Safaricom and Kenyan business banks declare the Central Financial institution’s (CBK) plan to construct a quick fee system (FPS) might value not less than $200 million (KES25.9 billion) and take as much as 4 years to finish. 

The FPS goals to reinforce interoperability throughout the funds panorama and cut back transaction prices, however Safaricom and the Kenyan Bankers Affiliation (KBA) argue that it might duplicate current infrastructure and result in inefficiencies that might sluggish innovation in Kenya’s monetary sector.

Of their joint report, Safaricom and the Kenya Bankers Affiliation (KBA) advisable that the CBK ought to as an alternative improve current fee programs similar to Pesalink—already used for peer-to-peer funds between banks—reasonably than making a expensive new system from scratch. Whereas acknowledging the potential advantages of FPS, each organisations query the $200 million price ticket and prolonged timeline. 

A key concern raised by KBA and Safaricom is the Particular Objective Car (SPV) proposed to handle and function the FPS. The SPV could be owned by the CBK (60%), Safaricom (20%), and business banks  (20%). It will require legislative amendments, together with amendments to the Central Financial institution of Kenya Act, the Nationwide Cost Methods Act, the Nationwide Cost Methods Laws of 2014, the e-money Laws of 2013 and an preliminary funding of $30 million.

The proposed SPV construction would make the FPS a state-owned enterprise beneath the CBK’s majority management. In line with the report, this might introduce bureaucratic delays, slowing innovation.

 “The creation of an SPV might imply that streamlining rules that might ship quick advantages inside the present fee panorama could also be delayed till the SPV and FPS are operationalised,” the proposal stated.

Whereas the CBK has not disclosed whether or not it’ll pursue the SPV mannequin or improve current infrastructure like Pesalink or M-Pesa, Safaricom and the KBA recommend enhancing current infrastructure is a less expensive, well timed choice.

The CBK didn’t reply to a number of requests for feedback.

Not appropriate for cellular cash market

One other vital concern is the cellular market in Kenya, some of the superior on the planet. Platforms like M-Pesa and Airtel Cash dominate the panorama, reporting billions of {dollars} in transaction worth yearly. In line with Safaricom and the KBA, the proposed FPS mannequin is probably not suited to a cellular money-oriented market.

“It’s a high-risk method as it’s an unproven mannequin in a market the place funds are predominantly digital and mobile-based. Most FPS implementations from different markets began when money and/or card funds have been dominant,” stated the Safaricom and KBA report.

Whereas the report doesn’t handle the views of different fee service suppliers (PSPs), Safaricom and KBA advocated upgrading current fee programs, a mannequin adopted by Zimbabwe. This may imply designating an current system, similar to M-Pesa or Pesalink, as the first operator of the FPS.

As an alternative of making a brand new system, Safaricom and KBA suggest broadening the possession of the present system to incorporate CBK and different fee service suppliers, SACCOs, micro-finance banks, and different gamers who might want to take a direct stake.

Regardless of the route CBK takes, fee specialists consider that the FPS will decrease transaction prices and ease funds switch throughout completely different platforms.

“It is going to create alternatives for smaller gamers however might additionally elevate entry limitations for them. It is going to drive innovation in Kenya’s funds business, with each small and huge service suppliers pushed to supply higher options,” stated Alfred Ongere, former Payless Africa chief expertise officer.

The prevailing fee infrastructure is fragmented, with cellular cash platforms working in silos from different monetary establishments. Banks, Saving and Credit score Cooperative Organisations (SACCOs) and different fee suppliers want separate agreements to plug into cellular platforms like M-Pesa and Airtel Cash. 

In the mean time, Pesalink solely caters to banks, locking out different monetary establishments. 

The CBK is predicted to challenge additional pointers within the coming months. Nonetheless, the talk over an optimum fee system highlights the fragile stability to keep up Kenya’s progress in cellular and digital funds.

.