Kenya’s central bank plans instant payment system across all banks and fintechs 

The Central Bank of Kenya (CBK) wants to develop a new instant payment system, the biggest advance in the country’s money transfer network. The system, called Fast Payment System (FPS), will allow instant transactions across all financial institutions, including banks and payment service providers (PSPs). The Central Bank did not disclose the launch date for FPS. 

FPS will allow Kenyans to pay bills, send money, and other transactions regardless of their bank. It is a project that seeks to fix the interoperability issue that has made it a pain for payment systems to speak to each other.

Pesalink, a payment switch by Kenyan banks and other financial institutions that facilitates electronic transactions between banks, mobile money providers, and other financial institutions in Kenya, was launched in 2015 to fix the interoperability issues. However, it does not have a utility payments segment, and it is not immediately clear where Pesalink will stand once FPS is activated.

In February 2024, the regulator began talks with industry players on a new payment system and formed a working group—CBK-Industry Technical Working Group—to develop it. 

“(FPS) will integrate certain aspects of payment services that are offered by financial institutions. FPS will enable customers to send and receive money instantly from anyone, anytime, anywhere, regardless of the type of institution a customer belongs to,” the CBK said in a statement seen by TechCabal. 

In 2014, East African countries started talking about interoperability. The CBK made progress in 2018 and 2022 with person-to-person and merchant payments interoperability, respectively. Tens of local banks allow customers to pay for utilities and other services without being locked into one banking payment channel. 

“However, existing forms of interoperability have major challenges. They lack a centralised switching mechanism, use costly bilateral arrangements, and are closed in nature,” the CBK said, clarifying the need for FPS.

“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).” 

Once implemented, FPS will make it easier for Kenyans to access financial services and stimulate economic activity through faster payments.