The Central Bank of Kenya's (CBK) plan to build a fast payment system (FPS) has raised concerns among key stakeholders, including Safaricom and the Kenyan Bankers Association (KBA). The proposed system, estimated to cost at least $200 million and take up to four years to complete, aims to enhance interoperability across the payments landscape and reduce transaction costs. However, Safaricom and KBA argue that it could duplicate existing infrastructure and lead to inefficiencies that could slow innovation in Kenya's financial sector.

In a joint report, Safaricom and KBA recommended that the CBK should instead enhance existing payment systems, such as Pesalink, which is already used for peer-to-peer payments between banks. This approach, they argue, would be a cheaper and more timely option. The report also questions the $200 million price tag and lengthy timeline, citing the potential for bureaucratic delays and slowed innovation.

One of the key concerns raised by KBA and Safaricom is the proposed Special Purpose Vehicle (SPV) that would manage and operate the FPS. The SPV would be owned by the CBK (60%), Safaricom (20%), and commercial banks (20%), and would require legislative amendments and an initial investment of $30 million. According to the report, this structure could introduce bureaucratic delays, slowing innovation in the financial sector.

The proposed FPS model may not be suited to Kenya's mobile money-oriented market, where platforms like M-Pesa and Airtel Money dominate the landscape. Safaricom and KBA suggest that the FPS model may not be the best fit for Kenya, citing the success of Zimbabwe's approach, which involved upgrading existing payment systems. Instead of creating a new system, they propose broadening the ownership of the existing system to include CBK and other payment service providers.

Despite the concerns raised, payment experts believe that the FPS will lower transaction costs and ease funds transfer across different platforms. It is expected to drive innovation in Kenya's payments industry, with both small and large service providers pushed to offer better solutions. The existing payment infrastructure is fragmented, with mobile money platforms operating in silos from other financial institutions. The FPS aims to address this issue, creating opportunities for smaller players and driving innovation in the industry.

The CBK is expected to issue further guidelines in the coming months, and the debate over an optimal payment system highlights the delicate balance to maintain Kenya's progress in mobile and digital payments. As the country continues to advance in the fintech space, it is crucial to ensure that any new system is efficient, cost-effective, and tailored to the unique needs of the Kenyan market.