🇰🇪 Payments in Kenya

The framework: the CBK, the NPS Act, and the national stack

Kenya's national payment system combines a public settlement infrastructure, run by the central bank, with a dominant retail rail owned by a private company. That retail rail is the mobile wallet of a telecom operator listed on the Nairobi Securities Exchange. No interbank clearing house holds that position. The banks built their response 10 years later. The central bank is still deciding how roles should be split between the two camps. The national instant payment rail has yet to be designated.

The legal framework rests on three texts. The Central Bank of Kenya Act gives the Central Bank of Kenya (CBK) responsibility for payment, clearing, and settlement policy. The National Payment System Act of 2011 sets up the authorization regime for systems and providers, and the National Payment System Regulations of 2014 lay out its operational details. Under this framework, the CBK itself plays five roles: settlement agent, system operator, supervisor, liquidity provider, and overseer (Central Bank of Kenya, National Payments System page, 2026). Kenyan mobile money was authorized under this regime and has remained so; at no point did it grow in a regulatory gray area.

M-Pesa: what “dominant” means here

M-Pesa is the e-money wallet launched in 2007 by Safaricom plc, a telecom operator in the Vodacom/Vodafone group, and now run by the M-Pesa Africa joint venture. No payment system has been studied more. Yet all its components were already known in 2007: the USSD menu, the network of shops, and the account base keyed to the phone number. Its position owes more to two market conditions than to technical innovation. It reached scale before the banks reacted, and no competing rail existed when usage habits formed.

M-Pesa's revenue mix is shifting from per-transaction fees toward services built on the wallet. Safaricom reports 17.1 billion free “Kadogo” micro-transactions out of 46.41 billion transactions for the year (Safaricom FY26). A large share of volume therefore generates no per-transaction revenue at all. Revenue comes from elsewhere: linked credit, merchant services, savings, and cards. The revenue breakdown points the same way. Consumer payments grew 18.4% and merchant payments 16.5%, while withdrawal revenue fell 1.3% (Safaricom FY26). Cash withdrawals were historically the model's engine; they no longer are.

The agent network, where money changes form

A mobile money agent is the service point where cash becomes e-money, and vice versa. It is a local business, such as a shop, a gas station, or a kiosk, that holds both a stock of banknotes and an electronic balance called float. A mobile wallet therefore creates no money. It converts existing money from one form to the other. The reliability of the whole system depends on keeping these two stocks in balance. An agent without cash cannot serve a withdrawal, and an agent without float cannot accept a deposit. This stockout is the most common failure in mobile money, and no technical monitoring picks it up.

These four figures tell the same story. The commission pool paid to M-Pesa agents has been flat since 2024, while the number of agents keeps growing. Pay per service point is therefore shrinking as a matter of arithmetic. Average annual commission per agent fell from KES 145,768 in 2016 to KES 112,244 in 2026. Anyone building a physical distribution network in Kenya in 2026 enters a commission market that is already saturated. Recruiting agents depends on filling their idle time or bringing them customers M-Pesa doesn't serve, rather than on paying more commission than M-Pesa does.

Accepting payments: paybill, till number, and Pochi la Biashara

M-Pesa offers three merchant collection options. The choice among them determines reconciliation, tax treatment, and cost. A paybill is a biller number paired with an account reference that the customer enters. A till number (Buy Goods) is a checkout number with no reference, so the merchant receives only the amount, the timestamp, and the payer's number. Pochi la Biashara is designed for small street vendors. It links a till to the trader's personal number while keeping business funds separate from the personal balance.

Integration goes through Daraja, Safaricom's developer portal, and follows a stable pattern. You create an app to get a key/secret pair, exchange it for a short-lived OAuth token, then call the API for your use case. STK Push (M-Pesa Express, formerly Lipa na M-Pesa Online) pushes a PIN prompt to the customer's phone and powers online checkout. C2B covers the reverse case, when customers pay a paybill or till on their own initiative. The merchant's system is then notified through validation and confirmation URLs registered in advance. B2C handles outbound disbursements, including refunds. There are two environments, sandbox and production, with separate credentials.

POST /mpesa/stkpush/v1/processrequest
Authorization: Bearer <OAuth token, short-lived>

{
  "BusinessShortCode": "123456",       paybill or till shortcode
  "Password": "<base64(shortcode+passkey+timestamp)>",
  "Timestamp": "20260807143000",       YYYYMMDDhhmmss
  "TransactionType": "CustomerPayBillOnline",
  "Amount": "1500",                    integer, in KES - no decimals
  "PartyA": "2547XXXXXXXX",            payer MSISDN, international format
  "PartyB": "123456",                  collecting shortcode
  "PhoneNumber": "2547XXXXXXXX",       phone that receives the prompt
  "CallBackURL": "https://.../mpesa/callback",
  "AccountReference": "CMD-2026-8841", reference supplied by the merchant
  "TransactionDesc": "Commande 8841"
}

PesaLink, Kenswitch, and the unresolved Fast Payment System question

PesaLink is the instant interbank account-to-account transfer service that Kenya's banking sector launched in 2017 in response to M-Pesa. It is run by Integrated Payment Services Limited (IPSL), a subsidiary of the Kenya Bankers Association. It connects more than 80 institutions, including banks, SACCOs (savings and credit cooperatives), and payment providers (IPSL/KBA, 2025–2026). Its volumes grew 78% in 2023 over 2022, according to the KBA annual report. No cross-checked 2025 figure is available. The interbank rail publishes statistics far less regularly than the operator it is challenging.

