In a significant move towards a more interconnected digital economy, the Central Bank of Kenya (CBK) has announced plans to develop a new instant payment system, the Fast Payment System (FPS). This groundbreaking initiative aims to streamline financial transactions across all financial institutions in the country, including banks and payment service providers (PSPs).

The FPS will enable Kenyans to seamlessly send and receive money, pay bills, and conduct other financial transactions regardless of their chosen bank. By addressing the long-standing interoperability issue, the CBK seeks to create a more efficient and inclusive payment ecosystem.

While Kenya has made strides in payment interoperability with the launch of Pesalink in 2015, the FPS is poised to take this progress to new heights. Pesalink, a payment switch facilitated by Kenyan banks and financial institutions, has been instrumental in enabling electronic transactions between various financial entities. However, its limitations, such as the absence of a utility payments segment, have highlighted the need for a more comprehensive solution.

The FPS will integrate certain aspects of payment services offered by financial institutions, providing customers with a unified platform for instant and convenient transactions. This will eliminate the complexities and inefficiencies often associated with current payment methods.

The development of the FPS is a collaborative endeavor between the CBK and industry players. In February 2024, the regulator initiated discussions with key stakeholders and formed a working group, the CBK-Industry Technical Working Group, to oversee the project.

The CBK emphasized the importance of addressing the existing challenges in interoperability, such as the lack of a centralized switching mechanism, costly bilateral arrangements, and closed-nature systems. By implementing the FPS, the CBK aims to mitigate these risks and lay the groundwork for an open and fully interoperable Digital Public Infrastructure (DPI).

The FPS is expected to have a profound impact on the Kenyan economy. By facilitating faster and more efficient payments, it will stimulate economic activity, enhance financial inclusion, and boost consumer convenience. Businesses of all sizes will benefit from streamlined transactions, reduced costs, and improved cash flow management.

Moreover, the FPS aligns with the broader global trend towards digitalization and cashless payments. By embracing this technology, Kenya can position itself as a leader in financial innovation and attract foreign investment.

The development of the Fast Payment System marks a significant milestone in Kenya’s journey towards a digital economy. It represents a commitment to innovation, collaboration, and improving the lives of citizens through advanced financial services. As the FPS gains momentum and becomes a reality, it is poised to revolutionize the way Kenyans interact with their money and propel the country’s economic growth.