Kenya has been at the forefront of mobile payment innovation in Africa, primarily through the rapid growth of the mobile money ecosystem. Leading this are non-banks, in particular Safaricom, which pioneered payment solutions for consumers with little access to formal financial services.
With the banking industry facing a challenge of falling card transactions, banks needed a new low-cost payment solution to compete with non-bank payment providers.
MNOs have been the primary drivers of financial inclusion in Kenya. To improve the banks’ contribution to financial inclusion, collaboration between FSD Kenya and banking industry stakeholders led to the creation of PesaLink – a payment infrastructure that allows banks to offer real-time, person-to-person transfers at a low cost.
PesaLink met with some resistance from banks over concerns that it would cannibalise their fee revenues from existing payment products, without understanding that traditional banking products were declining in the face of Safaricom’s growing market share.
Genesis partnered with FSD Kenya to develop a business case to convince Kenyan banks of the value of joining PesaLink. Genesis carried out a series of stakeholder interviews with the banks to understand their problems. Incorporating these findings with historical payments trends in the market as well as bank data, Genesis developed a financial model to assess the impact of PesaLink on the banks’ existing product revenues.
The model incorporated the expected revenue diversion from existing bank products and illustrated the potential savings from the more efficient PesaLink infrastructure. It demonstrated the opportunity for increased transactions because of convenience to the client, resulting in raised revenues for the banks. The model was shared and workshopped with the banks.
Through Genesis’s work there was greater buy-in from banks to develop their unique products to be rolled out on PesaLink. Thirty banks now offer products on the PesaLink infrastructure, resulting in KSH15-billion transaction value flowing through the infrastructure in the first six months of its launch.