of payments throughout the country.
