I recently ran a survey in Kenya’s 48th county, “Kenyans-on-Twitter” to see what people know about Pesalink and came to find out that most of them have heard of, but have never used the product. So I did some research and found that Pesalink is an initiative of the Kenya Bankers Association (KBA) to help Kenyans move funds from bank X to bank Y in a safe and convenient manner using their mobile phones. Assuming your bank operates in the 21st century, your phone number should be linked to your bank account. With that alone, you can use the Pesalink portal on your banking app to send money to buy your Toyota Probox (assuming it’s below Kes 999,999) to the car seller as you quaff a few drinks late Saturday night. Or send Kes 600,000 to Pastor Juma who’s selling that 100 by 50 plot in Kitengela, while you prepare your morning devotions at 4 a.m. on Sunday morning. Pesalink is also available on your internet banking app, ATM machine, banking agent and bank branch.
Straight through processing is what Pesalink is all about. It’s big brother RTGS – or real time gross settlement as it’s called – is also an initiative of KBA, and was created to allow faster settlement of large value transactions through a same day processing mechanism. Today you can’t issue a cheque for amounts over Kes 1 million as such a transaction has to go via RTGS. The direct beneficiary is the customer as the bank can no longer sit on the “float” as it waits to give the customer value for the cheque that has already cleared. The difference between RTGS and Pesalink is that the former requires you to walk into your bank branch and fill out a tedious form. The latter, however, is a few keystrokes from the comfort of your bar stool or Slumberland mattress 24-7. Both are KBA initiatives, which, when working optimally, should significantly reduce footfall as well as cash holding requirements in branches, the latter of which creates a trading opportunity cost for bank treasuries as it’s idle cash sitting in a vault.
I spoke to the team at the KBA-owned Integrated Payments Services Limited (IPSL), who operate the switch that runs Pesalink. The process is supposed to take at most 7 seconds for the transaction to go through. Since its launch in March 2017 until June 1st, the system has processed about Kes 2 billion between the 26 banks that have signed up to the system. Client ignorance on the one part and bank reluctance on the other are some of the reasons for the slow take up of the product. The bank reluctance, some say, comes from wanting to see stability in the system before launching big bang. My cheeky side wants to provoke and say the potential loss of float that banks will endure, as funds move real time, 24 hours a day, is something that would make any bank drag its feet to market this product. It also adds a new, but manageable challenge, for bank treasuries in squaring their cash positions once overnight fund movements become frequent.
Why should you consider moving funds this way? First it beats the exasperating Kes 70,000 transaction limit and Kes 140,000 daily limit on Mpesa. (Although it’s said that some banks have,counter intuitively, put in transaction limits. Why for the love of God?)Secondly, the fees have been capped at Kes 200/- no matter what amount is being sent. Thirdly, in case you missed it, the banks are running a no-Pesalink-charges campaign for the next two months to get customers onto the product. Fourthly, you can do it 24 hours a day 7 days a week. Finally there are no limits on the number of times you can send funds in a day.
The product is being launched in phases, primarily to get system stability and knock out the kinks before going full throttle. Today it’s serving Peer-to-Peer clients but the ultimate aim is for Business-to-Peer and vice versa, which would include government payments such as taxes and rates, or utility payments from businesses and individuals to KPLC and Nairobi Water. Pesalink provides one less reason to go to the bank physically and will be a key cog in the 24-hour economy wheel that we all wax lyrical about.