The next chapter in Kenya’s digital payment revolution

• by Judith Mwangoe and Njeri Macharia
• Jul 8, 2025
• 5 min

Kenya’s digital payments journey, led by M-PESA and steered by the Central Bank of Kenya, has driven major innovation and financial inclusion. Despite progress, challenges like high costs and fragmented networks persist. Ongoing reforms in interoperability, consumer protection, and infrastructure aim to build a secure, inclusive, and efficient digital economy.

Kenya’s success story is often told through the lens of M-PESA, the mobile money innovation that emerged in 2007 and fundamentally reshaped the country’s payment landscape. Its rapid growth stemmed from its agility, adaptive infrastructure, and regulatory initiatives. Thanks to M-PESA, between 2024 and 2029, Kenya’s total digital payment transaction value is projected to grow at a compound annual growth rate (CAGR) of around 14.1% to 26.16%, reaching approximately USD 24 billion by 2029.

Despite this progress, persistent challenges, such as high transaction costs, limited digital literacy, network reliability issues, and a continued preference for cash, hinder adoption. This is particularly evident in rural areas, where fragmented agent networks and duplicative service models limit access to affordable and reliable digital financial services (DFS).

The Central Bank of Kenya (CBK) recognized M-PESA’s pivotal role in the economy and introduced key reforms to promote a more inclusive, secure, and efficient digital payments ecosystem—one that could reshape the country’s economic future.

The CBK has positioned itself as both a regulator and a catalyst for transformative growth. Central to this effort is the National Payments Strategy (NPS) 2022-2025, a blueprint designed to propel Kenya into a future where digital payments are secure, fast, and universally accessible.

The promotion of interoperability across payment platforms has been a core pillar of the NPS. The mandated interoperability of mobile money platforms was a significant milestone in this effort. It enabled seamless and instant fund transfers between M-PESA, Airtel Money, and T-kash. Another leap forward was the introduction of merchant till number interoperability, which allowed payments to any business regardless of the mobile network operator (MNO). This simplified payment acceptance for merchants, especially small and medium enterprises (SMEs), and expanded their customer base. Previously, users incurred high costs by withdrawing funds to transact with users on different networks. Now, direct transactions lessen the need for cash-outs and make digital payments more accessible.

The financial industry in Kenya initiated a strategic initiative to design and implement a shared and interoperable agent network to deepen interoperability and expand financial access. MicroSave Consulting (MSC) led the implementation of this initiative in collaboration with Financial Sector Deepening Kenya (FSD-K). The CBK played a pivotal role in anchoring the project within the NPS and shaping regulatory expectations.

The CBK has also introduced and enforced key standards to enhance efficiency and security. The launch of the KE-QR Code Standard in 2023 introduced a single, interoperable QR code that allows users to transact with any merchant, regardless of PSP or MNOs. The CBK has also been developing a comprehensive framework for consumer protection within the National Payments System to protect consumers. This will establish minimum standards for PSPs, promote fair practices, improve transparency, and enable effective complaint resolution.

Kenya’s adoption of the ISO 20022 Global Messaging Standard also highlights its commitment to international best practices. This standard enhances data exchange during transactions, boosts efficiency, and facilitates more seamless cross-border payments. The CBK has been guiding this transition through policy issuance, stakeholder coordination, and upgrades to systems, such as the real-time gross settlement (RTGS) platform. These efforts enhance fraud detection, strengthen oversight, and reinforce Kenya’s position as a regional financial hub.

Further efforts involve plans to integrate PesaLink with mobile money platforms, such as M-PESA, which will connect traditional banking with mobile money. This push for interoperability will significantly speed up digital payment adoption throughout Kenya.

Alongside these reforms, the CBK is also at the forefront of using supervisory technology (SupTech) to strengthen its regulatory oversight and facilitate innovation. It can now monitor PSPs and banks in real time through digital dashboards, AI-driven anomaly detection, and data analytics platforms. This has drastically improved responsiveness to systemic risks. For example, its risk-based supervision model, underpinned by SupTech tools, allows for dynamic compliance assessments and more efficient fraud detection across mobile money operators.

Lastly, the CBK has been piloting regulatory sandboxes in collaboration with FinTechs. It uses SupTech to monitor innovation and safeguard consumer interests. These systems enhance agility in policymaking, which allows regulators to adapt faster to emerging technologies and payment models. The CBK seeks to proactively detect market abuse and enforce consumer protection in a data-driven, scalable manner through the integration of SupTech into its oversight mechanisms. This bolsters public confidence and ensures inclusivity, especially for vulnerable segments that seek to enter the digital economy for the first time.

As the CBK strengthens regulatory visibility through SupTech, it is simultaneously investing in the core infrastructure that will anchor a seamless and interoperable digital economy. It is in the process of advancing Kenya’s payment infrastructure with the Fast Payment System (FPS), set to launch in 2025. This system will support real-time, 24/7 transactions among individuals, businesses, and the government. Kenya is also integrated with the Pan-African Payment and Settlement System (PAPSS). It has become the 10th African central bank on the platform. This integration seeks to facilitate cross-border payments in local currency, reduce reliance on foreign intermediaries, and support the African Continental Free Trade Area (AfCFTA).

Together, FPS and PAPSS exemplify the CBK’s strategy to create an inclusive, interoperable, and globally competitive payments landscape, guided by global standards, such as ISO 20022, and inspired by models, such as India’s UPI and Brazil’s PIX.

Yet despite significant progress, several barriers continue to inhibit the full realization of an inclusive digital payments ecosystem. These challenges can slow down adoption and deepen existing access inequalities, especially in rural and underserved regions. Key gaps include:

• Fragmented agent networks: Overlapping and siloed agent models create inefficiencies, particularly in rural areas, where agents often serve a limited number of providers. This leads to poor service coverage and reliability.
• High transaction costs: For low-income users, the cost of using digital payment services remains prohibitive, especially when switching across platforms or accessing cash-out services.
• Inconsistent consumer protection: Resolution mechanisms are often inadequate or poorly enforced across providers, which undermines trust and discourages usage, particularly among vulnerable users.
• Lack of a unified payment switch: The absence of a designated National Payments Switch hampers full interoperability across mobile money platforms, banks, and FinTechs, which leads to fragmented user experiences and operational redundancies.

So, what should the CBK do? We recommend the CBK to prioritize the following strategic actions to sustain progress and address persistent gaps:

• Accelerate shared agent network rollout: The CBK should expand the shared agent network to reduce duplication and improve access in rural areas. A unified model will enable agents to serve multiple providers efficiently and lower transaction costs.
• Designate a National Payments Switch: The CBK should designate an existing payments switch as the National Payments Switch. It should be mandated to facilitate all domestic digital payments, similar to India’s UPI model. Clear targets to reduce cross-border costs would also benefit trade and remittances.
• Enforce consumer protection and promote digital literacy: The CBK should finalize the National Payments Consumer Protection Framework and launch targeted digital literacy programs to build trust and ensure safe usage.
• Introduce a secure open finance framework: The CBK should develop a consent-based open finance policy, such as the UK’s OBIE, to enable data sharing, encourage innovation, and enhance user control.

If sustained and expanded, Kenya’s regulatory and infrastructure efforts could redefine financial access for millions and offer a roadmap for digital economies across the continent. With the right policy frameworks and collaborative innovation, a truly inclusive and resilient digital payments future is within reach, both for Kenya and for Africa at large.