Key Facts for Kenya
- Primary real-time rails: Pesalink, M-Pesa, Fast Payment System (FPS).
- Typical settlement times: Maximum of 30 seconds.
- Common limits: Maximum per-transaction limit of Ksh 999,999 for Pesalink; daily aggregate limits vary by institution.
What “real-time payments” means in Kenya
In Kenya, real-time payments are defined as instant, 24/7 transactions where funds are immediately available to the recipient. This concept is embodied by services like Pesalink, which facilitates account-to-account transfers, and the forthcoming national Fast Payment System (FPS) designed for complete interoperability across all financial institutions. The scope is extensive, covering everything from P2P transfers to government disbursements. While no specific legal statute defines "real-time payments," the National Payments System Act 2011 and its associated regulations provide the governing framework for these systems.
The Central Bank of Kenya (CBK) is the lead regulator, overseeing the national payments system and spearheading the new FPS. While the CBK operates the core settlement infrastructure, private entities also operate key rails; for instance, Integrated Payment Services Limited (IPSL) runs Pesalink. Settlement for these transactions occurs via the CBK's Real Time Gross Settlement System (RTGS). Kenya is actively adopting global standards, with the CBK upgrading its systems to the ISO 20022 standard, though some existing systems still use ISO 8583 with plans to upgrade.
The country’s combination of a bank-led initiative and a central bank-driven strategy for a fully interoperable system places it at the forefront of payment modernization in Africa.
Payment Rail Overview
M-Pesa
M-Pesa is a foundational mobile money platform that has defined Kenya's digital finance sector for years. It allows users to conduct financial transactions like sending money or paying for goods directly from their mobile phones. While its exact launch date isn't specified in recent reports, it is widely recognized as the pioneering service that drove mass adoption of mobile payments in the country.
- Mobile-based transactions: Users can send and receive money using only their mobile device and phone number.
- Widespread adoption: Its dominance is clear, with mobile money transactions in 2022 averaging KSh21.7 billion daily.
- Daily commerce integration: The platform is integral to the economy, supporting everything from grocery purchases to peer-to-peer transfers.
- Pros: Unmatched convenience, a massive user base, and proven reliability for everyday transactions.
- Cons: Transaction costs, unreliable mobile networks in some areas, and limited digital literacy can exclude parts of the population.
Pesalink
Launched in 2017, Pesalink is an interbank, account-to-account real-time payment network. It connects over 80 financial institutions, allowing users to send money instantly between bank accounts, often using just a mobile number as an alias. The system operates 24/7 and is managed by Integrated Payment Services Limited (IPSL), an entity owned by the Kenya Bankers Association.
- Instant transfers: Payments are processed instantly, with funds arriving in a maximum of 30 seconds.
- High transaction limits: Users can send up to Ksh 999,999 per transaction, accommodating larger payments than typical mobile money services.
- Interoperability: The network connects a wide variety of financial institutions, including banks, SACCOs, and microfinance firms.
- Alias-based payments: A mobile number can be linked to a bank account, simplifying the process of sending and receiving funds without sharing account details.
- Pros: Operates around the clock, supports high-value transactions, and offers direct bank-to-bank transfers.
- Cons: Settlement occurs in cycles via Deferred Net Settlement rather than in true real-time, and non-bank fintechs have indirect access that requires a sponsor bank.
Fast Payment System (FPS)
The Fast Payment System is a forthcoming national payment infrastructure being developed by the Central Bank of Kenya. Announced in 2024, it is designed to create a single, fully interoperable system connecting all financial institutions. The goal is to establish a Digital Public Infrastructure (DPI) that allows anyone to send and receive money instantly, regardless of their chosen provider.
- Universal interoperability: It is designed to integrate all payment services into a single, open network.
- Centralized switching: It will introduce a central switch to resolve the problems of overpriced and closed bilateral agreements between service providers.
- Global standards: The system's design is aligned with international best practices for modern payment systems, including the ISO 20022 messaging standard.
- Pros: It is expected to lower costs and increase competition by creating an open and fully integrated system.
- Cons: The system is still in development, so its final form and potential operational challenges are not yet known.
Limits, Fees, and SLAs
- Limits: Pesalink has a per-transaction cap of Ksh 999,999; daily limits vary by institution, with no specified corporate tiers.
- Fee Structures: End-user fees for Pesalink are set by individual banks, not the payment service provider, and can range from zero to Ksh 500.
- Operating Hours: Pesalink operates 24/7/365, including on weekends and public holidays, with no specified cut-off times for transactions.
- Service-Level Guarantees: PesaLink reports an average annual uptime of 99.99%, a key metric for its high system availability.
Compliance and Risk
KYC/KYB & AML
Kenya's framework is built on the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA). Businesses must conduct customer due diligence, report suspicious transactions to the Financial Reporting Centre, and apply enhanced checks for high-risk clients like Politically Exposed Persons.
Data Residency & Privacy
Kenya is operationalizing its Data Protection Act, which governs how financial data is handled. For systems like PesaLink, transaction data is held in a central repository for a retention period of seven years, with banks acting as custodians of customer information.
