KENSWITCH on shared payments platform in Kenya

In April last year Kenswitch launched the Domestic Interbank Transfer Service (DITS), to enable users transfer money from one bank account to another on a real-time basis hence enhancing efficiency and convenience in payments. Kenswitch Managing Director, George Wainaina, shares insights on the shared payments platform in Kenya on the Q&A below:

What is Shared Payments and how does it work?

Financial services play a catalytic role in the efficient allocation of productive resources thereby contributing to trade, investment and economic growth. Central Banks through their national payment systems link financial institutions together for the purpose of transferring monetary claims and settling payment obligations efficiently. This is done in order to promote a safe and efficient national payment system.

How is shared payments facilitated in Kenya?

The Kenyan financial landscape is the most dynamic and vibrant one in the world.Traditionally, banks have been the custodians of things financial but this is no longer the case today.   Consumers want financial services and they are not too particular on whether it is being provided by a commercial bank or a trusted third party as long as it works for them.

Kenswitch has transformed itself from a company which shares ATMs, Point of Sale Terminals (POS) and Agents, to a payments platform which aligns itself with the consumer’s needs. So whenever a customer wants to make a payment or access payments instruments, Kenswitch is there as an enabler.

How does Financial Inclusion affect shared payments?

The dynamism in the financial sector has created an environment for innovation, technological advancement and collaborations that have gone a long way to ease the financial processes for both the institutions and end users as well as promote financial inclusion to areas that are hard to reach through conventional banking

In Kenya, the financial inclusion landscape has experienced a considerable and positive transformation over the years. Financial inclusion relates to ensuring that as many people have access to financial services.  To this end, Kenswitch has not directly rolled out payment touch points but works through its members to enhance the payments experience with is referred to as financial deepening.The company is offering mobile and internet based payments services and agency banking on a shared model. The latter allows banks’ customers to withdraw and deposit from agent locations deployed by the member banks.

What is the place of innovation in the shared payments platform?

Kenya has embraced financial innovation to enhance coverage and reduce transactions cost through means like electronic money transfers.As the Kenyan banking industry continues to expand and embrace technology in service delivery, Kenswitch has adapted to the ever changing requirements of the financial sector by providing a relevant platform that enables banks to gain scale and quick route to market.

Through the Domestic Interbank Transfer Service (DITS), Kenswitch users can transfer money from one bank account to another on a real-time basis. As a National Payments Switch, Kenswitch developed and launched the product with a focus on competing instruments like cheques and EFTs.  The product seeks to enhance efficiency in business payments by providing instant payments and convenience. The high adoption of the service comes as a pleasant surprise to Kenswitch. The growth has been at over 100% month-on-month as more of Kenswitch members enable their channels on the platform.

DITS is a first of its kind in the financial sector and is aimed at enabling businesses to easily disburse salaries, pay their suppliers, as well allow county governments automate their revenue collection. The service is available at agent locations even for the unbanked who wishto use the platform to make payments to the banked. Counties are also able to use the service to collect county funds as most of the banks are members of Kenswitch.

When it comes to payments no company can rest on its laurels because the degree of innovation is very high.  With the advent of smart phones and data bundles all the consumer needs to do is download an application and begin using the product. Competition is now global and players have low barriers to entry into the market.  The companies that listen to the needs of the consumers will thrive. The ones which refuse to hear will be confined to the annuals of history.

How secure is the shared payments platform?

The system has several features that enable us to detect suspicious activities.  The banks have also placed risk mitigation measures on their end.  The beauty of the system is that it’s a closed loop one within one of the most highly regulated sectors in Kenya which is the banking and finance sector.

How does the shared payments platform deal with “hidden or “exorbitant” charges levied by money transfer platforms on transactions?

In the past, on other services, Kenswitch charged a transaction fee to banks but had no control over the mark up and final price.  For instance Kenswitch could charge KSh.4 as a switch fee but the bank could mark it up to KSh40.

DITS for instance, has been designed with the end customer in mind.  The fees are extremely competitive starting from as low as 75 Kenya cents per transaction.

How does the National Payments Switch expect to enhance financial inclusion among Kenyans through the shared payments platform?

As the banking sector continues to evolve, Kenswitch has trained its focus in becoming the clearing house for retail payments in Kenya. The firm will continue to innovate while integrating with third parties thereby ensuring that its services continue to be relevant going forward.

The focus for the company will shift towards facilitating government payments both at National and County levels as well as the small and medium enterprises (SME) sector.

Currently, DITS is being offered across all banking channels including agents and the mobile phone. The former will allow universal acceptance and the later convenience.   Kenswitch is listening to what Kenyans are saying and Kenswitch has been focused on financial inclusion whereby Kenswitch has engaged with financial institutions to integrate existing payments infrastructure.

Our objective going forward in tandem with integration of payments infrastructure is financial deepening where our energies are geared towards providing more value to existing customers and improving the overall efficiency of the payments system in East Africa and beyond.As the Kenswitch tagline reads “Where you are, We are”!

(We wish to clarify that Kenswitch is not a subsidiary of Paynet as indicated in a story published in the August 2015 edition)