Safaricom and the Kenya Bankers Association (KBA) have jointly proposed that Pesalink, a digital payment platform, become the preferred next-generation fast payment system (FPS) in Kenya. The recommendation, outlined in a proposal submitted by both parties, argues for an industry-led solution to streamline digital payments in the country.

The proposal suggests that leveraging Pesalink's existing infrastructure would ensure seamless interoperability across different payment platforms, including banks, mobile money operators like M-Pesa, and fintechs. This would bridge the gaps in Kenya's fragmented payments landscape, which often sees mobile money platforms operating separately from traditional financial institutions.

According to the proposal, using Pesalink as the foundation for the national FPS would reduce transaction costs for users and businesses alike. Developing a new FPS infrastructure from scratch could cost at least $200 million (KES 25.9 billion) and take up to four years to complete, whereas upgrading Pesalink would be a more cost-effective option.

The proposal acknowledges that Pesalink would need to be upgraded to meet the needs of a nationwide FPS. This would involve enhancing its capabilities to handle at least 6,000 transactions per second, as well as improving risk management and security features.

While Safaricom and KBA argue that upgrading Pesalink is the best way forward, they also acknowledge that there are alternative models. One such model is the Colombian approach, which utilizes multiple private switches managed by a centralized regulator like the Central Bank of Kenya (CBK). However, the two parties suggest that this approach could lead to inconsistencies in service quality and governance, as multiple switches would complicate regulation and oversight.

The proposal aligns with the CBK's vision for a unified and interoperable payments system, which could simplify regulatory oversight. "A more integrated payments ecosystem would support the growth of Kenya's digital economy by making it easier for businesses and individuals to transact across different platforms," said Ali Hussein Kassim, chairman of the Association of FinTechs in Kenya.

Although the Central Bank of Kenya (CBK) has not yet decided on the proposed FPS upgrade, there is significant lobbying for the regulator to push for an upgrade to the existing infrastructure. If the proposal is approved, the Pesalink system would undergo significant upgrades to support the anticipated volume of digital transactions.

Safaricom and KBA envision a future where Pesalink can handle not just basic payments but more complex transactions, including cross-platform payments between mobile money providers, banks, and fintechs. This could have far-reaching implications for the growth of Kenya's digital economy and the development of a more integrated payments ecosystem.