On October 18, 2024, the CBK announced it would build a Fast Payment System (FPS), an interoperability solution meant to cover the entire financial sector. At the same time, it set up a technical working group with industry. The press release lays out the diagnosis. Existing forms of interoperability, the CBK wrote, “lack a centralised switching mechanism, use costly bilateral arrangements, and are closed in nature.” The stated goal is open digital public infrastructure, in line with the National Payments Strategy 2022–2025.

Wholesale rails complete the picture. KEPSS handles final settlement and is also the gateway to the two regional rails. EAPS links the RTGS systems of Kenya, Rwanda, Tanzania, and Uganda in local currencies. REPSS, the COMESA rail live since October 2012, settles in US dollars and euros. Eight of its 21 member states are actually connected (CBK, 2026). REPSS's real reach is therefore limited, and it should not be overstated against PAPSS, which targets the same need with fast-growing bank membership and unpublished volumes.

Digital credit: Fuliza, M-Shwari, and licensing

Wallet-linked credit refers to the savings, overdraft, and short-term loan products available from a mobile money account and backed by a partner bank. These products explain the depth of Kenyan usage better than any user-experience argument. M-Shwari, launched in 2012 with the Commercial Bank of Africa (now NCBA after the 2019 merger), adds savings and microloans to the wallet. Fuliza is an instant overdraft: when the balance is too low to complete a payment, it covers the shortfall and is repaid automatically from incoming funds. KCB M-Pesa offers the same kind of service with Kenya Commercial Bank.

Digital credit regulation addresses a conduct problem, not a solvency risk. The Central Bank of Kenya (Digital Credit Providers) Regulations, 2022, gazetted on March 18, 2022, require non-bank digital lenders to be licensed. The CBK itself explains why. The public had complained about “predatory practices by unregulated DCPs, particularly their high cost, unethical debt collection practices, and abuse of personal information” (CBK, July 14, 2026). The cleanup has been slow. More than 800 applications have been filed since March 2022, and 252 licenses had been issued by mid-July 2026, with the rest awaiting documents.

Two features define how this business operates. DCPs operate “mainly through digital channels, including USSD codes.” Their products include school loans, development loans, short-term personal loans, asset finance, and business loans (CBK, July 14, 2026). The product range is broad, and the market is already crowded. The CBK has also opened a public reporting address for unregulated DCPs. A lender whose license is delayed is therefore operating under active scrutiny and immediate reputational exposure.

Fees, and who really sets them

Kenyan mobile money fees require regulatory approval. On December 17, 2020, the CBK published its Pricing Principles, a guiding framework for setting fees. The framework rests on five requirements: customer centricity, transparency and disclosure, fairness, choice and competition, and affordability (CBK, press release, December 6, 2022, note 1). The schedules published by Safaricom and the banks follow this framework and are approved by the regulator. The price at the counter is thus ultimately the result of a negotiation with the central bank.

The fee waiver introduced during the pandemic offers the clearest measure of how price-sensitive usage is. On March 16, 2020, the CBK waived fees on transfers between mobile wallets and bank accounts. It published the results two and a half years later. Between March 2020 and October 2022, the number of Kenyans actively using mobile money rose by more than 6.2 million. Monthly P2P went from 162 million transactions worth KES 234 billion to 440 million worth KES 399 billion, up 171% in volume and 71% in value. Flows between providers and banks grew even faster, from 18 million transactions worth about KES 157 billion to more than 113 million worth KES 800 billion, up 527% and 410% (CBK, December 6, 2022).

Retail pricing boils down to a few rules, enough to model a collection cost. Depositing with an agent is free, and withdrawals carry a fee by amount band. Very small P2P transfers have been free since the Kadogo initiative. Paying a Buy Goods merchant costs the customer nothing, because the merchant bears the collection fee. Paybill follows a model chosen by the business, which decides whether to absorb the cost or pass it on. Three limits published by Safaricom and approved by the CBK frame the whole system: KES 250,000 per transaction, KES 500,000 per day, and a maximum balance of KES 500,000 (M-Pesa tariffs and limits published by Safaricom, 2026).

Operating in Kenya: market access, compliance, fraud, and moving funds out

There are three routes into the Kenyan payments market, with different timelines and costs. The first is to sign up with a local acceptance provider as an aggregated merchant, with no license of your own. The second is to obtain authorization as a payment service provider under the National Payment System Act of 2011 and its 2014 regulations. The third applies to lending, under the 2022 Digital Credit Providers regime. Aggregation takes weeks. The other two take months, because the CBK reviews the business model, consumer protection, and the fitness and propriety of shareholders, directors, and senior management (CBK, July 14, 2026).

• Choose the collection option before you integrate. Use a paybill when you need an order reference, a till for point-of-sale collection, and Pochi to equip very small businesses. Switching later breaks historical reconciliation.
• Build outbound flows alongside inbound ones. Refunds, disbursements, and transfers to a bank account use separate APIs and permissions. An integration that only collects in one direction is not operable.
• Test the USSD flow, not just the app. Basic phones remain the backbone of the market; a checkout validated only on smartphones is only half validated.
• Plan for a human exceptions queue. Mistyped references, duplicates, orphan payments: the residual rate is never zero, and strict matching won't clear it.
• Document the eTIMS invoicing chain. Since tax year 2026, all reported income and expenses must be backed by an electronic invoice (KRA, notice of June 8, 2026).
• Check the contracting entity, not the brand. Several regional providers operate under a trade name that differs from their legal name; the contract, not the website, is what counts.

Finally, a word of caution on sources. Kenya is the African market with the most published literature, and also the most outdated figures. Usage data change quickly. Registered accounts passed 94.2 million in June 2026 and active agents 572,000 (CBK, June 2026), and merchant fee schedules changed again in summer 2026. Every figure you reuse should be dated: a three-year-old source describes a market that no longer exists.