State House has been dragged into a fierce fight between local banks and a Nigerian firm for the development of a new real-time payments system.
Nigeria Inter-Bank Settlement System Plc (NIBSS), in a joint venture with two other local companies, wants President William Ruto to back them in their bid to build a new payment platform for the Central Bank of Kenya (CBK).
A partnership of NIBBS, Webmasters Kenya, the company that built eCitizen, and Ceva, a digital payments company, want to build a national switch platform that will integrate different payment streams for faster payments.
A national switch will enable customers to move money across any mobile provider or banking institution promptly and at reduced cost.
Kenyan commercial banks are opposed to the plans by the Central Bank of Kenya (CBK) to develop a new real-time payments system from scratch, advocating an upgrade of their PesaLink -- a mobile and electronic money transaction service.
They argue that upgrading PesaLink, which is owned by the Kenya Bankers Association (KBA), would save time, cut costs, and minimise disruptions.
The CBK is seeking to create a seamless Fast Payment System (FPS), a system designed to enable instant transactions across all financial institutions, including banks and licensed payment service providers.
This has triggered jockeying for a piece of a deal, with billions of shillings in fees at stake.
In a letter to President Ruto seen by Business Daily, the managing director of Ceva, Yatin Mehta, requested a meeting with the President to introduce the NIBBS, which provides the infrastructure for automated processing, clearing, and settlement of inter-bank payments and transactions in the West African nation.
“We hope this letter finds you well. We are writing to formally request a meeting with you at your earliest convenience,” said Mehta in the letter. “The purpose of the meeting is to introduce our partner, the Nigeria Interbank Settlement Systems (NIBBS).”
Besides him, Mr Mehta lists Premier Oiwoh, the CEO of NIBBS Nigeria, and its head of partnerships Yvonne Ige as some of the persons that will attend the meeting should State House give them an appointment.
David Kiprono, a director of Webmasters Kenya Ltd, the company that developed the eCitizen platform, would also attend the meeting.
The agenda of the meeting, Mr Mehta revealed, will be to discuss the development of the National Fast Payment System and the National ID Card System (AfriGo) which he reckons “would be beneficial to the Government of Kenya.”
Since the CBK announced in its a plan to develop a “single integrated solution with multiple functionalities (national switch)”, under the National Payment Strategy 2022-2025, commercial banks have been pushing for the upgrade of the PesaLink, while opposing plans to build a new platform from scratch.
Local lenders, through their lobby KBA, prefer an upgrade of the Pesa link service, noting this would be the fastest, cost-effective route to achieving CBK’s goal of creating a seamless Fast Payment System (FPS).
“This would see IPSL [Integrated Payments Service Limited, which operates PesaLink] 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, the KBA chairman and CEO of NCBA Bank, in a letter dated on October 25, 2024.
On October 18 last year, the CBK unveiled its plan to develop the FPS, a system designed to enable instant transactions across all financial institutions, including banks and licensed payment service providers.
In its payment strategy, the CBK acknowledged that with the launch of IPSL’s PesaLink service, customers can now send amounts ranging from Sh10 to Sh999,999 instantly between bank accounts using multiple channels like mobile, ATMs and the internet.
“The emergence of a fully integrated ecosystem that is seamlessly interoperable is critical,” said the CBK, noting that the launch of P2P interoperability in 2018 had set a strong foundation for the emergence of a national switch.
“To take this to the next level, CBK will examine and provide the guidance required for the full development of the solution anchored on a multilateral arrangement and the required scheme rules, technology solution, governance and oversight. The overall objective is to ensure that customers can move money across any mobile money provider or banking institution, promptly and at a reduced cost than is currently the case.”
However, the Ceva-led consortium is banking on NIBBS’s track record as Nigeria's national switch and payment infrastructure. The Central Bank of Nigeria owns NIBBS.
“Our robust infrastructure is developed in Africa, for Africa. Afrigo is NIBBS answer to Africa having its own card processing, driving our own economic independence and efficiency. India has done it with Rupay, China has done it with UnionPay, UAE has done it with Jaywan, Brazil has done it with PIX,” said Mr Mehta in the letter to State House.
Sources said the meeting took place on Friday afternoon.
As part of its National Payments Strategy, the CBK wants to introduce a financial sector-wide interoperability system that will allow users to send and receive money instantly, regardless of the bank or financial institution they use.
Kenya’s payments ecosystem is currently fragmented, with mobile money platforms like M-Pesa and Airtel Money operating separately from other financial institutions.
While mobile money allows instant transfers between Kenyan banks and digital wallets, it remains limited to institutions that have agreements with providers.
For example, some banks and microfinance institutions do not allow transfers to Airtel Money wallets, creating barriers for customers.
Mobile money continues to dominate Kenya’s payments market.
In 2024, mobile money services processed over Sh8.7 trillion, outpacing traditional methods like cheques (Sh2.48 trillion).
The Real-Time Gross Payment System stood at Sh27.86 trillion in the eight months to August.