Fraud Controls
The Central Bank mandates cybersecurity standards for payment systems, including incident management and annual compliance evaluations. The Directorate of Criminal Investigations is the primary law enforcement body for investigating financial fraud, working alongside other agencies to address criminal activities.
Recordkeeping & Audits
Firms must maintain transaction records and customer data for at least seven years, making them available for regulatory review. New participants in payment systems like PesaLink must undergo an external audit before going live, confirming their adherence to operational standards.
Lightning Network Integration as a Solution
The Lightning Network is a second-layer protocol on Bitcoin that processes transactions off the main blockchain. By using payment channels, it facilitates near-instant, low-cost payments. While local RTP rails are powerful domestically, they often operate within national borders. The Lightning Network complements these systems by providing a global, interoperable layer for cross-border transactions, connecting otherwise isolated payment ecosystems without relying on traditional correspondent banking.
Compared to domestic rails, Lightning offers true instant settlement, whereas systems like Pesalink rely on deferred settlement cycles. Transaction costs are drastically lower—fractions of a cent versus variable bank fees. But its most significant advantage is reach; while RTPs are confined to a single country's banking system, the Lightning Network is a borderless, open network accessible to anyone with a compatible wallet, opening up global markets.
- Cross-border complexity: It bypasses slow and expensive international wire systems, offering a direct path for global payments.
- Settlement finality: Unlike RTPs with deferred interbank settlement, all Lightning transactions are settled instantly and continuously between peers.
- Cost barriers for micropayments: Its near-zero fees make it practical for small-value transactions that are uneconomical on traditional or even some RTP networks.
Its open, global nature presents a new foundation for international commerce and financial inclusion.
B2B Enterprise Use Cases
- Supplier Payments – Pay international suppliers instantly over the network, bypassing traditional banking systems for cross-border transactions. Business value: Drastically reduces settlement times and costs for global supply chain payments.
- Merchant Settlement – Receive customer payments that settle immediately, eliminating the multi-day waiting period associated with card networks. Business value: Grants immediate access to working capital and lowers transaction processing fees.
- Treasury Optimization – Move corporate funds between international accounts in real-time, 24/7, for dynamic global cash management. Business value: Provides instant, on-demand liquidity across borders without waiting for banking hours.
- Payroll for Global Teams – Execute salary payments to a distributed international workforce with instant settlement and minimal cross-border fees. Business value: Simplifies paying a global workforce and reduces international transfer expenses.
- Programmatic Micropayments – Automate machine-to-machine payments for services like API calls or data feeds on a per-use basis. Business value: Opens up new pay-as-you-go revenue models for digital services.
Cross-Border Transactions and Remittances to Kenya
Cross-border payments are inherently complex, requiring “rail bridging” to connect separate domestic systems like Kenya's Pesalink to global networks. This process is complicated by inefficient foreign exchange (FX) paths and high costs. In Kenya, regulatory ambiguity around digital assets adds another layer of friction, creating operational uncertainty. These challenges often result in payment delays and stifle the adoption of more efficient global payment solutions, highlighting the need for a new approach to international transactions.
- Kenya-UK/USA: Diaspora remittances from these regions are a major economic driver, funding family support, education, and local investment. Transactions are moving from traditional money transfer operators to more agile digital platforms.
- Kenya-East African Community (EAC): Driven by regional trade and deep cross-border family ties, these payment corridors are vital for small businesses and personal transfers. Mobile money interoperability is a key factor for these frequent, smaller-value transactions.
- Kenya-Middle East: Funds sent from Kenyan workers in countries like the UAE and Saudi Arabia represent a critical income source for many families. These remittances are typically processed through exchange houses and increasingly through digital apps.
The Lightning Network presents a new architecture for these global flows. By using Bitcoin as a neutral, intermediate settlement asset, it facilitates near-instant payments across borders, sidestepping the high fees and delays of the traditional correspondent banking system.
How Lightspark Makes Integration Easy
Lightspark helps fintechs, digital banks, wallets, and exchanges integrate the Lightning Network to offer superior global payment services. We manage the operational complexities, including liquidity and routing, so you can focus on your core product. Our platform provides robust developer tooling and a comprehensive compliance framework to simplify integration and manage risk. This allows you to offer customers sub-second settlement globally, connecting them to a new standard for international transactions. Ready to build on the future of payments? Talk to our team.
Sources and Further Reading
- https://dpi.africa.com/revolutionizing-kenyas-financial-landscape-the-future-of-instant-payments/ – Kenya's future instant payments system.
- https://fastpayments.worldbank.org/sites/default/files/2021-09/World_Bank_FPS_Kenya_PesaLink_Case_Study.pdf – World Bank's PesaLink case study.
- https://www.lightspark.com/contact – Contact the Lightspark sales team.
- https://www.lightspark.com/knowledge/is-crypto-legal-in-kenya – Kenya's digital asset legal status.
- https://www.lightspark.com/news/insights/what-are-lightning-payments – Explains Lightning Network payment channels.
- https://pesalink.co.ke/ – Official Pesalink interbank payment network.
- https://techpoint.africa/news/cbk-instant-payments-transfer-solution/ – Kenya's new instant payment solution.
