Ideas & Debate

What national payment strategy seeks to achieve


A group of young people discuss the concept of central bank digital currency. PHOTO | POOL

While anthropologists will find reasons to dispute Kenya’s claim to being the cradle of humanity, its claim as the cradle of fintech is hard to challenge.

From the starting point of a simple money transfer innovation, an elaborate financial services ecosystem has emerged. More importantly, the payments system has provided the rails for Kenya’s financial inclusion journey.

Over the last 15 years, access to financial services has tripled from 26 percent of adults in 2006 to 83 percent in 2021.

Some of the key milestones in this journey have included, the rollout of mobile money, the implementation and continued strengthening of the Real-Time Gross Settlement System, and the establishment of regional payments systems in both the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa) regional blocs.

Undoubtedly, we have achieved a lot, but much more remains to be done. Whereas the Covid-19 pandemic on one hand accelerated the pace of digitisation, on the other, it had a scarring effect on lives and livelihoods globally.

Nevertheless, broad access to secure and efficient payment systems will be imperative, as we steer back to the path of shared prosperity for our citizens. Further, technological changes and innovations continue to gather pace.

This has led to the emergence of new and prospective payment methods, including digital currencies such as electronic money, cryptocurrency, stable coins and Central Bank Digital Currencies (CBDCs).

While each of these innovations offers prospective benefits, the inherent risks need to be assessed carefully.

It is against this backdrop, that we are launching the National Payments Strategy. It seeks to consolidate the gains we have made so far while illuminating the path towards a new chapter in Kenya’s payments journey.

Accordingly, the strategy seeks to realise the vision of a secure, fast, efficient and collaborative payments system that supports financial inclusion and innovations that benefit Kenyans. This vision will be anchored on five core principles: trust, security, usefulness, choice, and innovation.

The strategy has been developed through a consultative process with three overarching themes:

FIRST, people-centricity. While technology and innovations remain formidable allies, it is easy to fall for their allure. The test for any technology or innovation, as we push forward our payment frontiers, will be what need they meet.

Mobile money has so aptly demonstrated what people-centricity means. In Kenya and across many other developing, frontier and emerging-market economies, the need to transfer money from rural to urban areas sowed the seeds of the success of mobile money.

SECOND, maximising opportunities while minimising risks. Technology and innovations present us with opportunities to address the frictions in payment systems. These include cost, convenience, ease of use and more broadly the customer experience.

The next-generation payments systems that we are aspiring to, come with the promise of instant, cheaper, more convenient and user-friendly services. But risks lurk in the neighbourhood, including cybersecurity, data privacy and fraud.

To calibrate the balance between risks and opportunities, we shall be guided by the principles in the strategy. This will ensure that citizens can trust that their payments will be made on a timely and reliable basis, securely, affordably and conveniently. In effect, this will foster good order in our payment systems.

THIRD, collaboration. We cannot do it alone. Payment systems will require to be even more interconnected not just nationally, but regionally and globally. The cost of cross-border transfers remains high and in the case of remittances way beyond the Sustainable Development Goal (SDG) target of 3 percent by 2030.

There are encouraging experiments going on globally through collaboration among various central banks. These initiatives are showing early promise in significantly reducing the cost of cross-border transfers through, for instance, the use of CBDC.

The Strategy provides us the basic elements to chart a safe course in the face of future innovations and outrageous fate. But in the words of a proverb, if you want to go far go together.

It is therefore important that we learn from each other so that our countries are not left behind by the next generation of payment systems. In that sense the strategy is ours but it also belongs to every other country.

But the litmus test is implementation. We look forward to walking with you and other partners as we implement the strategy in an increasingly interconnected world.

This is an abridged version of Dr Njoroge’s remarks during the launch of the National Payments Strategy, 2022-2025 on February 23