What happened

The Central Bank of Kenya (CBK) has publicly announced that it is developing a new digital payment system designed to make bank‑to‑bank and mobile‑money transfers cheaper for consumers and businesses. In a statement released on the CBK website, the regulator said the initiative will address high transaction fees that have long been a pain point for small and medium‑size enterprises (SMEs) and ordinary Kenyans who rely on mobile money platforms such as M‑Pesa, Airtel Money and T‑Kash. The proposed system will operate alongside existing interbank settlement mechanisms, but will incorporate lower‑cost processing algorithms and a streamlined fee structure approved by the regulator. While no exact launch date has been set, the CBK indicated that a pilot could be rolled out within the next twelve months, subject to successful testing and stakeholder feedback.

Context and background

The push for cheaper transfers comes after years of complaints from the business community about the cumulative impact of transaction charges. Kenya’s financial ecosystem is heavily digitised, with over 85 % of adults using mobile money services for everyday payments. However, each transfer typically incurs a fee that can range from 1 % to 3 % of the amount moved, depending on the provider and the size of the transaction. For an SME that processes thousands of payments each month, these charges translate into a significant operating expense that erodes profit margins.

In recent years, the CBK has taken several steps to modernise Kenya’s payment landscape. The introduction of the Real‑Time Gross Settlement (RTGS) system in 2004 and the launch of the Kenya Payments System (KPS) in 2014 were aimed at improving speed and reliability. Yet, the fee structures governing interbank and mobile‑money transfers have remained largely unchanged. Industry analysts argue that the current framework was designed for a less mobile‑centric economy, and that the rapid growth of fintech has outpaced regulatory adaptation.

Stakeholders consulted during the planning phase include major banks such as KCB, Equity Bank, and Co‑op Bank, as well as mobile network operators that run the leading money‑transfer platforms. The CBK has pledged to hold a series of workshops with these players to ensure that the new system aligns with both consumer protection goals and the commercial realities of service providers. International best‑practice examples, such as the European Union’s SEPA (Single Euro Payments Area) model, were cited as inspiration for creating a low‑cost, high‑efficiency clearing environment.

Compared with what is normal

Under the existing framework, a typical bank‑to‑bank transfer of Sh10,000 may cost the sender between Sh100 and Sh300 in fees, while a mobile‑money transfer of the same amount often incurs a flat fee of Sh50 plus a percentage component. These costs are higher than those observed in neighboring countries that have adopted unified low‑fee payment rails. For example, Tanzania’s electronic funds transfer system generally caps fees at 0.5 % for similar transactions.

• Current bank transfer fees: 1 %–3 % of transaction value.
• Current mobile‑money fees: flat Sh50 plus up to 1 % of amount.
• Regional benchmark (Tanzania): fee ceiling of 0.5 %.
• Potential new fee under CBK proposal: expected to be below 1 % for both channels.
• Impact on a Sh100,000 monthly transfer volume: could save SMEs up to Sh1,500 per month.

Why it matters

For Kenyan SMEs, lower transfer fees mean more cash available for core business activities such as inventory purchase, payroll and marketing. A reduction of even a single percentage point on a Sh500,000 monthly transfer volume could free up Sh5,000 that can be reinvested or used to cushion against cash‑flow gaps. Moreover, cheaper transfers encourage greater use of formal banking channels, which can improve credit histories and open up access to financing that is often denied to businesses that rely heavily on informal cash handling.

Households also stand to benefit. Many families send remittances to relatives in rural areas using mobile‑money platforms; a lower fee structure reduces the cost of supporting extended family members, education fees and health expenses. In the broader economy, reduced transaction costs can stimulate higher volumes of digital payments, supporting the government’s financial inclusion agenda and potentially increasing the tax base as more economic activity is captured electronically.

Practical steps

• Review your current payment‑processing contracts and identify the exact fees you are paying for each type of transfer.
• Engage with your bank’s relationship manager to discuss the upcoming CBK system and explore any interim fee‑reduction programmes they may be offering.
• Consider consolidating multiple small transfers into fewer larger ones, where feasible, to minimise the cumulative percentage fees.
• Stay informed by subscribing to CBK newsletters or attending the stakeholder workshops that will be announced in the coming months.

Financial Management & Analysis services at Beavoren Ventures can help you assess how the new fee structure will affect your cash flow, optimise your payment processes and ensure compliance with any new regulatory requirements.

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.