PesaLink is taking a strong step to gain market share in the instant payment market in Kenya through direct competition with the mobile money sector by lowering transaction fees significantly.
PesaLink is an Independent Bank Switch owned by IPSL (Integrated Payment Services Limited) that has implemented a new pricing model that is currently being tested, which could potentially change the way Kenyans transfer money.
SBM Bank Kenya has announced its partnership with PesaLink to test this pricing model by providing a flat fee of only 20 Shillings for all transfers within the range of 1,001 to 999,999 shillings.
Furthermore, all the smaller transfers from 1 to 1,000 shillings will be free of charge, as part of the new partnership.
The new pricing scheme is a test for other banks; the Kenya Bankers Association is exploring the imitation of this model to increase transaction volume.
This initiative is being developed as a means of reducing the amount of money collected by traditional mobile money wallets that charge 100 shillings or more to transfer similar amounts of money.
According to Kenn Lisudza, Chief Product Officer at IPSL, “Our partnership demonstrates the ability of banks and other companies in Kenya to innovate and create products with customers at the center of their design.”
According to him, the process of establishing an initiative such as this will eventually lead to price transparency, simplification, and scalability throughout the industry over time.
Regulatory Pressure and Future Plans
Coincidentally, the launch of this initiative coincides with the Central Bank of Kenya’s (CBK) draft National Financial Inclusion Strategy for the 2025-2028 period, which calls for lowering transaction costs to consumers.
The above-mentioned regulator has set a high level of ambition by establishing a target for the average mobile money transaction fees for consumers to be reduced from Sh23 to Sh10 by 2028, which is an attempt to promote financial inclusion.
By proactively reducing fees, the banks will position PesaLink as the lowest cost rail for the proposed National Fast Payment System (FPS).
Safaricom and the Kenya Bankers Association (KBA) have already proposed that the PesaLink infrastructure be the basis of this national payment system to prevent any duplication of resources.
Should the SBM pilot project be successful, other members of the KBA will soon benefit from reduced transfer fees to flat-rate amounts similar to those of SBM.
For both commercial and private customers that transfer large amounts of money, this change represents the end of percentage-based transfer fees that were punitive in nature, and the beginning of a truly low-cost digital economy.
