Banks launch firm to take on M-Pesa’s mobile cash dominance

Money Markets

Kenya Bankers Association (KBA) chief executive officer Habil Olaka. PHOTO | DIANA NGILA 

By EDWIN OKOTH, edokoth@ke.nationmedia.com

In Summary

• KBA has been registered as the owner of IPSL on behalf of all 43 banks and will remain the key driver of the Kenya Interbank Transaction Switch that will facilitate money transfer from bank to bank.
• Founded under the Central Bank of Kenya’s (CBK) National Payment System (NPS) guidelines, IPSL is expected to interconnect all banks, cutting the transaction costs to customers while keeping the revenue earned among the banks. 
• IPSL is also expected to drive financial inclusion efforts by opening diversified commercial banking delivery channels, including mobile and Internet-based platforms as Kenya gears to become a cash-lite economy in line with the global digitisation trends.
• Commercial banks hatched a plan to established a mobile phone-based direct money transfer system more than three years ago in the heat of financial pressure from growing mobile money service providers, who have been eating into their transaction fees revenue.

Commercial banks have set in motion plans to set up a mobile money transfer platform, taking the battle for the fast-growing transaction revenues to the doorsteps of telecoms operator Safaricom’s M-pesa.

The Kenya Bankers Association (KBA) yesterday unveiled Integrated Payments Service Limited (IPSL) — the company that will facilitate direct transfer of money between banks without going through M-Pesa.

KBA chief executive Officer Habil Olaka described the platform’s launch as a key step towards creating an inter-operable mobile money transfer platform for all banks.

“The switch is exploiting a gap that has existed in the bank-to-bank payment system. It enables a P2P (person to person) funds transfer in real time where a customer in a bank can ‘push’ funds to the bank account of another in a different bank in real time,” Mr Olaka said.

KBA has been registered as the owner of IPSL on behalf of all 43 banks and will remain the key driver of the Kenya Interbank Transaction Switch that will facilitate money transfer from bank to bank.

Founded under the Central Bank of Kenya’s (CBK) National Payment System (NPS) guidelines, IPSL is expected to interconnect all banks, cutting the transaction costs to customers while keeping the revenue earned among the banks. 

The switch company will be in charge of receiving any new bank/branch registrations, monitor connectivity between banks and the switch as well as act as an arbiter in case of any disputes.

The company will also be in charge of registering users for P2P service (account-based transactions), setting up online interface configuration parameters (IP address, port) for customer connection with banks as well as providing routing switch for P2P transactions (authorisation process).

The switch will also maintain the look-up table, provide guidance for processing fees and set up SMS and e-mail notification template preparation for alerts.

Mr Olaka said the firm will inform policy direction and manage risks associated with electronic payment systems in the market, while providing technical and related guidance to KBA member banks.

IPSL is also expected to drive financial inclusion efforts by opening diversified commercial banking delivery channels, including mobile and Internet-based platforms as Kenya gears to become a cash-lite economy in line with the global digitisation trends.

The launch of the joint switch plan has been suspended twice — the last timeline having elapsed last month.

Rare show of unity

Commercial banks hatched a plan to established a mobile phone-based direct money transfer system more than three years ago in the heat of financial pressure from growing mobile money service providers, who have been eating into their transaction fees revenue.

In a rare show of unity, the local lenders resolved to set up their own money transfer switch that will enable any mobile phone owner to send and receive money without relying on any mobile money service owned by the telecoms operators.