What happened

The Central Bank of Kenya (CBK) together with the Treasury announced on Monday a plan to introduce a national payment switch that will standardise and streamline electronic money transfers. The initiative is presented as a way to cut transaction fees for businesses and consumers alike, while improving the speed and reliability of payments. Officials said the switch will bring together banks, mobile money providers and other payment service providers onto a single interoperable platform. The rollout is expected to begin in the second quarter of 2025, following a series of pilot tests conducted earlier this year. This marks the first coordinated effort by the two institutions to address the high cost of domestic transfers.

Context and background

Kenya’s payments ecosystem has long been dominated by mobile money services, most notably Safaricom’s M‑Pay platform, which accounts for a large share of person‑to‑person transfers. While this has driven financial inclusion, the fragmented nature of the market means that each provider sets its own fee structure, often resulting in duplicate charges when funds move between banks and mobile wallets. The CBK has previously introduced the Kenya Payments and Settlement System (KPSS) to improve interbank settlements, but the system does not fully cover non‑bank agents. The Treasury’s involvement reflects a broader fiscal objective to reduce the cost of doing business and to encourage formalisation of cash flows.

In recent years, the government has pursued several digital‑payment reforms, including the introduction of the National Integrated Financial System (NIFS) for public sector payments. Those reforms highlighted the need for a unified switch that could handle both public‑sector disbursements and private‑sector transactions. The current plan builds on lessons learned from those pilots, incorporating feedback from commercial banks, micro‑finance institutions, and mobile network operators. By creating a single point of routing, the switch aims to eliminate the need for multiple intermediaries that typically add markup to each transfer.

Stakeholders consulted during the design phase included the Kenya Bankers Association, the Mobile Money Operators Association, and the ICT Authority. Their input helped shape technical standards that will ensure compatibility with existing infrastructures such as the existing RTGS and the newer digital‑currency pilots. The CBK has pledged to oversee the governance of the switch, while the Treasury will monitor its impact on fiscal efficiency and revenue collection. The collaboration signals a rare alignment of monetary and fiscal policy in Kenya.

Compared with what is normal

Under the current fragmented system, a typical intra‑country transfer can involve a bank‑to‑bank leg, a mobile‑money leg, or a combination of both. Each leg may attract a separate fee, which can add up to a noticeable proportion of the transferred amount, especially for small‑value payments. The new national switch is expected to consolidate these legs into a single transaction, thereby removing redundant charges. While exact fee reductions have not been quantified, early pilots indicated potential savings of up to half the existing cost for certain transaction types.

• Current environment: Multiple providers, each with its own fee schedule.
• Historical trend: Fees have remained relatively stable over the past five years, despite increasing competition.
• Projected change: A single interoperable switch could standardise fees and lower them across the board.
• International benchmark: Countries with unified switches, such as the UK’s Faster Payments Service, report lower average transaction costs.

Why it matters

For Kenyan SMEs, transfer costs directly affect cash flow and profitability. A reduction in fees means more money stays within the business, enabling reinvestment or price adjustments. Moreover, a faster, more reliable payment route can shorten the cash conversion cycle, allowing firms to settle supplier invoices and receive customer payments more promptly. This is especially critical for traders who rely on daily cash movements between rural markets and urban hubs.

Consumers also stand to benefit. Lower fees make it more affordable to send remittances to family members in other counties, a common practice in Kenya’s informal economy. Reduced transaction costs can encourage greater use of formal channels, thereby improving the accuracy of financial data that the Treasury uses for tax collection and policy planning. In the long run, a more efficient payments system can bolster Kenya’s reputation as a fintech hub, attracting further investment and innovation.

Practical steps

Businesses and individuals can prepare for the upcoming switch by taking a few proactive measures:

• Review existing payment contracts and identify any clauses that may need renegotiation once the switch is live.
• Engage with your bank or mobile‑money provider to understand how they will integrate with the national switch and what new fee structures will apply.
• Update accounting and cash‑management software to capture transaction data from the unified platform, ensuring accurate reporting.
• Educate staff and customers about the upcoming changes, highlighting the expected benefits and any short‑term adjustments required during the transition period.

By staying informed and adjusting internal processes now, firms can minimise disruption and capture cost savings as soon as the switch becomes operational.

Financial Management & Analysis services at Beavoren Ventures can help your organisation navigate the technical and regulatory aspects of the new payment switch, ensuring compliance and optimal financial planning.

Need help with compliance? Email info@beavorenventures.co.ke or call +254 716 296 857.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.