The Central Bank of Kenya (CBK) has announced important updates regarding the country’s monetary policy.
In a statement on October 18, CBK issued an update on the progression toward financial sector-wide interoperability solutions and the formation of an industry technical working group that will enable instant transfer of payments across the entire financial industry.
The Central Bank highlighted crucial points aimed at guiding financial institutions, including the formation of a CBK-Industry Technical Working Group (TWG) to design, launch and roll out the envisaged solution.
“The financial sector-wide interoperability solution known as a Fast-Payment System (FPS) will integrate certain aspects of payment services that are offered by financial institutions,” reads part of the statement.
CBK in the statement said that FPS will enable customers to send and receive money instantly from anyone, anytime, anywhere, regardless of the type of institution a customer belongs to.
According to the bank, development of the FPS is being undertaken pursuant to the Central Bank of Kenya Act that mandates the CBK to formulate and implement policies that best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems.
Also Read: Decorated Career of ex-CBK Official Chosen as Head JP Morgan Chase Bank in Kenya
Kenya’s FPS design will also be in line with global best practice.
CBK provides update on new payment system
Discussions on enhancing interoperability of payment systems began in 2014 when East Africa Community (EAC) Partner State Central Banks agreed on the need to integrate regional card and mobile money systems.
CBK, in consultation with industry players, made some progress, including the launch of person-to-person (P2P) interoperability in 2018, merchant interoperability in 2022, and industry consultations that took place between 2018 and 2020.
However, the bank warned that existing forms of interoperability have major challenges.
“They lack a centralized switching mechanism, use costly bilateral arrangements, and are closed in nature. This has prevented players in the payments ecosystem from participating in an open and fully integrated system,” the statement adds.
“These challenges lead to additional cost and inconvenience to customers and has affected Kenya’s global standing as a leader in payments innovation and financial inclusion.”
Also Read: CBK Moves to a New Payment System for Domestic & Regional Transactions
Benefits of the Fast-Payment System and timelines
CBK has maintained that together with industry leaders, it is aligned on the need to address these challenges to mitigate the risk of duplication, reliance on fragmented domestic and international payment systems and lay the foundation for an open and fully interoperable Digital Public Infrastructure (DPI).
Further, the bank said that it will provide further updates on the timeframe for the launch of the FPS, working in conjunction with the TWG.
The successful launch and rollout of the FPS is set to enable Kenya to join the 57 countries globally that have an operational FPS, out of the 93 countries that responded to the 2023 World Bank Global Payment Systems Survey.
FPS is also set to bring the country closer to achieving the vision of the National Payments Strategy 2022-2025.
The update comes after CBK announced a transition of the Kenya Electronic Payment and Settlement System (KEPSS) to the internationally recognized Global Messaging Standard (ISO 20022 Standard).
ISO20022 is the latest international open standard for financial messaging that is being adopted globally.
Follow our WhatsApp Channel for real-time news updates!
https://whatsapp.com/channel/0029VaB3k54HltYFiQ1f2i2C
